Wednesday, December 30, 2009

Tuesday, December 29, 2009

From Joe's Vault: On Natural Monopolies

Joe's been kicking back a little during the holidays, but an old post seems relevant now in light of the health care debate. And, having noticed that Texans are now paying much higher electric rates than our neighbors are, even after we deregulated, this seems all the more relevant. From Sept. 28, 2007:

By Manifesto Joe

The late Molly Ivins once wrote something to the effect that after a service is deregulated, the result is that people often discover why it was regulated in the first place.

For 30 years, the "Priesthood of the Free Market" has been hellbent to sell Americans on the deregulation and privatization of damn near everything. Their progress has been astonishing. Even the Iraq war seems to have been about half outsourced.

After considering the deregulation of the electricity market, I am inclined to look beyond the "true believers" of the free market, and toward those whose only true belief is in maximization of profits, no matter the cost to anyone else. Remember the story of the Trojan Horse?

But the tide may finally be turning. It appears that many officials in states where electricity has been deregulated (about a third have done so) have come to similar conclusions as the late Molly.

The Sept. 21 online edition of the Fort Worth Star-Telegram reported:

Support for electric deregulation has dramatically fallen among the nation's utility regulators, with one-third in deregulated states expressing the likelihood of some sort of re-regulation, according to a new survey.

Conducted in conjunction with Standard & Poor's, the telephone survey of 96 state utility regulators also showed a plurality answering "none" when asked which states operate the most successful deregulated market. ...

Tim Morstad, an analyst with AARP-Texas ... said the poll should some as no surprise to anyone who pays a light bill in Texas. ...

"The rest of the country is figuring out what Texas consumers already know, that deregulation fails to deliver lower rates and better service," he said. ...

The survey also found that 43 percent of regulators in states with deregulation say it does not work well, and 37 percent said it does. Moreover, 54 percent of regulators in states with deregulation report that re-regulation is likely.

Texas is far from the only state where ratepayers have seen this kind of deception. This is from an article carried by The Associated Press in April:

BENTON, Ill. --This wasn't supposed to happen with deregulation. Electric bills were supposed to go down. Instead, Ellie Dorchincez can almost see the dollars evaporating every time she turns on the lights or opens the freezer at her small Farm Fresh grocery store.

Her electric bill, which used to be about $800 a month, has jumped to $1,800. ...

The cause of her distress is a common problem: the failure of deregulation to deliver its promise of lower electricity prices. In many states, it's had the opposite effect with sharply higher rates -- 72 percent in Maryland, up to 50 percent in Illinois.

Not one of the 16 states -- plus the District of Columbia -- that have pushed forward with deregulation since the late 1990s can call it a success. In fact, consumers in those states fared worse than residents in states that stuck with a policy of regulating their power industries.

An Associated Press analysis of federal data shows consumers in the 17 deregulated areas paid an average of 30 percent more for power in 2006 than their counterparts in regulated states. That's up from a 24 percent gap in 1990.

The idea was to move from a monopoly situation to robust competition for electric customers, with backers promising potentially lower rates in state after state. ...

But competition, especially for residential and small business customers, rarely emerged. ...

Consumer groups ... say deregulation has had a chance to prove itself. In Texas, for example, competition did develop after rate caps ended -- but the energy prices remained higher.

In Robert Kuttner's now-classic 1998 book Everything for Sale: The Virtues and Limitations of Markets, the economist wrote (p. 228):

We regulate some industries because they work more efficiently as monopolies. It would be wasteful and duplicative to have two parallel gas pipelines, two sets of telephone poles, two parallel rail lines, or two electric grids. Neither supplier could cover his costs by running at half-capacity, and both would soon have to raise prices or go out of business. Left alone, one would likely absorb the other. ...

Once we tolerate a monopoly, the producer is no longer subject to the discipline of competition. ... in principle the consumer is free not to buy the product. But in many natural monopolies, such as electricity, water, and transit, the product is a virtual necessity, and consumer demand is fairly inelastic; hence the consumer cannot discipline the monopolist.

Enter those godless socialists, the regulators. But I suspect that by now there are many God-fearing ratepayers in Texas and many other states who wish to God they had those crypto-Marxists back.

I reluctantly stuck with Reliant Energy here in the Lone Star State, in part just to see what they would do after the latest phase of deregulation. You know, like, to test the classical economic theory. Silly me. I went from paying 13.3 cents per kilowatt hour to 14.5 cents -- and the latter during the worst heat of the Texas summer. I'm certain, of course, that this was just a coincidence. I'm nevertheless switching to a "competitor" -- but not holding my breath for much improvement.

