Wednesday, November 22, 2006

 

Feral Corporatism

Belacqua Jones defines it for us.


Comments:
Thank you for the link.
 
Ms. Jones says that "In capitalism, the owners call the shots..." Unfortunately, given this illustration of gross ignorance, perhaps we should not try to understand the rambling that followed. Should she come to understand that in capitalism, consumers call the shots, maybe real analysis could commence.

Thanks for pointing to this link. No doubt we realize why its flaws should be exposed.
 
Speaking as a capitalist, I can say it's pure myth that the consumer decides product decisions, much less political ones.

First, the American market is far from pure competition. Entry/exit barriers are often too large to permit anything except oligopoly as the norm. The consumer only calls the shot in choosing to buy or not buy what producers choose to make available. There are many cases where one can show that consumers want something substantially different than what they are offered, but accept what is available because of necessity.

Health insurance is a good example. Roughly 2/3 of insured Americans are happy with their health insurance coverage. Many are uninsured, almost all of those because they can't afford any health insurance at all. By contrast, Canadians are overwhelmingly satified with their health care system, for which they pay about a third less than Americans. The difference between Canada and the US? In Canada, people choose by the ballot, and every person's vote counts equally. In the US, they decide by spending behavior, meaning that some people are more equal than others.

But more to the point, corporations control so much wealth that they make political decisions only weakly connected to the corporation's financial interest. A classic is the ABC memo instructing their stations not to broadcast ads by certain corporations on Air America Radio. Since Air America listeners tend to be a very good demographic, this is a political decision.

So, you're welcome to your own little world, but don't expect people who know what's going on to live in it.
 
“The consumer only calls the shot in choosing to buy or not buy what producers choose to make available.”

Indeed. This is my point.

It is irrelevant whatever products we think are necessities. The fact that consumers have a choice to spend or not spend their money is all that matters because it is the consumers from which the corporation gets its money. Even if one doesn’t believe that producers make what people want (which would disqualify one as a capitalist if one thinks those producers could stay profitable) one would still recognize the choice of the consumer to spend his/her money where they see fit.

If you’re arguing that corporations or labor unions or any one of thousands of other organizations or individuals influence government policy through not-so-legal means, I agree. It sounds like you want to end sugar subsidies (among thousands of other things that corps, orgs, et al. wind up with) and I’m right here with you.

But thanks for your comment. I appreciate a good thought. And I don’t want to be out of line, but I think you would benefit from having a tad more class in your responses; your rudeness and self-righteous attitude at the end of your comment was upsetting.
 
STL, frankly:

You come onto our website to accuse others of "gross ignorance" and "rambling" and then get offended and accuse me of "rudeness" and "self-righteousness" when I mildly say you're living in another world. This is hypocrisy so incandescent that even the blind should be able to see it.

Just saying.

You add nothing to the discussion when you say that consumers have the choice to buy or not buy a particular commodity. Diabetics can, of course, refuse to buy insulin, at the cost of suffering blindness, heart disease, gangrene, and other the other joys that untreated diabetes brings. Those consequences lead to what is called inelasticity of demand. The diabetic is only technically speaking acting of free choice when he "chooses" to buy insulin.

If one were going to throw out strawman arguments of the kind with which the right-wing universe is replete, one could just as easily say that consumers have no choice at all, because there is always some inelasticity of demand.

The truth lies in between those two myths: consumers have some power and producers/suppliers have some power. The question is deciding whether the real world is closer to one side or the other.

In the case of health insurance-- over a seventh of our GDP, very clearly consumers are not calling the shots. Only roughly half of the population has insurance and is happy with it-- but even they are hugely overpaying relative to costs. If they weren't so thoroughly lied to, they wouldn't be happy either.

There are many other cases where it's clear that the American market is failing. Its failures have very little to do with unions, which have almost no power, or even with sugar producers, which are a tiny part of the market. They have much more to do with oil companies buying corrupt politicians to prevent the country from finding alternatives to endless war, with pharmaceutical companies buying corrupt politicians to write price fixing into the Medicare system, with financial houses paying corrupt politicians to repeal usury laws so they can ensnare people in exploding interest rates.

