Haven't really had time to listen to media today, but what I have heard seems to revolve around the insurance companies being exempt from anti-trust laws. Somebody introduced a bill or something to take away that status?
Good.
You know, the only way you can actually have a trust, cartel, or a monopoly is if it's enforced by one government or another. I mean, think about it. Suppose you're making tons of money in, let's say, carbonated water. You want to own the only supply of carbonated water. How do you do that? You could try buying up all the production capacity for carbonated water... but if there's really any money in carbonated water, people will make more carbonated water factories -- and probably cheaper and more efficient ones. Or they'll develop a competing product to woo your customers away from you.
The only way you can truly and absolutely "corner a market" is to go buy yourself a couple senators and get them to pass a bunch of laws -- or maybe only one law -- that keeps anyone else from entering your market and competing against you.
This is exactly what happened in the late 1800s in the USA. It was the "rise of the trusts." The USA was very proud of its trusts, which actually were kinda like cartels. The Sugar Trust was a pretty good one, enforced by federal laws. John D. Rockefeller tried to set up an oil trust, and he might have come pretty close, using some pretty strong-arm tactics, too. He probably should have been busted for that -- actual crimes like bribery and grand theft -- instead of anti-trust. It required bribery and theft to try set up his monopoly.
The trouble is, when you get a limited number of producers (or only one) in a market that enjoys strong demand, the cartel or monopoly can make product any old way it wants -- with/without quality control. They can charge anything they want for it, and they can use their supply to extort the public. They probably won't do much R&D to improve their product or make additional products.
And the thing is, with free market capitalism, any market that enjoys high demand is going to attract a lot of investors and potential producers. The only way you can keep other people out of the market to establish a cartel or a monopoly is to buy a couple senators and pass a few laws... So while capitalism is often accused of creating monopolies, it's really government meddling that creates monopolies and cartels.
Left alone, capitalism is a bloody free-for-all. Build a better mousetrap and the world will beat a path to your door... And everyone else will be turning their attention to creating even better mousetraps to grab your market share.
The anti-trust laws also address price-fixing, another trick that has been tried by groups of producers. Suppose you get six guys in a room that decide the price of light bulbs will be $2.00 each. You might price them higher -- non-competitively -- but they all agree not to price them any lower. Then the CEO of ABC Light Bulb Company is driving home, and he gets a hot flash: Hey, everyone else is going to be charging $2.00 for a light bulb. If I charge $1.50, I can corner the market!!
Price-fixing rarely works without a government behind it to enforce it with law. Interesting to note, too, that with socialized medicine -- both the Baucus Bill and the House's HR3200 -- the main feature is fixing the prices for insurance. Just think about it.
Teddy Roosevelt, who initially loved the US trusts, like everyone else at the time, eventually got on board the anti-trust movement to break them up and loosen up the marketplace. Interesting that General William Tecumseh Sherman's brother, John Sherman, was the guy who wrote the "Sherman Anti-Trust Act" that prohibited establishing trusts and cartels that acted "in restraint of trade."
All Sherman -- or even ol' Teddy Roosevelt -- had to do was to forbid congress from making laws that created artificial barriers to trade. It was the law that prevented other potential producers from entering the sugar or the oil markets. The anti-trust laws are kinda stupid for that reason. All they do, mainly, is try to fix something that was created by bad law and government regulation.
The abuses perpetrated by the trusts also led to a Constitutional amendment that changed the way US Senators are elected. Originally, they were elected by state legislatures. The amendment made them elected by popular vote. I actually prefer the popular vote method -- but I'm from Illinois, don't forget, and may be too close to seeing the results of state-level corruption in government. The US Senate at the end of the 1800s was known as The Rich Man's Club. That was a pretty fair description of it, too.
Anyway, good! Do away with anti-trust exemption for insurance companies. They should have to compete, and that surely would improve their products and bring prices down -- as long as the government keeps its warty nose and long arm out of the marketplace. How likely is that?
You know at one time in the very near past, AT&T and the Bell Telephone companies had state-enforced monopolies all over the country. They were compelled to break up. So now we've got dozens, if not hundreds more phone service providers, as well as cell phones and a myriad of other telephony products. Sure, big disruptions for a time. But would you prefer going back to landlines-only, available only by designated Bell Telephone Companies?
But then here's another reminder -- the insurance industry is very heavily regulated because there has been a lot of Nigerian Banker-type fraud attached to insurance schemes throughout that industry's history. Not to suggest that insurance itself is a fraud -- it's not. But leave us not forget that many criminal organizations also sell "insurance." The whole concept apparently is too tantalizing for criminal types to resist.
I would prefer that insurance be unregulated. All that means is doing a bit of research before you buy. That's always a good idea anyway, for anything. Look at the insurance company's investment fund before you buy -- and make sure they've got good fund managers and are regularly audited by outside accountants. There will always be a risk and probably always some corruption, but that's also very true of anything run by the government. In private enterprise, if one company goes bust, only some people are affected. In a socialist scheme, if the government goes bust, we're all screwed -- and also unable to rebuild. I mean, look around.
At any rate, can you name any other industries that are exempt from anti-trust laws? Show of hands? Anyone? Anyone?
That's right! Very good! Labor unions are exempt from anti-trust laws and prohibitions against price-fixing.
Just to muddy the waters a little more.....
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