I posted this comment on a great blog, Red Hog Diary, about the health-care issue. But I think it also says a bit about natural monopolies that is salient:

A good incision sometimes works wonders. I'm going to try one.

The crucial thing so many seem to miss, and that populations of every developed country other than the U.S. have eventually understood, is that health care isn't a sector of the economy that is governed by a classical market mechanism. It's mostly what is termed a natural monopoly.

There are circumstances when one can make certain consumer choices. But if you've ever been picked up by an ambulance in what seemed like a life-threatening situation, you're not going to be able to shop around for the best room rates at the hospitals. Not if you want to live. Once you're in a hospital, you have to take it pretty much the way they offer it. It ain't like showing up at a flea market, haggling with the merchants like an Arab trader.

What I see is a fundamental mistake of people trying to apply classical economics to a sector that has never -- ever -- shown the appropriate characteristics for that. The rest of the world understands this. Even if they bitch about the particulars of their government systems, ask yourself why they aren't moving toward any emulation of ours.

Although I digress a bit -- these "thinkers" make the same mistake with utility deregulation. Where I live, under deregulation, I'm paying considerably more for electrical power now. It is another example of a natural monopoly. I can't play off two electrical grids against each other for lower rates, any more than I can do that between hospitals when I'm sick.

And, of course, I'm paying more for health care. Much, much more, outpacing inflation. Every passing year. And more for electricity. And more for medicine ... Get the picture?

I shouldn't leave this subject without noting that there is evidence of considerable chicanery by utility corporations left in charge of the proverbial henhouse. This is from an April 11 article in the online edition of the San Antonio Express-News:

Last week, TXU executives, facing a $210 million state fine for alleged price manipulations in the summer of 2005, threatened to withhold power by shutting down natural-gas-powered electricity plants if the allegations were not dropped.

That's so Enron. That kind of abusive management mentality went out of style with the Enron implosion of 2001. (It did? -- MJ)

The group of investors trying to buy TXU had to scold the TXU executives into withdrawing the threat a few days later. The executives' capitulation indicates that the potential buyers are deciding policy at TXU headquarters these days.

I have no argument whatsoever with market approaches that are genuinely competitive, socially responsible and deliver the goods in the best possible way. Ideally, the relationship between markets and governments is symbiotic: governments providing the infrastructure markets depend on to thrive, and strong markets supplying governments with the tax base they need in order to deliver on their end. Government entities can be maddeningly inefficient, but I've worked for large corporations that seemed to be trying to compete with them on that score.

This is how the prosperous economies of developed countries have really been built -- with a mixed system. (This World Wide Web: courtesy of the government. Look it up.)

As economist Kuttner wrote:

Faith in idealized market structures also has spawned a political jihad intent upon stripping away the community and governmental safeguards against market abuses and imperfections -- safeguards that are essential to the modern American system constructed during the Great Depression and after World War II. In addition, an overtly and proudly selfish ideology finances and propels the drive to cut taxes on the wealthy, punch holes in the social safety net, and "unchain" business from the shackles of regulation and litigation. The conservative catechism castigates those who would "reward need" by supporting public programs for the poor and, at its most radical, even rejects Adam Smith's conviction that the state must provide the bedrock of the educational and physical infrastructure of an industrialized society.

Plainly, utilities are usually natural monopolies, and Americans were ripped off en masse when the "Priesthood" sold so many on electric deregulation.

The corporate Trojan Horse is inside the gates, but it's not too late to drag it back out. It's just a shame that we the people, and more importantly our lawmakers, have to keep "relearning" these hard lessons.

R.I.P., Dear Molly. You saw this coming years ago, and you told us so.

Manifesto Joe Is An Underground Writer Living In Texas.

Tuesday, December 22, 2009

On Health Care: For Democrats, The Glass Is Half-Full; For Republicans, 'The Glass Is Mine'

By Manifesto Joe

Two votes down, one to go. It now looks certain that the maximum-diluted, piss-poor Senate version of "health care reform" will pass, and that some sort of conference-approved bill will make it to Barack Obama's desk.

There's not much meaningful left in the bill -- but something is better than nothing. Despite unhappiness among people like me, those who would heartily favor national single-payer, there are now no dissenters among the 60 Senate votes in the Democrats' bloc. Even Bernie Sanders (I-Vt.), who has described himself as a socialist, has apparently decided that this beats the status quo.

I'm not even a socialist; I'm a Keynesian. Yet my first instinct about this was to say, hell no. Then I thought some more.

