Carly Fiorina & Crony Capitalism

Elizabeth Warren is probably most recognizable for her schtick that the deck is stacked against the average American and that our economic model is becoming ever more unfair. On that, Ms. Warren, I and the latest applicant for the republican presidential nomination, Carly Fiorina, all agree.

There is no question that the ever mounting regulation and mandated costs are making it more difficult to open and operate businesses in this country, and that is the alpha and omega of economic opportunity for all Americans. According to Carly Fiorina, it is crony capitalism that is at the heart of this huge threat to our economy:

The former Hewlett Packard CEO also claimed to have the expertise needed to reform bureaucracies, an important point in light of her belief that “the government is one giant, unaccountable, corrupt bureaucracy.” She went even further than that at times, showing signs that she might run as a sort of conservative Elizabeth Warren, flashing some of the anti-corporate sentiment that has made the Massachusetts senator a darling of the Left. “Look, crony capitalism is alive and well.

Elizabeth Warren, of course, is wrong about what to do about it,” Fiorina said. “She claims that the way to solve crony capitalism is more complexity, more regulations, more legislation, worse tax codes, and of course the more complicated government gets and it’s really complicated now, the less the small and the powerless can deal with it.” Fiorina made that point while denouncing the net neutrality regulations recently approved by the Federal Communications Commission in a 3-2 vote.

“The dirty little secret of that regulation, which is the same dirty little secret of Obamacare or Dodd-Frank or all of these other huge complicated pieces of regulation or legislation, is that they don’t get written on their own,” she said. “They get written in part by lobbyists for big companies who want to understand that the rules are going to work for them. . . . Who was in the middle of arguing for net neutrality? Verizon, Comcast, Google, I mean, all these companies were playing. They weren’t saying ‘we don’t need this;’ they were saying ‘we need it.’”

Fiorina suggested that large companies, by backing such regulations, have emerged as an enemy of the small businesses run out of people’s houses and garages. “Google started out that way too, in a dorm room, but they seem to have forgotten that,” she said. They also comprise part of a “political class” that is “disconnected” from most Americans.

“The vast majority of people . . . believe there is a political class that is totally disconnected from their lives and that’s stacking the deck against them,” Fiorina said. It’s a diagnosis of American politics that is appropriate to her biography. “It’s interesting, people out there are not at all troubled that I haven’t held elected office; in fact, the people I run into consider it a great asset,” Fiorina said.

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OUTRAGEOUS Crony Capitalism: How A Drug Goes From $10 To $1,500 A Shot

Free market capitalism is defined by open competition. Competition increases quality and lowers cost. The polar opposite is crony capitalism, where the government picks winners and losers, competition is stifled if not banned, and monopolies are created. The public suffers significantly from the absence of competition.

No better example of how this works can be seen than with production of the drug Makena, a progesterone mix that has, for the past decade, successfully treated pregnant women at significant risk of spontaneous premature labor. It is a condition that effects black women at far higher rates than either whites or hispanics. The drug is given to such women once a week between the 16th and 36th week of their pregnancy. For years, the drug has been mixed at numerous pharmacies and has been sold at $10 to $20 per shot, with an entire regimen of the drug costing between $200 and $400. It is estimated that the drug could benefit up to 130,000 women in the U.S. annually. It is also the only known effective treatment for women suffering from high risk of spontaneous premature labor.

The FDA recently gave sole approval for production of Makena to KV Pharmaceutical of St.Louis. KV did not pioneer the use or production of the drug. And indeed, the drug was first developed over 50 years ago. Patent rights, which were never KV's to begin with, ended decades ago. Nonetheless, KV petitioned the FDA to give them approval to produce the drug under the "orphan drug" law, which would give KV, among other things, a seven year monopoly on the market to produce Makena. The FDA complied.

Yesterday, KV announced that physicians could purchase Makena from them at a cost of $1,500 per shot. An entire 20 week regimen of Makena will now cost $30,000. KV also sent out cease and desist letters to all other pharmacies producing the drug.

The costs for this will be born by the public through Medicaid and higher insurance premiums. The only winner in this gross distortion of the market is KV pharmaceutical and those who championed their cause - such as the March of Dimes who receives hundreds of thousands in support from KV annually.

This is an outrageous travesty that cries out for congressional investigation. Why did the FDA approve the monopoly under these facts? Is it as it appears, that the orphan drug law was wholly misused in this case? And if the government is going to grant a monopoly over lifesaving drugs, what responsibility does or should it have to oversee pricing? The bottom line, in a just society, we would hang the people at KV and FDA for this grand larceny taking place at the expense of women in need and the public purse.

(H/T The Anchoress)

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Clueless Obama Channels His Inner Marx

This from Obama's speech at the Chamber of Commerce the other day:

If we're fighting to reform the tax code and increase exports, the benefits cannot just translate into greater profits and bonuses for those at the top. They have to be shared by American workers, who need to know that opening markets will lift their standard of living as well as your bottom line," President Obama told the Chamber of Commerce on Monday morning.

Its Obama channeling his inner Marx.

