This column may stress you out. It stressed me out just writing it.
Start counting on your fingers how many of the following aggravations you have encountered personally. Ready?
You call a customer line to report a problem with some product or service, and after being forced to navigate through a multi-stage menu of options, you finally get a live person — who, unfortunately, seems capable of responding to only small set of basic requests.
You file an insurance claim, but the paperwork and documentation required to get the claim paid seem intentionally convoluted so as to deter you from ever collecting.
Your bank — which is paying you less than 1 percent on savings and checking deposits, money you’re lending it — finds all sorts of creative fees and fines to penalize you.
I could go on, but you take my point: Hidden costs, inefficiencies, paperwork hurdles, scams and other frustrations are common to everyday business transactions. And these are just the minor irritants. Beyond that are the retail costs that seem to be rising faster than wages.
Now, a question: Why don’t we blame “markets” for these problems the way we blame governments and politicians for their failures?
Consider food safety. According to Eric Schlosser in “Fast Food Nation,” an estimated 14 Americans die every day from food poisoning. That’s about 5,000 per year, equivalent to more than 1 1/2 Sept. 11 attacks. Every year. But the market cares about these fatalities only insofar as there may be lawsuits or lost sales from bad publicity.
By contrast, the Centers for Disease Control and Prevention, one of the most effective and crucial federal agencies, does a splendid job of tracking and preventing the spread of potentially lethal viruses across the globe.
I’m a capitalist. I believe in the importance of the profit motive. I also have plenty of gripes about the failures of government and the mendacity of politicians of every stripe. But I get the distinct sense that Americans are too quick to glorify markets and vilify governments.
People who email me about my columns, for example, issue a lot of complaints about waste and inefficiency in government. They say public-sector workers are lazy, overcompensated hacks who sit on their butts all day, draining the taxpayers’ hard-earned dollars. And government corruption? It’s rampant!
Yes, there undoubtedly are crooks who file phony Medicare and disability claims. And I’m sure there are some lazy bureaucrats not earning their bloated salaries. The government should do its best to identify these people and root them out.
But guess what? Overhead in federal insurance programs like Medicare and Social Security is minimal. By some estimates, only 2 percent of expenditures go to administrative overhead, with the remaining 98 percent is paid out to beneficiaries. By comparison, a 2009 Congressional Budget Office study shows that small, private insurers spend about 12 percent in administrative costs, and even large insurers on average spend about 7 percent on overhead.
So, in some cases, private markets operate less efficiently than do public alternatives. We just tend not to think about the lazy, overpaid person who knocks off early to play golf in the private sector as raising the costs we pay for things. We console ourselves that the “market” will correct for this, driving out of business companies teeming with incompetent jerks drawing huge compensation. Anyone who still believes this after the financial crisis of 2008 didn’t follow the news accounts very closely.
Markets, markets, markets — we hear that mantra chanted incessantly during Republican presidential debates. Government is evil, crooked, sclerotic and wasteful. Sometimes, yes, government is the problem.
But those keeping a running tally of grievances should not overlook the frustrations and failures they’ve encountered in the marketplace. After all, like governments, markets are imperfect. Citizen-consumers benefit most when the strengths of each counterbalance the weaknesses of the other.
• Schaller teaches political science at the University of Maryland-Baltimore County.
Comments (25)
Add commentHow DARE he??
Criticize the markets? That is just plain heresy. Greed is good. It brings out Americans' best qualities. Like the ones that will be on display soon right below this comment...
If it does not effect me
If it does not effect me directly then why would i care about anything?
Pretty much the philosophy we live by.
And yes pp i know it does effect us directly but its not in the forefront of our minds like when the media puts BIG BOLD CAPITOL HEADLINES SCROLLING ACROSS THE SCREEN.
Another one of these
Another one of these ensconced, so much smarter than anyone else, professors, at a public university, sucking off the taxpayer for his welfare, all the while lecturing us about the evils of the private sector. Yuck...and he calls himself a "capitalist"?
They are different.
1. You call a customer line to report a problem with some product or service...
Solution: Drop a bunch of F-bombs, most VCCs are programmed to give you higher priority. Ask for a supervisor. Sound huffy.
Or
Switch to a different company.
2. Your bank charges you $200 in annual fees.
Solution: Read your contract. Do your research. Have a conversation with the branch manager. Get huffy if they don't give you what you want. Threaten to switch banks.
