Two examples in this morning’s Times of the way in which rent-seeking is slowly draining the lifeblood out of this country. What is truly phenomenal is that one would expect this type of thing to have more deleterious effects elsewhere, for isn’t this the country that doesn’t have a tradition of bribery of public officials. But everywhere we look, corporations are, through one unsavory means or another, purchasing the right, by bribery in the form of campaign donations and/or lobbying, to impose the equivalent of taxes on the rest of us or to gain the monopoly power to provide lower quality products at higher costs than would be the case in an uncorrupted market system; whether that market was regulated or not. Today’s examples include one case of corporations getting government permission to confuse and defraud, and another of corporations being allowed to monopolize market segments so they can charge high prices for worst in world services.
First case in point, another Obama administration cave-in. (Are you surprised?):
WASHINGTON — When millions of Americans around the country sign up for insurance under President Obama’s sweeping health care law in October, the system they encounter will lack some of the key protections and cost controls that Massachusetts consumers receive.
Massachusetts, the first state in the nation to implement near-universal health coverage, served as the model for major aspects of the groundbreaking health care overhaul law. But under lobbying pressure from the insurance industry, the Obama administration has decided not to adopt features of the Massachusetts plan that advocates say have helped consumers more easily make cost-effective choices.
Massachusetts, in an effort to ensure that consumers get the best deals, conducts competitive bidding to promote cost-efficient plans in its exchange — the state’s online insurance marketplace — and standardizes the benefit packages to make it easier for consumers to compare plans.
The federal program will also feature exchanges. But in the 34 states where the federal government will be running the exchange, the government has decided to permit any plan to qualify that meets a minimum set of standards set by the law.
Other than that, its gatekeeper role will be weak. It will not conduct competitive bidding, nor will it require that plans contain the same features so consumers can make easy comparisons.
The federal rules took shape amid an intensive lobbying campaign by the insurance industry, and advocates say the result was a weakening of the law’s basic goal of giving consumers a simple way to shop for health insurance.
(via The Boston Globe)
Think it’s hard choosing among cell phone plans? We all know we’re getting cheated, but who has the time to compare plans in a meaningful fashion? We can take some small solace from the fact that with cellphones it’s not life and death; just more bucks out of our pockets that we shouldn’t be spending. With health care it’s a bit different.
But speaking of cellphones and internet service generally, lets not forget that we in the United States have slower internet service and poorer cellphone service than most of the rest of the world. Why?
If you were going to look for ground zero in the fight against a rapidly consolidating telecom and cable industry, you might end up on the fifth floor of the Benjamin N. Cardozo School of Law in New York.
Susan Crawford, a professor at the school, has written a book, “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age,” that offers a calm but chilling state-of-play on the information age in the United States. She is on a permanent campaign, speaking at schools, conferences and companies — she was at Google last week — and in front of Congress, asserting that the status quo has been great for providers but an expensive mess for everyone else.
Ms. Crawford argues that the airwaves, the cable systems and even access to the Internet have been overtaken by monopolists who resist innovation and chronically overcharge consumers.
The 1996 Telecommunications Act, which was meant to lay down track to foster competition in a new age, allowed cable companies and telecoms to simply divide markets and merge their way to monopoly. If you are looking for the answer to why much of the developed world has cheap, reliable connections to the Internet while America seems just one step ahead of the dial-up era, her office — or her book — would be a good place to find out.
In a recent conversation, she explained that wired and wireless connections, building blocks of modern life, are now essentially controlled by four companies. Comcast and Time Warner have a complete lock on broadband in the markets they control, covering some 50 million American homes, while Verizon and AT&T own 64 percent of cellphone service. Don’t get her started on the Comcast-NBCUniversal merger unless you have some time on your hands.
…
“There has been a division of, ‘You take the wires, we’ll take wireless,’ which means that there is very little competition and investment, and very little access to high-speed connections,” Ms. Crawford said. It is worth pointing out that the billionaire Carlos Slim Helú controls 80 percent of the landlines in Mexico and 70 percent of the wireless market there. His recent appearance at the New York Public Library was accompanied by protests that his outsize presence was hurting consumers in Mexico. (Mr. Slim holds a minority stake in The New York Times Company.)
(via NYTimes.com)
The article points out that the telecommunications companies have lobbied for barriers to competition, including laws barring municipalities from providing internet service. Some folks have compared Professor Crawford to Elizabeth Warren, and you know what that means:
And she is hardly a lone gadfly shouting against the wind. When the F.C.C. chairmanship came open recently, petitions sprang up all over the Web, suggesting that President Obama select Ms. Crawford in an effort to return consumer fairness and balance to regulatory matters.
Instead, the president has nominated a venture capitalist and former chief lobbyist for the telecommunications industry, Tom Wheeler. As Politico reported, Mr. Wheeler will have to divest himself of a large portfolio of industry holdings in order to take the job. Perhaps that shedding of assets will help him in his transition to an advocate for American consumers stung by hefty Internet, cable and wireless costs.
Yes, perhaps it will. Would anyone care to take a bet and make me a rich man? We all know that he’ll just be biding his time until he can cash in with his former masters for holding the line against competition for the length of his term. I think FDR said he put Joe Kennedy in charge of the FTC because he felt you should set a thief to catch a thief. That worked with Kennedy, but that was then and this is now.
The odd thing about this particular example of rent seeking is, as the article points out, the fact that it causes real harm to other American businesses, who have to put up with an internet that is in the Stone Age relative to that enjoyed by the foreign competition. If they were looking after their stockholders, they’d be fighting mad about this state of affairs, but that’s not what it’s about. They’re rent seekers too, at least the ones with the power and the lobbyists, and they see their class interests as more important than the interests of mere stockholders, or, perish the thought, the country, small businesses, or consumers.