Corporate monopoly and the business climate

Republicans and many Democrats have sung a familiar tune over the last two decades: deregulate U.S. corporations, lower taxes, let the market do its thing. Many small-business leaders both in Maine and nationally often complain that labor unions, wage standards, and inadequate public schools – or some combination of these – create a bad business climate in the United States.

Yet even as unions have been undermined, the minimum wage eroded and our public schools more closely monitored over the last decade, competitiveness eludes us. U.S. wage stagnation and competitiveness problems may have other roots. No business can compete without healthy workers and supply and shipping networks that economize on scarce energy. Why our energy and health insurance conglomerates do not receive far more attention even from the small-business owners who constitute one of the traditional building blocks of the Republican Party is a mystery to me.

The small-business owner who wishes to attract the best and the brightest faces a daunting challenge when he or she wants to provide health insurance. Where HMOs do compete, costs and benefits are continually changing and establishing the deal that makes the most sense for any constellation of employees can become virtually a full-time job itself. The bottom line, however, is even starker. Far from achieving an efficient outcome, competition among private insurers produces a health care system that is about twice as expensive in real terms as that in most other major industrial democracies and yields health outcomes that leave the U.S. well behind our major competitors. Competition in many markets involves relatively few players with often more focus on advertising and on different ways of gaming the system rather than substantial differences in price. The U.S. health care system wastes between 10 and 20 percent of the premiums it takes in on marketing, administrative costs, CEO salaries, and dividends, as compared with about 2 percent for Medicare.

The costs of transit have also grown dramatically. Citizens are often told this reflects supply constraints, growing worldwide demand for oil, and the power of OPEC. Yet there is much evidence that high gas prices also reflect an oil industry that has become increasingly consolidated. Orono writer Wayne O’Leary argued in the Dec. 1, 2006, issue of The Progressive Populist: “The growth of oligopoly, bringing with it administered prices is key to clarifying the current chaos at the pump. From 1985 to 1999, oil and gasoline prices, while substantial, were relatively stable. Since 2000, however, their direction has been steadily upward, leading to an approximate tripling in seven years. This price expansion coincided almost exactly with the five-year wave of industry concentration that began in 1998 with British Petroleum’s absorption of Amoco and Atlantic Richfield, and culminated in 2002 with the merger of Conoco.”

Increasingly concentrated industries act more and more like literal monopoly. Corporate heads need not engage in formal price fixing. Each on their own can come to understand that price competition is not in their mutual interest. But even if O’Leary’s hypothesis is not correct, the industry’s control of a relatively finite resource has led to inordinate profits – made at the expense of other segments of the U.S. economy.

Oil companies claim they need – and use – this revenue for further exploration. They also use it, however, for marketing, for inordinate stockholder dividends, for lobbying, and for public relations. BP may claim to be beyond petroleum, but most of the dollar spent by the multinational oil firms keep us on the same unsustainable path. Taxing some of these windfall gains and spending on public transit and expanded tax credits for alternative energy and conservation would greatly lower the cost structure of most domestic U.S. homes and businesses.

Similarly, replacing the U.S. health care system with a Medicare-style program for all citizens would give us far better health care at lower costs. Conservatives and business leaders have a familiar rejoinder, voiced by Philip Boffey in his July 5 New York Times oped: “suspicion of the insurance companies is matched if not exceeded by suspicion of the government.”

Many polls, however, show otherwise. Nonetheless, as economist Dean Baker has argued, the simplest way to resolve this dispute is to offer citizens a choice. Our corporate market economy gives us a choice among private insurance oligopolies but not a public option like Medicare. Why not allow – and provide subsidy to poor citizens – to buy into the private or public options and let the market decide how averse our citizens are to programs like Medicare. In my experience, Medicare not only is more efficient but less intrusive into private medical decisions than are the corporate bureaucracies now controlling so many health care decisions.

Our domestic economy is likely to become more just and efficient only by finding ways to blunt the political and economic stranglehold the health and energy conglomerates now hold. Public sector programs are not perfect or above reproach, but if given a chance many would buy into them now and once there would have at least as great a chance to fix imperfections as they do in their dealings with the corporate entities that dominate so much of our economic lives.