Wednesday, October 21, 2009

The Wall Street Journal Defends the Predator State

The Wall Street Journal Defends the Predator State: Robert P. Murphy: Mises Daily

Who's the Predator — the Government or Corporations?

Wall Street Journal columnist Thomas Frank starts his piece with the angle that everyone on Capitol Hill took his advice to read James K. Galbraith's book The Predator State, which concerns the capture of government agencies by corporate special interests. Frank then expresses dismay that many Republican politicians have apparently misunderstood his advice:

During a debate last week over two Democratic proposals for a healthcare bill featuring a "public option" — a government-run alternative to private health insurance — [Iowa Republican Sen. Charles Grassley] announced he opposed the idea because, as he put it, "Government is not a fair competitor.… It's a predator."

The word "predator" seems to have become something of a Republican talking point. Mr. Grassley's colleague from South Dakota, John Thune, went on the record in July to warn that, when government goes into business, it "becomes not a competitor but a predator."

Have these two august men of the right secretly become fans of Mr. Galbraith, one of our leading liberal economists?

If so, they need to go back over "The Predator State" a second time. Although they have snapped up Mr. Galbraith's catchy title, they have misunderstood his message.

Hmm, that's interesting. Even hardcore-progressive activists smell a rat in the emerging healthcare "reform" bills, and accuse Obama of being a "charming liar" by selling out to "Big Pharma" and other villains.

What we have in Washington is the worst of both worlds: the government is greatly expanding its role in healthcare, and is at the same time redistributing billions from regular Americans into the pockets of politically connected corporations.[1] (The same thing is playing out with cap-and-trade legislation, as I explained recently on Fox Business.)

Granted, Republican congressmen — with one notable exception — aren't actually proponents of a truly free market. They typically oppose only certain types of corporate welfare, while generously supporting other types (such as military contracts). Even so, Senators Grassley and Thune are perfectly correct when they claim that a "government option" in health insurance would not be true competition, but instead act as a predator on the market. Unfortunately, Thomas Frank has no grasp of even basic economics and ends up writing sentences that would embarrass USA Today, let alone the Wall Street Journal:

What makes government predatory, Mr. Grassley seems to believe, is its public-mindedness. Were government to offer health insurance to everybody without the industry's many devices for excluding risky individuals, some seem to fear, it might be able to offer consumers a price too fair for the profit-minded sector to match.

This is a curious reversal for a movement that ordinarily celebrates Darwinian struggle and the destruction of the weak by the strong. Just think of the conservative caricatures that must be inverted for this argument to work: All those soft liberal bureaucrats? Ferocious man-eaters. The welfare state? Law of the jungle.

No, Mr. Frank, what makes government predatory is that it steals its resources from unwilling taxpayers. In contrast, insurance companies (at least until Obama's mandate goes through) can't force people to send them checks. A government enterprise can put any private analog out of business if the politicians are willing to throw enough money into it.

Read the rest here.

: Remember this is being crafted in the Senate...time to repeal the 17th folks before we are bankrupted completely.

On another note, I had some internet problems and couldn't post for the last few days; my apologies to the readers.

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