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Profits Gone Wild: Government’s Role in Business

Greed is good.  Greed in its many forms, be it striving to compete to be the best at what you do, striving to grow your business etc, drives us.  Fear and greed, hand in hand, run our economy.  Trouble is, people get carried away, and start doing nasty things to get ahead to earn the almighty dollar, in ways that rob people (or other of Earth’s inhabitants) of rights, and in ways that will eventually come crashing down.  Here’s what I mean:

Whaling and Tuna Industry

I love sushi, and so do the Japanese.  But despite weak attempts at regulation by the government, the Japanese tuna industry is undeterred, and is threatening to turn the Mediterranean into an empty pond.  They’ve turned fishing in that region into a massive commercial operation with planes, helicopters, huge freighters and nets, where thousands of massive blue-fin tuna are caught at once.  Everyone (but the fishing companies) know how this story ends: no more fish.  Due to lack of oversight and enforcement, a moratorium on bluefin fishing looks necessary, as a knee-jerk last-ditch effort to avert a crisis.

Japan also loves to hunt whales by the thousands in Antarctica.  On November 18th, a fleet of vessels plans to harpoon 50 humpback whales in the Antarctic Ocean, under a loophole in the 1986 ban against commercial whaling, where whales can be killed for “scientific research”. Somebody is very asleep at the wheel here.  If the law is junky, redo it!  It has been 22 years!  Otherwise, bye bye whales, all so the Japanese whaling industry can profit.

Health Insurance Industry

Currently, health insurance companies deny coverage to sick and dying patients for a variety of ”read the fine print” reasons.  Every human being has the right to basic health care.  Other countries provide this, but we do not (even people who have private health care here are having claims denied routinely). Health insurance companies are in the business of denying claims: the more claims they deny, the more money they make.

Government’s role, then, must be to define instances where it is immoral and unethical to deny coverage, within the boundaries of which companies can still operate profitably while operating ethically.  If an insured person missed a deadline for filing a paper by 24 hours, and thus their coverage was denied, should they die because they can’t afford a life saving procedure?  No - that’s an example where regulation must step in and force insurance companies to protect life.  Alternatively, health care could be provided by the government, whose job it is to provide excellent care, not to turn a profit.  Personally, I’d rather see health care stay private, but with government funding and a guarantee that care will be provided to everyone for any reason.

Pharmaceutical Industry

Drug companies make billions in profits and spend relatively little on R&D. Drug companies do not profit from curing disease, they profit from treating diseases.  If a cure is found, it is administered, and the drug company goes out of business.  Drug companies charge exorbitantly for brand name drugs, supposedly to cover the cost of drug development (which is in part to blame on the FDA drug approval procedures and its vast inefficiencies), and which is made apparent by the cost of the same drugs in generic form.

If drug companies have no financial incentive to cure illness, then another massive, publicly funded, industry, must step in to do it (such as a much larger National Institutes of Health).  Research must be turned into cures for the public good, and ”natural” drug treatments (like Resveratrol from grapes for anti-aging, from red wine, or fish oil) should be explored, even if they aren’t profitable to anyone.

Bush Cronies and Abuse of Government Positions

This could be a novel.  I’ll focus on Haliburton and Saudi Arabia.  Dick Cheney worked at Haliburton before he was VP and continues to receive payments from that company.  Who benefited from the war in Iraq? Haliburton  benefited, to the tune of more than $20B in contracts in Iraq.  What was the only airplane flying after the FAA grounded all planes on September 11, 2001?  A private plane full of Bush’s Saudi oil buddies, on its way back to the middle east. We can’t simply trust government blindly.  There must be checks and balances as the system intends.  In the past, we trusted that presidents would not abuse their power.  Bush broke that trust.  Bush has shown how much leeway the executive branch has, and he pushed it to its limits.  

Mortgage Industry

In the absence of adequate government regulation, the mortgage industry ran wild, conning consumers into agreeing to ridiculous and dangerous mortgage contracts.  ”Here’s a $500k house, pay me $1/month now and in 5 years, you’ll owe me $1M, okay?”  Reverse amortization loans, adjustable mortgages, sub-prime loans to people with bad credit. None of this should been allowed by the government because it was a hugely bad idea and so very risky for our whole economy as we have now seen.  

Government must impose wide boundaries on what’s reasonable. Profit is a good thing and everyone has a right to it, but the government’s role must be to step in and define limits on where we can’t go, what we can’t exploit, to protect ourselves from ourselves.  We’re all seeing the hazards of a “free for all” market lacking in any kind of good leadership and governance.  In this regard and for all of the above examples, our government has failed us miserably.  Government has to know when to get out of the way, and when to not stifle small business, capitalism, and growth, but there is a balance, and it must impose certain boundaries and define what’s reasonable, within which there should be more than ample room for all of us to reap massive profits in most industries.It’s much better to manage issues along the way and avert crisis, rather than impose massive knee-jerk regulations after industries collapse.

We shouldn’t fear government regulation as long as its reasonable and is subject to much oversight.  So, what do you think government’s role should be in business?

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Wednesday, November 5th, 2008 at 7:26 pm and is filed under Web Business. If you like this post why not subscribe to my full text RSS feed. You can leave a response, or trackback from your own site.