There are some reasons why all 40 Senate Republicans are voting, as a bloc, against this. The denial of coverage for pre-existing conditions, one of the most heinous of the insurance companies' practices, would be banned. An estimated 30 million Americans would be able to get shitty private health insurance, with subsidies for those who can't afford it. SOMEBODY with plenty of juice doesn't want this passed -- they're just thankful that it wasn't real, far-reaching reform.

The Republicans, typically disingenuous, are doing a lot of posturing and posing on what they depict as a moral high ground. In a rare moment of genuine wit, Sen. John McCain, R-Ariz., called the Medicaid deals that were perhaps cut for Sen. Mary Landrieu's (D-La.) vote "The Louisiana Purchase."

Good for a chuckle, but come now -- Republicans never cut any deals like that to get legislation passed? It was recalled among TV journalists, at least those who actually possess memories, that Texas' own Tom "Twinkle Toes" DeLay, back in his infamous days as The Hammer of the House, came under fire for cutting deals like that in order to get the necessary votes for passage of Medicare drug coverage.

Granted, we've had some stinky bloodwurst made here, but a certain number of human lives will be saved because of it.

And, the issue won't go away. Monopoly insurers and Big Pharm are still screwing millions upon millions of us, with big profits going to their stockholders. I've been through the mill with them at workplaces -- Aetna, Blue Cross-Blue Shield, United HealthCare, etc. -- ostensibly competitors, but they certainly don't do price competition. Your employer is typically under contract for a calendar year. And, if they go to the expense and hassle of switching providers, they get pretty much the same deal from the "competition." Take it or leave it, MFs.

Something is better than nothing. In 1965, Medicare was passed for the growing population 65 and older. It's in trouble now because people don't want to pay the taxes to support it, and because crooked providers often find ways to bilk the system. But my wife and I have both been caretakers for sick, elderly people. I say, go ahead and cuss that single-payer Medicare system all you want -- that is, until you need it. Then it becomes something you can't figure out how people ever did without. I've got a big hint for those folks -- look at U.S. life expectancy, pre-1965 and post-1965. (And we're not even one of the best countries in that department -- about 42nd. Want to guess why that is?)

I repeat, something is better than nothing. LBJ couldn't get single-payer for all Americans through Congress. So he and the Democrats of the time (hey, and even a few Republicans, back when that party had moderates) did what they could do.

The fight for real reform is some years away. I'd hoped that, amid what is being called The Great Recession, enough people had become uncomfortable enough to have an epiphany -- that throughout the rest of the developed world, even conservatives realize that health care shouldn't be dominated by the profit motive.

But not quite enough people became that uncomfortable, and even some who did interpreted their pain in a back-asswards way, deciding that their taxes are too high while remarkably oblivious about their premiums and co-payments. And of course, the lobbies for Big Pharm and Big Insurance are the best that money can buy.

Some 56 senators, plus four who apparently had to be bought, are apparently going to deliver something, as opposed to nothing. So, let's get on with it, and see what tomorrow brings. Happy holidays.

Some related links:

Economist Robert Reich pretty much sums up my sentiments about this health care debacle. We're definitely on the same page.

The most magnificent Keith Olbermann sums up my initial reaction to this outcome. My source of disagreement is that, at 53, my days of idealism are long past.

And finally, Big Pharm has opened up a whole new door to obscene profits by doping up little kids, as well as their parents, with psychiatric drugs.

Break out that eggnog -- the real stuff. That's a much older panacea, and it probably won't kill you any quicker. Season's greetings.

Manifesto Joe Is An Underground Writer Living In Texas.

Friday, December 18, 2009

A Quote That Sums Up Right-Wing Health Care Idiocy

"Keep your government hands off my Medicare!"

-- Speaker at a South Carolina town-hall meeting, July 2009.

Source: The Yale Book of Quotations, 2009 edition -- MJ

Monday, December 14, 2009

Paul Samuelson, 1915-2009: A Loss In A Time Of Economic Illiteracy

By Manifesto Joe

Paul A. Samuelson, America's first Nobel laureate in economics, died Sunday at his Massachusetts home at age 94. He had lived long and accomplished great things, so I wouldn't normally have taken much note of his passing.

But Dr. Samuelson represents the passing of more than just one person. This was perhaps the last great economist who saw firsthand the transformation of American capitalism, and he went on to profoundly change the way many academics approach the discipline.

However, his passing is especially disheartening when one surveys the U.S. landscape and sees how little change his innovative thinking has wrought on Main Street, where Tea Baggers bandy the word "socialism" about without being able to accurately or adequately define it.

