Saturday, June 13, 2009

The new American Civil War

Once again America finds itself in a war in which, like pre-9/11, one side is mostly unaware they are even engaged. It's a battle for control over the allocation of resources, human and otherwise. It pits the free market against big government and some of the biggest players on the free market side are actually aiding and abetting their rival.

Ideally, in the free market world, the allocation of resource is accomplished by the cumulative effect of billions of individual decisions made every day. Corporations are headed by boards and management which is directly accountable to shareholders, customers, suppliers and associates. They are graded with every purchase decision and their performance is measured in profits. The model is subject to a vote every business minute of every day.

In the big government world, resources are allocated by a select group of bureaucrats, appointed by leaders who are only periodically accountable to voters. The deck is stacked in favor of incumbents through constant and free exposure and they are supported by an underlying bureaucracy that is accountable only to itself. There is no instantaneous measure of efficiency in particular sectors, only the general measures of the economy, based on data compiled by the bureaucracy.

For a time, it looked like the free market had the upper hand. The largest corporations were getting larger. Companies like WalMart were actually able to roll out their own, private sector prescription drug programs. Companies like Google were able to turn the internet into a powerful means of information exchange and storage. If things continued down this path, private sector companies would eventually be more relevant than the government. Something had to be done.

The big victory for big government was in pressuring financial institutions to make loans to individuals based on neighborhoods and ethnicity rather than credit risk. They enabled them to re-package these high risk loans into derivatives and sell them to the taxpayers via Freddie Mac and Fannie Mae, who turned around and sold them to private institutions. Soon, even financial institutions that were not subject to government arm twisting were getting in on the free money orgy. It spread like a cancer, until the whole thing blew up. Of course, rather than let these now huge financial institutions fail, big government saved them. The financial industry surrendered before they even knew they were in a fight.

The auto industry take-over has been in the works for decades. While pundits argue over whether the demise was due to the unions or poor management, few ask the real relevant question: Why has there been no competitive new car company established since around 1935? It's been about 75 years since a newcomer has appeared on the scene. Again, the industry was complicit in its own demise. They went along with ever increasing regulation in the name of safety, fuel efficiency and workers rights. They made compliance so expensive and time consuming that starting a new American car company became a fiscal impossibility. In ensuring that they'd have no competition, they made a deal with the Devil. The Devil won.

Doctors are beginning to wake up to the fact that they too are in a fight for their own survival. But it may already be too late. They were all for third party pay because it ensured that they would be compensated for their work. Everyone would pay and they wouldn't have to spend time on collections. They could negotiate with a few insurance companies rather than individual patients. It would be great! Now the demands on their time are cutting into their income generating capacity. The need to order tests for everything to avoid liability, has vast resources tied up in CYA activities rather than actual health care. Malpractice insurance has gone through the roof. The insurance companies that they negotiate with fund the campaigns of the big government folks who set the rules. Game over.

The FDA has taken control of the tobacco industry, to thunderous applause. There's talk of new regulation of the food we eat, the beverages we drink and of course, big government is going to save us from global warming by taxing us all on carbon emissions, even as global temperatures are falling. Of course, they can show data to the contrary, but as the now infamous fraud known as the "hockey stick" graph demonstrates, they can produce data to demonstrate that the moon is made of green cheese if they want to.

We have the capacity to fight back. Nothing stirs a politician more than an angry mob. The people can demand their freedom back and if they put up a united front, defeat big government. The problem for free market proponents is that either the people and the corporations are unaware that they are under attack, or individuals and individual corporations still believe that they can personally benefit from big government somehow. If it's the latter, the war is over.

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