Or
Actually switch banks.
Funny point #1 Food poisoning probably IS caused more by the actual manufactures as opposed to the people preparing it.
3. Government insurance doesn't provide you the service/medication you need.
Solution: Switch governments? Write your local senator?
Or
....???
Just like when I code my timesheet, yes administrative overhead is BAD. So I just provide less services, or it comes out of some other area. To bad I can't code things to silly Baltimore Professors.
Opinion (Completely Unjustified of Course):
I fall on the side of too much capitalism because I believe it is a lesser evil for those who can pay for a service to get it, as opposed to someone who can't afford a service to receive it without paying.
Why is this?
Big corporations and wealthy individuals have resources. You can't take a bunch of politicians and bureaucrats and make those greedy workaholics pay up. Have you seen GE's tax rate? Go visit the legislature, for a refresher, and then lay me out your five point plan about how a bunch of part-timers are going to get Tim Cook to give up the 40/60/80?? billion Apple is sitting on. Have fun!
Funny point #2 - You think Social Security will be around. Sorry those of us under 30 are making other plans. At least if they're smart.
My generation personally thanks yours for [filtered word that rhymes with duck]ing us in the [filtered word that rhymes with bass, the fish, not the instrument].
The free market works
as long as no one cheats and steals. I'd prefer government waste to outright theft and exploitation by the major corps. What you are mad at is the billions in favors, subsdies, and tax breaks handed out to businesses that defraud the government.
Hummmm...without government handouts to businesses I wonder how many industries would still be so wildly profitable?
They only want to stop the handouts to individuals so there is more for them.
Mama T - don't forget
the loopholes big business can get passed to allow them to squeeze out competitors (soybean market) or do really upstanding things like increase top retirement packages and restructure a company deleting the entire pension funds for all the folks who worked 30 years to get them where they are, and then pocket the pension fund as a bonus once they are done.
Nice.
http://blogs.reuters.com/reuters-money/2011/09/14/retirement-heist-book-...
what a hoot
to read post from those who complain about 160,000 pages of regulations and have no idea about what they are saying. They never bother to identify those are the composite regualtions that must cover any and all businesses that range from building a nuclear power plant, disposing of toxic waste operating a bank or brokerage firm, to exporting software. These folks forget anything that is not in writing provides some attorney a defense for why their client did or did not do. Thing you would consider common sense are an attorneys dream. But alas it is not specifically written into the regulations and the business did not have to use common sense in deciding how to do things, they just do their own thing.
Yes there is an abundance of regualtions. Unfortunately there is an abundance of those who would do anything to make a profit without considering whose lives they might put at risk, whose property might get affected, or whose money might get lost in the shuffle.
A great indicator of our real business problems is the number of times a day you can watch a commercial for some law firm telling you how you might be eligible to receive compensation for some companies failure to do do one thing or another.
The free market
ultimately reflects:
1) The interests of those making the greatest profit, and therefore able to write and implement the greatest amount of legislation designed specifically to make it easier for them to make more money;
2) The largest sector of the populace expressing a given lowest common denominator regarding demanded comfort, perception of quality-of-life, and immediacy of gratification.
The "free market" CANNOT address issues of environmental degradation, impact, and loss in the time frame needed to correct or prevent them. It is only after sufficient time has passed that such degradation results in some perceived loss of the above three factors that common ethic begins to change, which is missing the entire point! Not to mention that the interests reflected in #1 will exert enormous effects to convince the largest lowest common denominator (representing the greatest buying power for most commodities) that environmental considerations, or ANY considerations other than expenditure of money, is either irrelevant, morally wrong, or foolish.
How sad it is to read that
How sad it is to read that fellow Americans think so little of the freedoms that we enjoy in our country. wren said it best yesterday - 'you all want to enact and live under your socialist eutopia while enjoying the protections you have in the most free country in the world'. None of you have a clue.
Hey swimmer, as you're whining about pension plans being yanked from retirees again (which I would argue, rarely happens) tell us about Greece and Europe and the pension plans under those wonderful socialist systems. It ain't pretty...
Here's a juicy tidbit I bet you all didn't know - GM is funneling millions of dollars to lobbyists with direct access to the White House. How much does that miserable company still owe us taxpayers? If anyone buys a GM car, damm them...