Dr. Samuelson was not a socialist, but rather a Keynesian, heavily influenced by British economist John Maynard Keynes (1883-1946). Like Keynes, Dr. Samuelson was not seeking an end to private ownership of the means of production. Keynes regarded Karl Marx's Das Kapital (1867) as an obsolete text, and far from an adequate prescription to end modern capitalism's shortcomings.

Where both Keynes and later Dr. Samuelson broke with the classical school of economics was on the role of government in finance, trade and the general welfare. Simplistic people on the economic right commonly mislabel this activist/interventionist approach as "socialism," but that's because they don't even know what socialism is. (See my previous post for the Webster's definition.) Mere income redistribution isn't "socialism" -- any time a government entity changes tax policy, subsidizes something, or appropriates public money for any purpose, income is redistributed. It is simply a question of to whom -- and historically, it has more often been the rich who benefited.

The Keynesian school is one that Dr. Samuelson popularized at least to some degree with his seminal Economics textbook (19 editions, first published in 1948).

The New York Times obituary for Dr. Samuelson contains a couple of paragraphs that sum up this peaceful revolution well:

The textbook introduced generations of students to the revolutionary ideas of John Maynard Keynes, the British economist who in the 1930s developed the theory that modern market economies could become trapped in depression and would then need a strong push from government spending or tax cuts, in addition to lenient monetary policy, to restore them. Many economics students would never again rest comfortably with the 19th-century view that private markets would cure unemployment without need of government intervention.

That lesson was reinforced in 2008, when the international economy slipped into the steepest downturn since the Great Depression, when Keynesian economics was born. When the Depression began, governments stood pat or made matters worse by trying to balance fiscal budgets and erecting trade barriers. But 80 years later, having absorbed the Keynesian teaching of Mr. Samuelson and his followers, most industrialized countries took corrective action, raising government spending, cutting taxes, keeping exports and imports flowing and driving short-term interest rates to near zero.

What the economic semiliterates of the right have failed to understand, generation after generation, was that government activism didn't harm capitalism. On the contrary, it rescued it from a time, around 1932, when the old approach was on its knees and the ref was counting. In the U.S., there were delays and powerful opponents (sound familiar?), but eventually the new approach ushered in our greatest era of growth and prosperity to date, 1945-73, ended only by OPEC's first oil embargo.

Dr. Samuelson's basic text has sold about 4 million copies to date. Back in the early '90s I worked for the publishing house that was doing the revised editions, and it was still one of the most widely adopted textbooks in the country.

Sadly, both Keynes and Dr. Samuelson left much work to be done. The concept of a mixed economy is standard throughout much of the developed world, but still lost on many Americans. I still encounter people, otherwise educated, who think in terms of "free market" versus "command economy," not comprehending the fundamental logical fallacy of such an "either/or" notion.

It isn't "socialism" when governments intervene to mitigate capitalism's once-devastating boom-and-bust cycles. Dr. Samuelson once described the prosperity wrought by laissez-faire as a fragile flower indeed -- the busts can devastate many millions of lives. In the modern economic era, our booms have perhaps been more modest than in the roller-coaster days of the 1920s, but our busts have been commensurately less painful. Even the reactionary Bush II administration, confronted with a potential global economic meltdown, resorted to -- gasp -- Keynesian intervention to avert a repeat of the 1929-33 disaster.

But this year's Tea Party spectacle demonstrates how little has been learned in America, in spite of Dr. Samuelson's life work. As many people as there must be out there who took freshman economics with Dr. Samuelson's book as the course text -- well, there are many antidotes to education, such as cheating, lazy professors and teaching assistants, and just the human habit of reverting, postcollegiate, to the brainwashing of a conservatard home.

The best tribute that nonsocialist progressives can give Dr. Samuelson is to spread the word. This isn't socialism -- it's capitalism tempered by uncommon sense.

A revealing postscript from Dr. Samuelson: "It is not too much to say that the widespread creation of dictatorships and the resulting World War II stemmed in no small measure from the world's failure to meet this basic economic problem [the Great Depression] adequately."

Manifesto Joe Is An Underground Writer Living In Texas.

Conservatives Don't Even Know What Socialism Is

This is from Webster's New World College Dictionary, Third Edition:

socialism: 1 any of various theories or systems of the ownership and operation of the means of production and distribution by society or the community rather than by private individuals, with all members of society or the community sharing in the work and the products

The key words there are "ownership" and "means of production." Income redistribution is not part of the definition.

