“Too big to fail” is not just limited to the recently bailed-out financial system. There are other industries critical to our economy that are already there, or well on their way:
- The upcoming merger of United Airlines with Continental Airlines will establish the largest passenger air carrier in the world. This is the latest in the reduction of competition since the airlines were deregulated in 1978. Since deregulation, airline prices have gone up (faster than fuel prices), and the quality of service has deteriorated to the point that non-business travelers are treated like cattle. Increased security requirements are often used as an excuse, but as the competition in the airline industry is further reduced, travel by air will be even more of a drudge than a pleasure. Fortunately some regulation remains. The FAA retained regulatory approval for airline safety, making airline travel one of the safest modes of conveyance. The recent regulatory change that levies high fines to airlines that strand passengers inside the metal tubes for more than three hours shows that the industry’s attempt at self-regulation is a dismal failure.
- The Comcast and NBC/Universal combination is another potential “too big to fail” event. This is the latest of a series of mergers in the entertainment and news industry that lines the pockets of shareholders while limiting a key tenet of capitalism – consumer choice. This situation will worsen if Congress succumbs to the industry’s lobbyists and does not impose strict net neutrality regulations.
- Health Care has enjoyed its fifteen
minutesmonths of fame with the passage of watered-down reform. Still in play, however, is the cartel of health insurance companies that again limit consumer choice and keep both premiums and profits at record high levels.
- The aerospace and defense industry has morphed from several dozen competitors to four main players (shown here). This is an industry that is highly regulated, but with the revolving doors between government and industry, the effectiveness of that regulation is questionable (Disclosure: I worked for this industry for 40+ years). We have reached the point where only the larger companies have the resources to bid on the mega-contracts such as the politically-charged Air Force tanker. So is the military getting more bang for the buck?
- The breakup of AT&T in 1984, after ten years of litigation, resulted in a steep decline in long-distance rates. (For the younger generation, when I was a kid, making a phone call to a friend or relative not in one’s immediate geographic area was a rare and carefully considered event.) Since the breakup, many of these companies have re-merged, but advances in technology have replaced the diversity of companies in ensuring that phone rates remain low.
Competition is a lynchpin of capitalism, but the current environment does not provide a level playing field. Legislators from both parties rely on financial support to get elected, and much of this support comes from corporations and their lobbyists. What makes this situation even worse is the foolish Supreme Court decision in the Citizens United case which grants corporations all the rights of personhood without the concomitant responsibilities. The situation is self-perpetuating, since any attempt at reform or regulation is shut down by the same industry interests who fund our politicians. Lest you think this problem is confined to Republicans, note that 27 Democrats satisfied the banking lobby by recently voting against the Brown-Kaufman amendment which would have limited the size of banks so that one bank’s failure would not collapse the system. Once again, the interests of the corporate elite trump the interests and needs of the electorate. Megamergers and deregulation fly against the best interests of a competitive capitalistic economic system.
Disasters like the BP oil spill or the AIG collapse get a lot of press because of their impact on citizens and our environment. Where regulation is effective (such as those pertaining to air safety), there is little or no press coverage, and consequently the public pays little attention to the regulatory success stories.
Can effective democratic capitalism be saved? Or is it too late? It’s hard to tell. If the current crop of legislators is in the pocket of corporate interests, then this perpetual logjam will be difficult to break. But if there is a glimmer of hope, then it is incumbent on all citizens to “lobby” their elected representatives and push for consumer-friendly regulation and corporate restrictions.