"General Motors has funneled more than $1 million to two powerhouse Democratic lobbyists since the taxpayers rescued the automaker in 2009.
GM teamed with Navigators Global and the Podesta Group beginning in 2010 and soon arranged six-figure contracts with lobbying teams headed by Democratic bundlers Vin Roberti and Tony Podesta. Each earned top nods from GQ’s Monthly Power List soon after inking the GM contracts.
Podesta Group, ran by John Podesta who happened to be on Obama’s “transition team” and also president of the Soros-funded Center for American Progress. I thought Obama promised there would be “No Lobbyist” in his administration? Just another documented lie from Obama who keeps rewarding his cronies with taxpayer money."
Yup, most transparent administration evvvvvver...
@swimmergirl
Thanks for the link...very interesting
And there is a new health Insurance twist too. Increasingly employers self insure their health plans paying a company to administer and purchacing catastrophic care plans. So your boss pays the small claims and if you get really sick the catastrophic care kicks in. There is the potential for large employers to make money on company benifits while reducing risk. The dark side is that health assumptions could influence hiring decisions which could result in increases in age and disability discrimination.
The money the large corps put into washington is stacking up against the little guy.
@calypso
"How sad it is to read that fellow Americans think so little of the freedoms that we enjoy in our country."
I appreciate my freedom...I don't appreciate perversions to the rules like the ones practiced by the credit card industry...or the abuses in preditory lending. I don't appreciate those that lie cheat and steal to make themselves wealthy on the backs of hard working americans. The vultures that swoop in to take over the homes of those that lost them to fraud and theft are reprehensible creatures that you would forgive instead of a homeowner that was lied to whome you would villify as being stupid.
No I simply cant get on your freedom train because your freedom leads straight to slavery.
Different ways to "complain"
There is a lot of corporate red tape, not every company gives good service, there can be laziness within many companies that allows for a lot of crap out put.
BUT
I feel I do get the choice whether or not to spend money I work for at said companies. I choose not to deal with certain retailers if I have received sub standard service. I don't patronize restaraunts where owners or management have been arrested for drug charges. I choose where I feel comfortable spending my money. I don't do starbucks because they are not local and there are local coffee options. I have a choice and with my pocketbook I have a voice.
With government spending I do not feel that same ability to cut off even my meager pennies from agency coffers. I think that is the difference, the feeling of not having a choice. It isn't that I oppose any service I do not directly get benefit from, that is asinine. But there are some expenditures I disagree with, I don't feel they promote even the "greater good". Since there are no little boxes on my tax return form for me to allocate my contribution where I see fit. I feel helpless. That makes me more apt to complain. As my dad said, I vote so I can complain. At least I tried to be heard.
government works great for us alaskans
The U.S. government spent $17,762 for every man, woman and child in Alaska in 2010, putting the state at No. 1 for per capita federal expenditures — 69.8 percent above the national average,” according to the summary written by economist Neal Fried in the February 2012 edition of the state publication, Alaska Economic Trends.
we are all commy pinko welfare queens now!
LONG LIVE THE PFD!
@mamat - Is anything right in
@mamat - Is anything right in America with you?
Try to put 2+2 together and get 4 instead of 5.
Preditory lending? I'm guessing my definition of predatory is much different than yours. How many pages long are those government regulations that banks must bow to? Are Barney Frank or Chris Dodd heros of yours?
Do some research on the Community Reinvestment Act signed into law under Carter and which Clinton doubled down on. Then maybe you'll have just an iota of sympathy for the banks. Maybe?
Ummm, last time I purchased a home there was this really, really long contract that I had to put my name on atleast a dozen times. At the end, it said if I didn't pay my mortgage to the bank, they had the "right" to come and take their house back and try to sell it to someone that would pay them. It's really simple - personal responsibility. Banks are not there to serve at your pleasure.
Slavery, you say? That's just stupid and makes no sense. I've noticed that it's something new that the left likes to throw out though.
@calypso
When I signed up for my credit card (20+ years ago) I agreed to certain conditions. Since then the agreements have changed into a confusing whirlpool of loopholes that have been exploited by the issuing entities in new perverted ways. Universal defalt comes to mind. I read the provision and never imagined it would be used ways that have become standard. Not simply used for customers that pay late but for anyone no matter their payment history. How is this OK? A field of landmines just waiting for you to put a toe sideways.