Obama wants to rule by fiat what markets ultimately determine. The laws of supply and demand apply to jobs and wages also. If our economy is booming and employers have to compete for employees, what then happens to employee wages and benefits? Indeed, that history is the history of our nation. Free market capitalism has been the single greatest boon to mankind in history. Ask Milton Friedman.



On a related note, as Friedman also points out, government regulation creates monopolies, it does not create competition.



Obama will never be mistaken for a free market capitalist. To the contrary, his push of our nation into crony capitalism, picking winners and losers in the marketplace, can only hurt the "have nots" he claims to be championing.

Update: Given that small businesses create the most jobs in America and provide perhaps the most direct avenue to increasing wealth, it would seem that one of the focuses of Obama should be on removing barriers to small business creation. Instead, we are seeing a growth at the state level of big businesses partnering with government to limit competition. This from Hot Air:



And this from the WSJ:

Amid calls for shrinking government, lawmakers across the country are vowing to cut regulations that crimp economic growth. President Barack Obama recently said it's time to root out laws that "are just plain dumb."

Tell that to the cat groomers, tattoo artists, tree trimmers and about a dozen other specialists across the country who are clamoring for more rules governing small businesses.

They're asking to become state-licensed professionals, which would mean anyone wanting to be, say, a music therapist or a locksmith, would have to pay fees, apply for a license and in some cases, take classes and pass exams. The hope is that regulation will boost the prestige of their professions, provide oversight and protect consumers from shoddy work.

But economists—and workers shut out of fields by educational requirements or difficult exams—say licensing mostly serves as a form of protectionism, allowing veterans of the trade to box out competitors who might undercut them on price or offer new services.

"Occupations prefer to be licensed because they can restrict competition and obtain higher wages," said Morris Kleiner, a labor professor at the University of Minnesota. . . .

While some states have long required licensing for workers who handle food or touch others—caterers and hair stylists, for example—economists say such regulation is spreading to more states for more industries. The most recent study, from 2008, found 23% of U.S. workers were required to obtain state licenses, up from just 5% in 1950, according to data from Mr. Kleiner. In the mid-1980s, about 800 professions were licensed in at least one state. Today, at least 1,100 are, according to the Council on Licensure, Enforcement and Regulation, a trade group for regulatory bodies. Among the professions licensed by one or more states: florists, interior designers, private detectives, hearing-aid fitters, conveyor-belt operators and retailers of frozen desserts.

At a time of widespread anxiety about the growth of government, the licensing push is meeting pockets of resistance, including a move by some legislators to require a more rigorous cost-benefit analysis before any new licensing laws are approved. Critics say such regulation spawns huge bureaucracies including rosters of inspectors. They also say licensing requirements—which often include pricey educations—can prohibit low-income workers from breaking in to entry-level trades.

Texas, for instance, requires hair-salon "shampoo specialists" to take 150 hours of classes, 100 of them on the "theory and practice" of shampooing, before they can sit for a licensing exam. That consists of a written test and a 45-minute demonstration of skills such as draping the client with a clean cape and evenly distributing conditioner. Glass installers, or glaziers, in Connecticut—the only state that requires such workers to be licensed—take two exams, at $52 apiece, pay $300 in initial fees and $150 annually thereafter.

California requires barbers to study full-time for nearly a year, a curriculum that costs $12,000 at Arthur Borner's Barber College in Los Angeles. Mr. Borner says his graduates earn more than enough to recoup their tuition, though he questions the need for such a lengthy program. "Barbering is not rocket science," he said. "I don't think it takes 1,500 hours to learn. But that's what the state says." . . .

Mr. Kleiner, of the University of Minnesota, looked at census data covering several occupations that are regulated in some states but not others, including librarians, nutritionists and respiratory therapists. He found that employment growth in those professions was about 20% greater, on average, in the unregulated states between 1990 and 2000.

Licensing can also drive up costs to consumers. Licensed workers earn, on average, 15% more than their unlicensed counterparts in other states—a premium that may be reflected in their prices, according to a study published by the National Bureau of Economic Research and conducted by Mr. Kleiner and Alan Krueger, an economist at Princeton University.

Mr. Kleiner estimates that across the U.S. economy, occupational licensing adds at least $116 billion a year to the cost of services, which amounts to about 0.1% of total consumer spending. In a look at dentistry, Mr. Kleiner found that the average price of dental services rose 11% when a state made it more difficult to get a dental license.

State regulators say licensing is vital to protect the health and safety of citizens, and industry experts generally agree that certain professions should be monitored. Inept or untrained electricians or tree-trimmers, for example, could put innocent bystanders in danger. Acupuncturists, tattoo artists and massage therapists can potentially inflict more direct harm.

However, in many service trades, licensure "is totally out of control," says Charles Wheelan, a lecturer in public policy at the University of Chicago. He says the marketplace might be a better judge than the government of whether a barber or a yoga instructor is competent. "It's fairly easy for you to tell whether you've gotten a bad haircut or not, and if quality turns out to be bad, it's not a big social problem," says Mr. Wheelan. . . .

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