Now for the video portion of our program:

I love the smell of napalmed right-wing ass in the morning. -- MJ

Sunday, December 6, 2009

Misgivings About Obama's Afghanistan Policy

By Manifesto Joe

After several days to ruminate on the matter, I still find myself in a state of utter ambivalence about President Obama's decision to ramp up the Afghanistan war. I want this president to succeed -- but I faintly smell napalm in the morning, and I don't love that smell. This involvement is beginning to look a lot like a small-scale Vietnam with sand and mountains.

Although I have what I believe is a healthy skepticism about war in general, I'm no pacifist. My left knee doesn't jerk every single time the U.S. embarks upon military action. But there are just enough Vietnam parallels to make this a bit disturbing.

First, the Differences

There are contrasts between this action and the invasion -- yep, I said invasion -- of Vietnam. The North Vietnamese and Viet Cong never attacked Americans on our own soil -- ever. One could argue that neither did the Taliban. But they harbored people who did -- namely, Osama bin Laden and al-Qaida.

I would characterize the initial U.S. assault on the Taliban as justified, as does Obama. It's just a shame that the Bush-ordered action didn't result in a quick knockout (the capture or killing of bin Laden), and that opened the door for all kinds of international mischief by the Il Doofus administration, most tragically the Iraq invasion.

In contrast, I would characterize the U.S. invasion of Vietnam as virtually a rogue action, with little justification at its core. I have concluded this largely with the benefit of hindsight. At the time, without hindsight, many if not most Americans wore blinders about 'Nam. Obstructing vision on one side was the Domino Theory, which now looks like nonsense. Blocking the other side was the notion of a monolithic communist threat, the idea that a commie is a commie is a commie. That's no more true than a fascist is a fascist is a fascist, or a capitalist is a capitalist is a capitalist. Any broadly drawn political or economic ideology will contain within it some diversity, even conflict.

The assumption in Vietnam was that a communist there was the same as a Soviet one, or a Chinese one. And of course, a common view during the Cold War was that any and all communists must be opposed, at any cost and regardless of ethics. We largely know now, 40 years later, that some communist regimes were expansionist, while others were not and are not now.

Around 1946, Vietnamese communist leader Ho Chi Minh actually approached the U.S. for support, with an appeal to our sense of independence and self-determination. He was ignored, and we backed the French colonialists in that war. In 1954, with the French in defeat, the Geneva Accord called for a plebiscite for eventual reunification of Vietnam. The U.S. opposed and ultimately blocked that vote -- because it was sincerely feared that Ho would WIN. So much for democracy and self-determination of peoples.

The U.S. involvement in Vietnam was fatally flawed from the beginning. I don't believe that to be the case in Afghanistan, where arguably, a much more clear and present danger was lurking, and the leader of our enemy would never have invoked the name of George Washington, as did Ho.

Here's Where the Involvements Start to Look Alike

-- In Afghanistan, as in Vietnam, we're fighting seasoned guerrillas who have fought multiple foes, generationally, and prevailed because of the simple fact that they wouldn't quit. The North Vietnamese and Viet Cong lost every major battle, and it's estimated that about 3 million Vietnamese died during the U.S. involvement. Yet they fought on, against us and many of their own people. It eventually became too expensive for the invaders to sustain their effort.

-- Afghanistan, like Vietnam, is a place that has been historically untenable for any occupiers, all the way back to Alexander the Great. The British and the Soviets found the place equally inhospitable. Can the U.S. expect a different result?

-- The Karzai "government" bears more than a passing resemblance to the corrupt General Thieu regime in South Vietnam. With friends like that, it was harder to fight the enemy. And yet, we expect to establish a strong, democratic and relatively honest central government in a place that has never known one?

Again, I want the Obama presidency to succeed. The U.S. is just starting to emerge from 28 years of political reaction. Obama's success is crucial for keeping America from lurching back into the stupor of the Reagan/Bush/Gingrich/Bush II years.

But I fear he's in a no-win situation. He's escalating, and if it doesn't "work" soon, the Republicans will hammer him. If he had refused to do so and started a gradual withdrawal, there's a serious danger that the Taliban would eventually retake Kabul, and Obama would certainly be blamed for that and characterized as weak.

Since I can't be less ambivalent about this, I'll wrap up. My hope is that, seemingly against the odds indicated by history, Obama can somehow have the U.S. emerge from this involvement relatively unmuddied, and with our re-energized progressive movement still intact. He has my very, very reluctant support.

Manifesto Joe Is An Underground Writer Living In Texas.