The deregluation of the banking industry and the complete failure of government offices tasked with protecting the public is a crime. Ms. Brooksley Born ridiculed by Allen Greenspan (Mr. free market himself) reminds us nothing has changed. Allen Greenspan himself now admits he was wrong but NOTHING HAS CHANGED!
And...I signed all those papers 20 years ago when i bought my home. You telling me you read and understood every word in all those papers? Though I did ...I was at closing for 6 1/2 hours and still misunderstood several provisions. Yes my friend...your free market stragety is freedom to lie cheat and steal from the american people.
but hey...lets do without all government including useless wars
iraq
iran
afghanistan
border
drugs and
terror
bet that would save a penny or two!
Reform campaign finance
Regulate industry with the same zeal we pat down the american public to get on a plane
stop spending so much to micromanage gay people and birth control
Mama T
Government waste is "out right theft." Also, government handouts to certain businesses are helping them keep the price you pay as a consumer lower...thereby the Government is also giving you a handout.
good grief....
Calypso, you are aware there was history prior to 2009, correct? The two biggest years for GM lobbying in recent history were 2007 and 2008. You don't honestly think a major player only lobbies in years ending with "D" do you?
(I know, this is a blog, sources are cited at the bottom though)
http://www.opensecrets.org/lobby/clientsum.php?id=D000000155
And as for Greece, and Wisconson, I might add - - - you must realize that, like Social Security - these issues are not a surprise. Their government, like ours, saw this coming for YEARS and YEARS (it's not too hard to count the baby boomers and realize there will be an issue in 40 years........) The problem is, and continues to be - that politicians, because we don't have any reasonable term limits or campaign spending controls (which recently just got a whole lot worse, as you'll recall) or limits on Lobbying in general - politicians aren't beholden to you or I or the guy who works as a fireman for 30 years and expects the pension he was promised, or the grandma who paid into SS for 50 years but happened to be born 10 years after the baby boomers - they are beholden to the Lobbyists and corporations, who paid big bucks to get them elected, and now expect the laws to be re-written so they get the tax breaks, subsidies, loopholes and what have you, all of which have a detrimental effect on the budget and our economy at large, in my opinion. Not to mention leaving not much left over to pay down the pension debts so they don't balloon out of control.
Even in our state - the governor would rather pay his oil buddies than pay the bills up front that will allow Alaskans who work as teachers, firemen, police, and yes, government employees, to retire as promised after 20-30 years of working in good faith.
Calypso, I do agree with you....
on the home loan thing, partly. On my first and my current home, the bank was willing to loan me much more than I was willing to take, and during the first loan (1997) process, I was offered an ARM. Fortunately for me - I was paranoid enough (as a single person) to know that I absolutely had to NOT borrow more than I could afford to pay each month, even if I lost my current job and had to start over.
I think it is unfortunate that some lenders would take advantage of people who didn't understand what they were signing, but people have the obligation to not buy the 6 bedroom house with the pool if they can't really afford it - even if they want it.
HOWEVER - banks also routinely jerry-rigged the paperwork to allow for greater loans at lower interest than was called for, and then bundled these and other bad loans into larger packages that were sold and re-sold, creating money on paper for banks that was not supported in reality. This caused the larger portion of the housing crisis, and a lot of people who WERE responsible also saw their homes go underwater because of it.
This is absolutely not right, and not the fault of granted, more than a few, who's eyes were bigger than their bankbooks when they bought homes.
GM can lobby all it wants
GM can lobby all it wants with its own money. However, they still owe us taxpayers $27B from the bailout in late 2008.
They're just a little too cozy with this current administration. Stay away from the White House - if nothing else, it looks bad.
Greenspan and the free market. Not so much. And anyone married to Andrea Mitchell - just saying...
Pensions are broke, why?
Why are pension fund broke?
You start with employees/employers putting money into a fund.
A firm is hired to invest those funds, hopefully earning a good returns which will be used in the future to pay the promised benefits.
Those firms create a great way to earn interest: funds that were made up of home loans. Home loans are considered one of the safest investments, just after USA government bonds because they require a lot of money in a down payment and the borrowers are thoroiughly vetted.
A lot of those firms are owned by or own, banks, who make those home loans with federally backed deposits.
The firms/banks take out insurance in case the loans go bad.
