The Corruption Of The US Economy – A Rant

Last Wednesday, I had four posts that illustrated various problems with our economy. The first post was about Aetna withdrawing from Obamacare exchanges apparently as payback for their merger with Humana being blocked on antitrust grounds. Aetna is one of the five health care companies that control over 80% of the health care insurance market in the US. Just like the Wall Street banks, these oligopolies have become so powerful that they can virtually do whatever they want and basically dare the government to rein them in.  Aetna’s astounding letter to the DOJ essentially amounted to an extortion attempt in order to allow their merger to go through. The oligopolies largely collude with each other legally, and sometimes illegally, and make sure that no new competitors can be significant players in their industry. This reduces competition and actually makes the price of their products higher than they should be.

The second involved the CFTC essentially giving Steve Cohen, the head of the disgraced insider trading firm of SAC Capital, a slap on the wrist. This case perfectly illustrates that due to the wording and interpretation of the law, most white-collar criminals essentially get off without paying any significant price at all. When you compare the draconian sentences given for what are essentially minor drug crimes, the contrast is astounding. Time and again, executives are caught making millions of dollars illegally and suffer no serious punishment. Occasionally, firms will be fined but compared to their bottom lines, those fines amount to nothing. The lack of any significant prosecutions of Wall Street executives after the financial crisis is as good an indication as any of the futility of our current laws in properly regulating business. And in those industries controlled by oligopolies, the abuses continue with impunity. They will not change their behavior until they can be shown that there will be a real price to pay.

The third post was about a proposal in Arlington, Virginia to replace some bus service with Uber and Lyft ride-sharing services. This has become increasingly common since the Carter and Reagan years when the privatization of the commons began.  The privatization of government activities has rarely been a success for citizens and taxpayers, but it has been a bonanza for the companies that took over those functions. Privatization failures abound, from private prisons which are less safe and less healthy for inmates, to private contractors in the military who stole millions in Iraq and Afghanistan and managed to commit war crimes at the same time, to the privatization of parking meters and toll roads that have raised costs for citizens, lowered the pay of workers, and lined the pockets of those companies managing those services.

And the last post was how Donald Trump managed to pay pennies on the dollar for nearly $30 million in back taxes and interest owed to the state of New Jersey. This is crony capitalism at its worst. In many ways, it is linked to the ineffective laws that allow Steve Cohen to get away with a slap on the wrist. There is a reason those laws are ineffective. Similarly, wealthy individuals, large firms, especially those in oligopolies like Aetna, and politically connected companies like Uber are able to bend government to their will.  Groups like ALEC represent business and essentially write legislation that gets adopted word for word, sometimes without even being read.

All these examples expose the problems with the US economy these days. Conservatives always like to say that government should stay out of business. But the real problem is that business should stay out of government. Oligopolies like Aetna wield way to much economic and political power that abets criminal activity and a warping of the system to their advantage. That power also allows them to limit the legal price they pay for their illegal behavior. Either through regulatory capture or political connections, they get government to help them line their own pockets or avoid paying what they owe. And all this will be done under the banner of the free market. It is exactly the opposite – all these actions are meant to ensure that there is no challenge to their market dominance. All this means higher costs, lower wages, and worse service for American citizens. And it is doubtful that anything will change until we break up the oligopolies and restore some real punishment for businesses that are serial offenders.