In an Acton Commentary last month, Jordan Ballor presented a helpful explanation of the differences between “capitalism” and “corporatism”, a capitalist system that has been corrupted:

The main dynamic of the market system is the relationship between the producer and the consumer. Corporatism, by contrast, brings to the fore the role of the “managerial state,” in which the government takes on an increasingly larger task in telling producers what they should produce and consumers what they should consume. This can be done in many ways, some more implicit and others more aggressive. Corporatism is distinct from socialism, because under corporatism the means of production (capital) remain in private hands. But the private firms are not simply free to respond to market signals. Instead, under a corporatist structure, the government directs firms in the ways in which they should employ their resources, sometimes through moral suasion, but more often through regulation, tax policy, and legal directives.

Yesterday, Peter Schweizer wrote in The Daily Beast about how some pharmaceutical companies are using corporatism to their advantage—and to the detriment of the rest of us:

The Obama administration’s mandate that all health insurance companies must provide coverage for contraceptives has set off an explosive debate about religious freedom and women’s health issues. The attention has been focused on the administration’s insistence that religious institutions, such as Catholic hospitals and schools, would be required to offer the benefit for their employees, even though it contradicts church teaching. But completely ignored is the more fundamental problem: this mandate is not only about the bedroom, it’s about the boardroom. You’ve heard of crony capitalism? Well this is America’s first example of crony contraceptives.

Forget for a minute the religious question and look at who wins big here: Big Pharma. This mandate is not really about condoms or generic versions of “the pill,” which are available free or cheap in lots of places. This is about brand-name birth control drugs and other devices that some consumers swear off because they are too expensive. The Health and Human Services (HHS) mandate requires health-insurance companies provide contraceptive coverage for all “FDA approved contraceptive methods.” It does not insist on generics. And it does not offer any cost containment.

What’s more, the mandate prevents health-insurance companies from having copays or deductibles for the benefit. This is the perfect set up for Big Pharma. Since the drugs will be paid for by a third party (insurance companies, who will pass the cost on to employers and the rest of us), the consumer won’t worry about the price. Expensive brand names will no doubt see demand rise. Ask more health-care analysts why the cost of medical services continues to rise so rapidly and near the top of the list is the fact that a third-party payment system won’t contain costs.

Read more . . .


  • http://twitter.com/jurisnaturalist Nathanael Snow

    The real question which has to be addressed is whether the market can constrain monopoly sufficiently by itself.  I’m reading Walter Eucken now, and he seems to be concerned that the conflict may lie in whether freedom of contract can be consistent with market systems leading to liberty when freedom of contract includes freedom to collude, or to write enforceable contracts among colluding parties.
    When the state merely works to enforce such contracts, there are problems enough.  What we have now is the second stage, which is where the state uses regulation as a way to restrict exit and entry into an industry, but there is a de facto enforcement of the cartel. 
    What is the right way out?
    Perhaps competitive legal systems within political systems would come to the same realization that the competition among political systems has discovered: that courts should not enforce collusive contracts.  Further, more competition among political systems (perhaps by increasing the effectiveness of the Tiebout effect by liberalizing migration) might also demonstrate that regulatory infrastructures serve to protect cartels.
    Finally, perhaps what we might consider is whether political systems can be justified as legitimate under any circumstances, given that they without fail lead to power differentiation which can be influenced by wealth differentiation, which by itself imposes no harm on others.

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