I would guess that your understanding, both academic and real world, of economics and finance is very close to zero. If you think otherwise, you're welcome to try again.
 
This is a lot to tackle but I’ll give it a quick shot.

Whether or not I’m a hypocrite does not change the fact that your statement was rude. You needn’t descend to my level no matter to whom the website belongs. I apologize anyway.

The elasticity of demand for a good or service is not useful for this discussion because it does not mean that consumer choices are eliminated or even relatively limited. Indeed, the demand for insulin is relatively inelastic. As is the demand for gasoline. Yet insulin and gasoline are within two highly competitive markets and consumer choice (from which producer a consumer can purchase) are abundant. Even though the effects of diabetes are morose, insulin producers cannot price their products at $1.3 million per vial and capture only the richest diabetics and make plenty more money. Instead, those who “overcharge” will be undersold by other insulin producers who price at the market equilibrium (or lower) in search of more consumers. That is the choice producers have. Consumers may shop wherever and from whomever (subject to many regulations in the case of buying medication but that’s another issue).

Same thing with gasoline. Quite inelastic. Yet we’re not paying $7 per gallon. Why not? Because if one producer tries that, another will sell at $6. And then $5. On down to $2.30 or whatever, until an equilibrium is realized.


I will need more information to address your statement “…the American market is failing.” I have no idea what that means. The “market” is indeed composed of sugar producers, no matter how small a fraction thereof, as well as hundreds of thousands of other markets. Which ones are “failing”? The whole market? I don’t get it.

I agree with most of the balance of your post, which implies that the health care market is encumbered with too much government regulation to allow beneficial market forces to affect consumers. Indeed, the government should be quite removed from the workings of the health care marketplace and politicians should indeed not be corrupted by anyone.

I am not sure about the usury thing you mentioned. If one borrows money from another, there is a governing contract or loan agreement. No one should enter a contract or loan agreement if they do not like the terms or the level of interest rates. I recommend that consumers choose some other financial house with which to do business if they feel that particular producer of financial products offers discouraging terms.

By the way, those sticky sugar tariffs are making ethanol (an oil alternative) not so cheap unless you live in Brazil. Oil companies, which may be corrupt as you claim, are nonetheless underselling the competition. Consumers are making their choice buying oil instead of something else. Blame them. Producers are just “giving the people what they want.”
 
STL says,

You needn’t descend to my level...

OK, so your basic argument is that you've been very rude, but that that I should't reciprocate.

That's definitely up there with the man who killed both parents but begged for leniency on the grounds he was an orphan.

Your economics is similarly weak.

Elasticity is always central when debating consumer choice. Granted, there's the supply curve as well, but one can't discuss market function/consumer choice without understanding both.

There are three reasons that insulin suppliers don't price their product at millions: (a) anti-trust laws, (b) income constraints on the part of the consumer, and (c) producer curves, all of which work in tandem. It usually happens to be more profitable to sell many units at a lower price than a few units at a high price.

You claim that all consumers have the choice to buy needed medications. In fact, many don't. They lack the money. A major scandal is developing in this country as it becomes more and more obvious that we suffer premature death on a mass scale simply because of the perverted "economics" of health. We can afford to treat all Americans as living, breathing, feeling human beings, rather than shunting millions off to premature, often painful deaths so some g$dd#@mned shareholder can make a few extra bucks.

Canada has far higher regulation and yet its health care system costs far less. So, your argument that regulation makes things more expensive is disproven. Regulation is like having an umpire at a baseball game. He helps everyone by making the rules predictable. The view that economic umpires should be banned is completely idiotic.

People fall into usury because they are desperate. They need, say, insulin, and don't have any money. So they take on impossible debt to pay to stay alive long enough to, they hope, repay the debt. Payday lenders are not free consumer choice. They're loan sharks under another name.

Speaking of private property, this website is just that. The rules are here. I suggest you read them.
 
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