Dark Capitalism
Dark Capitalism: Products and Services That Have Harmful Capitalistic Incentives
Health insurance companies, private prisons, pharmaceutical companies, medical service facilities, public utilities, transportation, communications, higher education. What do all these enterprises have in common? Keep reading.
I love capitalism. I unquestionably believe that were it not for capitalism, my lifestyle and quality of life would be drastically less enjoyable than it is. Capitalism in and of itself is a marvelous human innovation for which we should all be grateful. I certainly am.
But, and there is always a but for stories like this, most good things can have a dark side, too. And capitalism has certainly been deployed in America for countless nefarious intentions. Capitalism on its own does not know how to be bad or cause bad outcomes. But humans are very capable of weaponizing capitalism against society.
Much effort has been successfully expended to privatize many industry sectors that were originally intended to affordably accommodate public wellbeing. The argument that won the day during the Reagan years was the theory private industry is incentivized to deliver services and products more efficiently because of the profit motive. On the surface, I would enthusiastically subscribe to that premise. Now, let’s look at the rest of the story, as someone once famously said.
Private industry is always, no exception, driven by incentives. The most obvious incentive is to charge the highest acceptable price possible while delivering the lowest cost service or product possible. There is a tipping point on both ends of that spectrum and the challenge of any private industry entity is to get as close as possible to that tipping point without exceeding it. Can it be said that the primary cause of dark capitalism is bad incentives? Let’s seek an answer to that question.
Following is a list of some business sectors that are thriving from the impression that society is better served when services are primarily driven by profit motives:
Health insurance industry — Harmful Incentive: charge the highest possible premiums while paying as few claims as possible.
The health insurance companies in America are entirely and simply middlemen. There are no examples I can think of where middlemen reduce costs and improve services. They are funnels and gateways at best, and they control access between the consumer and the purveyor. For a health insurance company to prosper and contribute to the wealth of its stakeholders, there has to be high and growing demand. This industry needs laws and regulations tilted in its direction to control access to critical medical services. It also needs to minimize in every way that is legal the amount paid out for claims on behalf of consumers to their care providers. It is beneficial and convenient to this industry that morals and ethics are not primary considerations in determining how they function.
Private Prison industry — Harmful Incentive: participate with law enforcement agencies as much as possible to facilitate the highest possible occupancy.
The prison industry could be regarded as an involuntary hospitality business. The hospitality business earns and grows profits by maximizing occupancy. There is no other option. Heads in beds make money. If everyone stopped committing crimes that the law resolves with incarceration, this industry would go up in smoke in a blink. That would be unacceptable. Therefore, it is vital that the private prisons have great working relationships with the sheriff departments everywhere possible. Profits can only grow if prison facilities are as full as possible. America’s archaic drug laws are the most productive channel feeding private prisons. The industry lobby fights aggressively behind the scenes to discourage legislators from eliminating or reducing penalties that lower the number of potential inmates. Those inmates are money to private prisons.
Pharmaceutical industry — Harmful Incentive: Invent diseases to develop medications for, and develop those medications to treat, not cure, chronic disease and illness.
As a corollary to the prison industry, the pharmaceutical industry can best prosper by serving the unhealthiest population possible. It is not in the best interest of the pharma industry to develop curative medications. Curing sick people reduces the available market for drugs. Treating sick people increases demand for drugs. It sounds like a conspiracy claim to suggest that the pharma industry prays for as many chronically ill people as possible. However, if the volume of drug sales are going to increase to enrich stakeholders, that is a necessary circumstance. Treat, don’t cure, and do not become overly proactive in assisting people with learning better health management practices.
Medical services industry — Harmful Incentive: Charge the highest fees possible while delivering the lowest level of onsite care possible and driving up occupancy as much as possible.
This is a multi-faceted category. It includes not just hospitals, but also clinics, specialty treatment centers, nursing homes and all sub-groups of senior care enterprises, to name a few. What they all have in common, like the prison and hospitality industries, is the need for a perpetually flowing pipeline of people who are channeled into these facilities through no choice of their own. It is another heads in beds or waiting rooms model that can only grow and thrive if the need increases. There is no profit incentive for helping people avoid these destinations.
Privatized public utilities — Harmful Incentive: disburse the maximum value of dividends possible to stakeholders while seeking ways to have infrastructure maintained and upgraded by tax payers.
Critical public utilities are those that people cannot live safe and healthy lives without. They include the natural gas, electricity, water and sewer services present in every human dwelling. They must be affordable to all for a healthy and safe society. However, to enhance stakeholder value, these business entities are pressed to charge the highest prices possible without consideration of who can afford the services. These businesses are overseen by regulatory boards because it is assumed that without this oversight, they would likely set prices that would leave large numbers of citizens without access.
Transportation — Harmful Incentive: Keep the population behind the wheel of as many vehicles as possible even when the only occupant is the driver.
People in American society today must be mobile. They essentially have no choice. Vital services such as drug stores, supermarkets, public schools, individual workplaces, healthcare facilities, all need to be reasonably accessible for everyone. There was a time in the past when the proximity of all these suppliers were in easy walking distance for anyone who lived in a municipality. But consolidation of these businesses has disbursed them far enough away from where people live that they need vehicular transport of some affordable nature. Municipalities have moved away from being the source for this need for many decades. There are positive signs today that this is reversing, albeit much to slowly.
Communications industry — Harmful Incentive: Monopolize services as much as possible to reduce consumer options that might be more competitively priced.
Communication in today’s America includes cell phones, internet access, and emergency call capability. These services, with few exceptions, are all privatized and much too costly compared to the economies of scale they could pass on to consumers. Most advanced nations maintain private/government partnerships to deliver high quality service at very affordable cost to citizens. There are several tiers of service that can be provided, but if there is a basic low cost level of service that makes citizens feel safe, it is fine to have premium, luxury levels available as well.
Higher education — Harmful Incentive: Encourage extensive participation in student loan programs to enable education establishments to inflate costs beyond the value they provide.
It is an inarguable fact that post-secondary education of all categories has seen costs to consumers escalate beyond the value proposition they purport of offer. We still hear advocates insist that it is still economically viable even at currently extreme cost. However, that argument is losing credibility and it has become necessary to expand the definition of viable beyond the rational.
This is not a comprehensive list, but rather a sampling of American commercial life. I am sure the reader can think of other examples I have not included.
In my opening paragraph, I asked what do each of these categories have in common at their most basic level? A healthy society requires that each of them be affordably accessible to everyone regardless of their personal circumstances in every respect, because in an advanced society, they all should be public goods. Primary emphasis on the profit motive corrupts the probability and viability of that necessity. An unfettered capitalism system is motivated and incentivized to charge as much as possible, and deliver as little as possible, without violating regulations and laws. More advanced nations and societies recognize that adequately recovering cost of delivery of these services and products promotes a much healthier culture and general economy.
And that is my brief portrayal of dark capitalism.