The demand for these good interest rate funds goes up, and the firms respond by giving out more loans without properly vetting the borrowers. Many of these loans have low starting interest rates, little money down, and a large balloon payment after a brief initial period.
Property values go up, up, up , up, up! Everyone thinks it will never end.
The firms continue to make sure they have insurance in case the loans go bad, while giving out more and more loans, and investing more and more pension/retirement funds in these "collateralized debt reimbursement funds."
Many of the firms who are buying this insurance own those same insurance companies.
Home owners cash out equity in their current homes to buy newer bigger homes and really cool toys with the new loans.
Property values go up, up, up , up, up! Everyone thinks it will never end.
The demand for these good interest rate funds made up of home loans goes up, up , up, up! The firms respond by giving out more loans without any vetting of the borrowers. Many of these loans have low starting interest rates, no money down, and an even larger balloon payment after a brief initial period.
Some home loan borrowers, the ones who should not have been given loans, start to default on the loans when the balloon payments come due. This causes banks to tighten up the requirements for the loans. People who thought they would be able to qualify for a new loan before the balloon payments are due, cannot get a new loan and default on their home loans.
Banks stop loaning money to anyone. They go to the government for the insurance on the deposits. They don’t lose anything.
The firms line up for the insurance they bought in case the investments went bad. This causes the insurance companies to try and borrow money from the banks to cover the losses. The banks are not loaning money… This causes the insurance companies, and the firms that own them to go broke, which cascades back on those investors, and the value of all the stocks that were used as collateral for the firms investing goes bad.
The banks, firms, and insurance companies (who aare all invested in each other) go to the government and say “We’re too big to fail! Give us money or we’ll destroy the economy!” The government “loans” them money at an interest rate of zero. The government issues bonds to get this money. These bonds are purchased by the firms that asked for the money from the government with the money the government gave them at an interest rate of zero.
The pension funds, invested in the markets in order to pay for retirement benefits, plummet in value and thus their ability to keep up with promised benefits goes away. The people paying into these funds go to the goverment and say "Our retirement funds are broke, we need more money to pay the benefits we promised." The government says "NO! You are greedy scum who deserve nothing!"
A Tea Party arises and says "Those workers are lazy and deserve NOTHING! Unions are the problem because they ask for too much! That is why our economy tanked!"
Really, nothing to do with the big banks and the fat cats on wall street. This is all the fault of the unions, workers, and their government cronies handing out fat benefit packages.
Meanwhile, the big banks are bigger, the fat cats fatter, and the huddled masses are pointing the finger of blame at each other, not at the true culprits.
The Community Reinvestment
The Community Reinvestment Act of 1977 (CRA) provides a framework for financial institutions, state and local governments, and community organizations to jointly promote banking services to all members of a community. In a nutshell, the CRA
•Prohibits redlining (denying or increasing the cost of banking to residents of racially defined neighborhoods), and
•Encourages efforts to meet the credit needs of all community members, including residents of low- and moderate-income neighborhoods.
Combine those regulations and the shenanigans going on at federally controlled mortgage giants Freddie and Fannie and that explains pretty much the housing bubble.
Now we're heading down the same path with student loans.
Too much government involvement?
Sen. Orrin Hatch's take on
Sen. Orrin Hatch's take on public pension underfunding -
http://hatch.senate.gov/public/_cache/files/ecfaf678-a3ec-45a4-a2bf-3bca...
"Some have argued that the public pension underfunding crisis was caused by the collapse of the housing bubble and subsequent global financial meltdown in 2008, suggesting
that pension underfunding is a temporary problem that will be corrected by the states over time. This analysis severely understates the character of the crisis. Unfunded public
pension liabilities are a longstanding problem that existed well before the current economic downturn. Over 30 years ago, the Government Accountability Office (“GAO”) warned
Congress that poorly funded public pension plans could lead to a “fiscal disaster and possible loss of employees’ earned benefits.” The current pension debt crisis began not in 2008, but at least a decade ago."
And Orrin Hatch is?
A senior Senator with strong ties to the financial industry. Senator Hatch is the ranking member of the Senate Committee on Finance.
Campaign donations to Orrin from the Securities & Investment sector are his #1 donor at $694,071. Insurance is #4 at $326,944. I am sure he is unbiased in his opinion.
So let's keep pointing the finger at each other instead.