Cross-posted from The Horse You Rode In On
Disclosure: I love capitalism. It’s the great engine of wealth-creation and prosperity.
Among political theories, I always favored the one enunciated by my ex-wife: "The left wing flies the bird." But in economic theory, there is no escaping the implicit founding maxim of capitalism: "Greedy bastards make the world go ‘round."
I also favor the steam engine. Until James Watt, brute force had to be supplied by muscles – the muscles of horses, oxen, elephants, or humans. Steam could turn a wheel faster than a human or an ox, although it did present other problems.
As the fire got hotter and the steam gathered force, the engine would run out of control and tear itself apart.
What James Watt actually invented was not just an engine – lots of people knew how to build that – but an engine with a governor that kept the whole contraption operating within reasonable limits. Two arms were mounted on a vertical shaft – like your own arms when they’re dangling by your sides. As the shaft turned faster, centrifugal force raised the arms, gradually closing the apertures that admitted the steam.
In economic systems, capitalism, like the steam engine, provides the power. Greed provides the steam.
Now what we need is a governor. We thought we had solved that problem with the idea of government regulation. But since politicians love money, they soon wound up in bed with greedy bastards who then co-opted the regulators, and finally they bought the government. For the past 6-1/2 years, we’ve seen how that works.
The greedy bastards achieved this conquest under the banners of Free Enterprise, Deregulation, and the Magic of Market Forces.
The ultimate battle cry was Competition, heralded as the high road to efficiency, productivity, and low prices for consumers.
Electric utilities, for example, had always been regulated. But for the past 15 years or so, state legislatures have been adopting laws – some of them drafted by Enron – to introduce competition to the electricity market. That might have worked, but the referees in this competition turned out to be the greedy bastards who were supposed to be competing, so the costs of electrical power in the "competitive" states quickly rose high above the costs in regulated states. By one calculation, competition has cost rate-payers an extra $48 billion in 25 states, most of which are now busy re-establishing regulation; and Illinois just voted to give back $1 billion of the overcharges.
We’ve all seen what deregulation can do for the airlines, and what the free market machinery of capitalism can do for health care, where several battalions of greedy bastards have installed their toll booths between you and your doctor.
The result is health care that costs twice as much as Europeans or Canadians pay, doesn’t keep us as healthy as they are, and leaves 48 million Americans without coverage.
Part of the reason is the cost of pharmaceuticals. Competition among big drug companies was supposed to take care of that, but Congress passed a Medicare drug benefit bill that prohibited Medicare from negotiating lower costs. The day the bill passed, the stocks of HMOs and drug companies went through the roof of the stock exchange, demonstrating what happens when greedy bastards are running the government.
But there’s nothing wrong with capitalism that a bit of reasonable regulation can’t fix. Here’s a good, conservative idea:
One of these days, we ought to take our government back from the greedy bastards and the corporate welfare cheaters and give capitalism a try.
Maybe even democracy.