‘Crony Capitalism’ Is Not Capitalism

David Brooks has a piece in the New York Times this morning that’s worth reading, “Health Chaos Ahead,” even if it misses a crucial aspect of its subject. Obamacare is off to a rough start, he argues, and it’s only going to get worse. He says he’s talked to a bipartisan group of health care experts, and even some of the law’s supporters “think the whole situation is a complete disaster”—many predicting that it will collapse. Yet “a clear majority,” he adds, including some of the law’s opponents, believe that after a few years of messiness we’ll all settle down to a new normal.

That’s hard to believe, given the “cascades” of problems Brooks goes on to discuss: structural, technical, cost, adverse selection, and provider concentration cascades. That last one is especially noteworthy because, as Brooks says, “the law further incentivizes a trend under way: the consolidation of hospitals, doctors’ practices and other providers.”

That it does. So why does Brooks himself seem to believe that the system will survive? It’s because, even if the law’s unpopularity costs President Obama and the Democrats control of the Senate in 2014, the giant insurance companies and health care corporations spawned by Obamacare will come to the fore to defend it. “Having spent billions of dollars adapting to the new system, they are not going to want to see it repealed or replaced.”

He’s doubtless right about that, but it’s not simply because they want to preserve their “sunk costs” in the new system that these “rent seekers,” as economists call them, are and will continue to be the system’s biggest defenders. These are the same institutions, after all, that were onboard with Obamacare from the start. And they were onboard because, working hand-in-hand with government, they sought to gain advantages over smaller competitors that invariably find it difficult and often impossible to compete in so highly regulated a market as we have here.

Call it “crony capitalism,” yet it’s not capitalism at all. Labeled most charitably, it’s cartelism. But the root of the problem is not with the corporate importunings of Congress. It’s with congressional acquiescence. They’re the people who take an oath to uphold our Constitution for limited government. I’ve always thought that the snake, in the Garden of Eden, got a bum rap. Yes, he was tempting Eve, but she could have just said “no.” Maybe the 114th Congress will have enough members, viewing the health care disaster unfolding before them, who will just say “no.” Then we might start returning to real capitalism.