Vail Daily letter: Capitalism’s dark side
Vail, CO, Colorado
Not to be outdone by the health-insurance industry, which has been passing out double-digit premium-rate increases for 2010, the pharmaceutical industry has increased prices on its brand-name drugs by an average of 9 percent in 2009.
This comes within the backdrop of consumer prices deflating at a rate of 1.3 percent this year. The result of the brand-name drug-price increases will be more than $100 billion in profits over 10 years – exceeding the $80 billion over 10 years the pharmaceutical industry committed to the Obama administration to help contain the cost of health care.
Did the Obama administration actually believe that a segment of the health care industry would stop worshiping at the altar of the god of profits?
The magic word here is “profits.” Our stock market as measured by the Dow Jones Industrial Average is up about 65 percent over the past eight months. This rise has been accompanied by a sharp rise in the rate of productivity, an increase in the output per hour worked, a reduction in employment costs and rising corporate profitability.
Those of you who are still employed should be able to connect these dots. You used to be doing the work of two people. With layoffs over the past year and a half, you are now doing the work of three.
Participate in The Longevity Project
The Longevity Project is an annual campaign to help educate readers about what it takes to live a long, fulfilling life in our valley. This year Kevin shares his story of hope and celebration of life with his presentation Cracked, Not Broken as we explore the critical and relevant topic of mental health.
You are working yourselves to death, and statistics of this recession and of past recessions prove this point. The death rate actually decreases during economic recessions.
Why? Well, there are a number of reasons: fewer automobile fatalities because people drive less, more time for sleep and relaxation and perhaps visiting the gym more often for those unemployed. And no work-related stress for the unemployed. Apparently, the stress from financial challenges of keeping mortgage payments current and putting food on the table are not of the magnitude of stress on the job.
Hate to deliver bad news to those who retain their jobs through this economic crisis, but your employer will deduce that you can handle the workload at your current salary. If your 401(k) provides matching company payment in company stock to some degree, then you should rejoice. Except maybe if you are not in the upper-management ranks that are awarded stock options and restricted company stock. When they cash in, your stock will be diluted and worth less.
Such is life and work in a free-market capitalistic country and in every other economic system. Life’s a b—-, and then you die.
Free-market capitalism has been widely recognized as the primary driver of our standard of living. For its most ardent proponents, there is no downside.
Unfortunately, there is. Free-market capitalism has a dark side. The credit crisis, which began in midyear 2008, the real estate bubble, the near collapse of our commercial- and investment-banking systems, the invention of debt instruments of varying quality into salable securities in which risk cannot be calculated and the globalization of these problems are all examples of the dark side of free-market capitalism. The tech bubble that exploded in 2000 through 2004 is a great recent past example.
Critics will say that government has played a leading role in all of the above examples, and they are correct. All administrations in my experience have played to this tune. They have promoted excessive spending, accumulation of unsustainable personal debt and ostentatious display of wealth as a proxy for self-worth.
To fully reap the benefits of free-market capitalism and diminish the problems of excesses, we need to understand the characteristics of that economic system.
Free-market capitalism is brutally impartial to human pain. It is totally focused on efficiency. It seeks the lowest cost of production (ergo, the exporting of jobs overseas). It knows no higher authority. It is impervious to environmental concerns. It is obsessed with winning with no empathy for losers. Its primary measure of success is profits.
And it is amoral. It is not an economic system that is inherently corrupt. Only humans can make it so. It is an economic system that can be deployed in any political system (witness China and more recently Vietnam).
As a nation, we seem to have a difficult time harnessing the benefits of free-market capitalism while mitigating its dark side. It’s time we learned.