Why the US is Not a Free Market

Lawmakers in Congress receive significant rewards from corporate lobbyists. Big corporations and industries spend big bucks wooing our representatives. The goal of these lobbyists is to convince Congress to enact laws which are favorable to the them. The lobbyist will court lawmakers with fancy charts summarizing various statistics which support their case. Of course, such statistics are biased to favor the industry in question.

In addition to official corporate lobbies, there are non-profit organizations pleading for support. We must avoid judging these groups without first doing our research. Many of these "non-profit" organizations are funded by commercial enterprises. This gives the illusion of an independent lobby, when in fact it quite biased.

Here are some clear examples (just to name a few) of how US corporate interests have been able to usurp monopoly regulations. As a result, the free market has become so eroded it can no longer function properly.

Cell Phone Service

When you buy a cell phone, you have a choice between pre-paid service or a 2-year contract. In either case, your phone ONLY works with the original service provider. Your selection of phones is also limited to what the provider sells. Such a phone is said to be "locked". Suppose you buy a T-Mobile phone on a contract. 3 months later, you are transferred to a different location where T-Mobile service is sporadic. You are stuck for the duration of the contract. The contract is a legally binding debt.

Let's say your contract period has almost lapse and you wish to modify your service package. Guess what? The provider will extend your contract another year.

If you travel to a foreign country often, you may want to use the same phone. You can't do that without first getting your provider to "unlock" the system board. When you ask about this, they will first try to sell you a special "international" plan, with international calling rates charged at over $1 a minute.

I can buy a GSM phone abroad, say, in Singapore, at 7-eleven or an electronics store which is unlocked by default. To activate it, I simply stick in a pre-paid SIM card for the provider I wish to use. When I go to Thailand, I can walk into a 7-eleven and get a pre-paid SIM card for the local provider and swap cards until I return. In either country, the local per-minute dialing rate is between 5 and 7 cents a minute.

Health Industry

Insurance
Most people believe we have a free market system of health care. In a free market, you are able to choose your insurer. Your choice of providers would be based on the innovation, treatment style and price. In fact, you have no choice in these matters.

Your insurance plan is negotiated by your employer and that is the plan you get. Your wages are reduced to compensate for the employer-paid portion of the premium. If you opt for another, you must pay the full premium out of pocket. Your employer will not alter your wages to give back their share of the premium.

Because the insurance market is a monopoly dominated by a handful of companies, there is no real competition in the insurance market. Premiums and co-pays has increased steadily and significantly. Overhead for your provider has risen to nearly 50% of the cost of providing care. Regardless of your insurer, regardless of your provider, the insurance company dictates the process your doctor must follow in order to get paid. This limits how a doctor approaches your treatment plan. The physician is not allowed to innovate or follow their "gut".

Because admin costs are so high, and because insurance companies deny so many claims, your doctor now crams too many patients into their day. You are likely to wait an hour or more before seeing the doctor for only 10-15 minutes.

Malpractice lawsuits are another destroyer of the free market. Malpractice claims can be quite lucrative for patients with a grudge, but particularly for lawyers. Because of this, too many false claims are made before the court—forcing doctors to carry huge liability insurance. In a free market, there would be no motivation for such frivolity. Instead, a doctor would earn profit solely by his reputation.

Big Pharma and the FDA
The purpose of the Food and Drug Administration is to protect consumers from fraud and dangerous products. The FDA has a staff of scientists and researchers to review and test products before they are approved to market, which can be a lengthy process. Pharmaceutical companies for years had complained about this lengthy process. Because it is limited in resources, the FDA can do only so much. Enter the current system: allow drug companies to pay big bucks to expedite approval.

This turned out to be a serious problem. The FDA began to regard "paying" drug companies as "customers"--rather than the people it has sworn to protect. In addition, many of the FDA executives are appointed temporarily, only to return to private industry when their term is complete. Ergo, they don't want to appear unfavorable to the very industry which guarantees their employment. The end result has been a virtual monopoly of drug companies, who now spend twice on consumer advertising than they spend on R & D.

In it's November 2007 report, "FDA Science and Mission at Risk" the Subcommittee on Science and Technology outlined these and other issues impacting the FDA's ability to perform it's mission.

A Managed Economy

The Federal Reserve Undermines Free Market Corrections
Without getting into the details of how the Fed works (an novel in itself), it is fairly to understand it's impact on the free market.

We've all heard of bubbles, recessions, and depressions. Many of us have faced the effects of a slow economy. These are symptoms of a free market gone awry. If stock values become overinflated, the market will crash. In a free market, this is the logical outcome when assets become over valued. The result is recession, which is the market correcting itself.

This self-correction of the market is a natural and expected reality in a free market economy. It should not be feared, but embraced as proof of a healthy economic environment. To the Federal Reserve and commercial banks, its effects are more disastrous.

The primary role of the Central Bank is to control the supply of money in circulation. They increase the money supply by lowering interest rates, while raising rates to retract it. This increases or reduces the amount of new debt that is created. In the banking system, debt is it's only asset. When the economy sours, defaults on debt occur, reducing the assets of all banks.

Again, this is to be expected in a free market system. It should be factored in to any bank's business plan. Today's banks do not follow the models of successful enterprise. They don't have to. If a bank has problems, the Fed routinely lends money to troubled banks without requiring approval from Congress. To prevent banks from failing the Fed will alleviate the recession by lowering interest rates. In doing so, they undermine the free market's attempt to correct itself.

The repeated cycles of expansion/retraction has compounded to the point where the free market can no longer fix our economic problems.

The FDIC

The FDIC insures individual bank deposits and prevents consumers from losing their life savings. This is a great concept meant to protect consumers and I would not recommend getting rid of it in the current environment. Even good banks can fall victim to economic conditions it cannot control, therefore the FDIC it is a wise protection to have in place. It is also necessary due to flaws in the current monetary system.

The existence of the FDIC, however, can contribute to bad decisions made by some banks. A bank whose deposits are insured can be more tempted to mismanage their assets and put deposits at risk. Again, this interferes with the free market.