January 9, 2010

Obama Bails Out Republicans

The person who has the best chance of saving the Republican Party is Barak Obama. The president campaigned on change. He clearly stated that he was not going to allow big business to own and run Washington. If the health care proposal that is moving through congress is his version of change, the citizens of this great country are going to realize what he meant was “chump change”.

When he and his fellow democrats said more competition is needed in the health insurance industry, what did they do? They came up with the idea of a public option. The essence of the option was to create a not-for-profit health insurance company run by the federal government. They refused to tackle the oligopolistic prone health insurance industry. One of the pillars that made this country and its citizens the most prosperous in the world is the free market system called capitalism. Capitalism is under attack from within the business community and our government refuses to do anything about it.

With Barak Obama’s refusal to bring about the change he promised by weakening the strangle hold oligopolistic industries have on our “free markets” he is giving the republicans the opportunity to rise from their terminal illness. The citizen is losing his right to access the free market and it is being taken away from them because the oligopolies have bought our politicians including Barak Obama.

Adam Smith when he discussed “rational self interest” and competitive markets in his book Wealth of Nations, envisioned many consumers buying goods and services from many producers with everyone looking out for their self-interest. By keeping markets “free”, producers pursue their rational self-interest and this best meets the needs of the consumers and the citizens of our country, who are also looking out for their self-interest. Under this system, what is in the producers self interest is to provide the best product possible to the consumer, while striving to be a low cost producer for their niche. If they do not, they will perish.

This consolidation of markets began in the late 1960's early 1970's in the auto industry when three giant corporations and one union transformed it from a free market to an industry that was controlled by these entities. As this transformation was occurring, the auto company's and auto union's self-interest became separated from what the consumer wanted and/or needed. Competition between the companies broke down and this gave an opening for foreign competition to enter our markets and the beginning of the end of the American auto industry as we knew it.

Other industries saw what was happening in the auto industry and saw that government was not objecting so naturally they followed the same path with little concern on any ones part that we were losing our free market system to a more centralized market system of oligopolies. As a result, we now have major markets where the producing entities self-interest is not always in line with the self-interest of the consumer. What is in the self-interest of the entities in these industries is to keep the oligopoly alive. Thus, this was the creation of special interests and lobbyists.

These oligopolies have bought the protection of our representatives in Washington and state capitals. I am baffled by the fact that corporations and unions cannot vote in this country, however they are allowed to buy votes with their contributions.

We lost track of a key ingredient that Adam Smith identified as necessary in order for “rational self interest” to work. There must be many producers. In too many industries, the number of producers has shrunk and the ones remaining have gotten “too big to fail”. This is true in the auto industry, the banking industry, Wall Street, health care and will soon be true in the computer software industry.

In the end, the republicans may be thanking Barak Obama for providing them a bailout package called the free market.

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