Thursday, August 07, 2014

Central planning doesn't work in capitalism, either.

I remember how we used to laugh at Communist Russia. Whatever they could do, we could do better. Long lines for commodities. Shortages of commodities. No competition. Sounds familiar, doesn't it?

We see a similar situation with broadband. We pay more for broadband than all the other industrialized countries, yet we rank something like 17th in speeds and quality of service compared with other industrialized countries. The industry is dominated by just a few really big players who face zero competition in their respective domains. There is even evidence to suggest that they are colluding to decide who gets what territories. With data caps and data prioritization, they are even engineering shortages to make more money.

We have a similar situation in health care. People spend a lot of time in waiting rooms, and then wait some more in the treatment room. Many people apply for coverage of their injury or illness only to find that even after paying a premium every month for years with just regular checkups, they still have a hefty bill to pay. Fortunately for the health care system, they have a government that doesn't mind thrusting the middle class out to compete with the rest of the world, while protecting itself in free trade agreements. Did you hear about how the AMA engineers shortages of doctors through Congress? That would be a planned shortage, right?...nah, that's absurd in a capitalist country.

The events leading up to the meltdown of 2008 included bond ratings agencies basically accepting bribes for their ratings because there were only 3 agencies doing all the work. There was very little oversight and zero competition. Why? The ratings agencies were more concerned about making money than doing a good job. So far, no one has gone to jail for any of the misdeeds of the bond ratings agencies. I guess a few regulators landed some plush jobs at the bond rating agencies.

In all three examples above, we have seen monopolies become established and entrenched in their respective industries. Monopolies, as we have seen, are slow to move and slow to respond to customers but they are quick to raise rates when they can find a way to justify it, unless there is oversight. You know, regulation.

You know what's worse than a government monopoly? A private monopoly.  At least with a government monopoly you have some hope of change with the next election. Not so with private monopolies. Not only are they large corporations that can capture their regulators with the hope of a lush job, corporations can live on indefinitely through succession. Who's next when the CEO leaves? His best bud and long-time business associate.

Fortunately for us puny humans, we can learn from our mistakes. Communities are taking matters into their own hands to remove distant bean counters from their decision making process.

The big telecom companies are facing competition from community broadband. The healthcare industry is now facing a stunning reversal in health care spending. And the bond ratings agencies? Well, they didn't learn from the last time they took down the economy just yet. Any day now, they might get it, but they may need more repetitions before they figure this out. Maybe a few more lawsuits will do it.

So the next time you find yourself genuflecting on the good ol' days when we were better than the Russians, remember that there are still a few central planners running amok, you know, monopolists. They're harder to find now because they don't sit in a government office in DC, they sit in a corner office in New York City.
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