Back in August I argued that, despite accusations of socialism, what this Administration seems to be working toward is recasting the US as a European-style corporate state. We are quickly discovering that this is not just some fuzzy prediction of future intentions — the implementation of the 2010 health care law is making it quite clear that this transition is already taking place, to the detriment of all but a small elite group in power.
Corporate states tend to feature top-down organization of the economy, generally by a troika of large corporations, labor unions, and government bureaucrats. This organization may be highly structured, as in FDR’s National Industrial Recovery Act or Mussolini’s Italy (which was pretty clearly the template FDR used for his efforts). Or it may be organized more informally, as in many current Western European nations.
In either case, the justification is increased efficiency, with the edicts of the best and brightest technocrats substituting for the messy disorder of market competition (death panels, anyone?) And in both cases, the failure modes are the same: information and incentives. Information, because no group of bureaucrats can possibly digest enough information to optimize prices or the distribution of goods. And incentives, because time and again well-intentioned efforts tend to devolve into the in-clique of business, labor, and political actors seeking to optimize the well-being of their own groups to the detriment of all others.
The losers are, well, everyone else who does not have the power to run to Washington for special treatment — consumers, taxpayers, private workers, entrepreneurs, and small businesses.
I won’t revisit the passage of the health care law, as the twists and turns could take five columns to describe. Suffice it to say that despite the anti-corporate rhetoric of the Obama administration, a few large corporations and prominent labor unions were allowed to mold the law to their benefit. You think Obama hates the health insurance companies? Well, whose product will everyone in America now be required to purchase a few year’s hence? Does the government force every citizen to buy your company’s product or service?
More recently, additional powerful evidence has emerged that the health care law will be run by and for the benefit of a few elite. It has been learned over the last few days that HHS has given out 111 exemptions to the requirements of the new health care law. Where in the legislation does it allow for such exemptions? Where does the law specify a fair process and consistent criteria for obtaining such an exemption? The answer is, nowhere. A large, influential corporation came to the Administration demanding special treatment, and they got it. After that, the race to DC was on. No one will be surprised to the stalwart Obama supporter SEIU among the select.
The list of beneficiaries is a mix of corporations and labor unions who have somehow wrangled special attention in Washington — in effect allowing just 111 lucky organizations out of 15-20 million US business to be allowed lower cost labor than their peers. Does your restaurant compete with McDonald’s or Ruby Tuesdays? Sorry, but through their political muscle, your competitors have received special exemptions from costly regulation, and you likely will not.
In founding this country, Americans explicitly rejected the institutionalized class divisions and hereditary aristocracy of most European states that handed out special privileges and exemptions to elite groups. It is amazing to me to see children of the 1960’s, who fought against the second class status of blacks through the civil rights movement, take such positive steps to return the country to a system of tiered citizenship where different groups are subject to different laws.
This is how the corporate state works — while casting all its actions under an egalitarian veneer, the results are anything but egalitarian. The politically powerful and connected now operate under different laws than everyone else.
The goal is in fact not equality, but a new distribution of rewards. Instead of success accruing to the business that best serves its customers, has the best productivity or whose owners simply work the hardest, success is awarded to those who have political power. It is a victory for the credentialed and connected over the capable. It is a crony system only slightly more sophisticated than that which obtains in most third world dictatorships.
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