The Ecstasy of St. Teresa by Bernini

One of the unkillable ideas that ricochet around the empty heads of the right wing is that markets are part of the natural order of things. As Bernard Harcourt explains in his book, The Illusion of Free Markets, in this natural order “economic exchange constitutes a system that autonomously can achieve equilibrium without government intervention or outside interference”. That idea evolved into the idea that markets are inherently efficient. That is, of course, stupid. The last couple of weeks provide several examples of the myriad ways actual markets work.

1. Freedom Industries pollutes the drinking water of Charleston, WV. It has no insurance, but it has assets. Its owner, J. Clifford Forrest, owner hires the giant law firm MacGuire Woods to handle a bankruptcy. The Bankruptcy Judge, Ronald Pearson, allowed Forrest or someone linked to him to lend the bankrupt firm $5 million to keep it operating, while taking a first lien on its assets. Then when the company collapses into Chapter 7 liquidation under the weight of the damage it has done, the current owner will exercise the lien and put those assets into a new company and keep right on working for himself.

2. Health Management Associates of Naples, Florida runs a bunch of hospitals. It set up a system of rating emergency room doctors by how many of their patients got admitted to the hospital. The goal was to admit half of emergency room patients. The company posted scorecards so every doc could see how they were doing. The New York Times reports:

This month, the Justice Department said it had joined eight separate whistle-blower lawsuits against H.M.A. in six states. The lawsuits describe a wide-ranging strategy that is said to have relied on a mix of sophisticated software systems, financial incentives and threats in an attempt to inflate the company’s payments from Medicare and Medicaid by admitting patients like an infant whose temperature was a normal 98.7 degrees for a “fever.”

3. Hammerman & Gainer was awarded a contract to manage assistance to homeowners in the wake of Hurricane Sandy by the Chris Christie administration. It was terminated recently because of complaints that it didn’t provide help. It’s bid was $68 million, “$127 million less than the only other bidder”, according to the Wall Street Journal. It won despite having been criticized for its handling of a similar contract in the wake of Hurricane Katrina. WNYC, a public radio station, adds this tidbit:

HGI won its contract last May shortly after its New Jersey law firm, Capehart Scatchard, made a $25,000 donation to the Republican Governors Association, which is now headed by Christie. The RGA contributed $1.7 million to Christie’s re-election campaign.

4. United States Investigations Services LLC provided background checks for security clearances. The Department of Justice filed a suit against the company asking for billions in damages because the company didn’t actually do the background checks in at least 665,000 cases. The complaint says the point was to increase revenues and profits. A spokesperson explained: “These allegations relate to a small group of individuals over a specific time period and are inconsistent with the strong service record we have earned since our inception in 1996.” Perhaps the problem was that only a small number of people were hired to handle hundreds of thousands of clearances.

Those are just some big examples from the last couple of weeks. The list could be multiplied without end. The concept “market” may be perfectly efficient and wonderful in every respect, but the practical application of the term in the real world is pretty much like every other human activity: plenty of effort by participants to game the system for their personal benefit and screw everyone else.

It’s bizarre that so many people cling to the myth of market marvelousness despite massive evidence of market corruption and inefficiency. People seem to think that each example of corruption or inefficiency is a bad apple who should be punished. But, of course, we don’t do that any more. The people behind these examples are being sued, not indicted. Their corporations may or may not pay up, but no one is going to jail, and no one is being punished. Every single one of the responsible people will walk away with a pocket full of dirty money, and their reputations, if they care about them, will be restored after the obligatory time away from the media spotlight.

Beyond that, how could anyone think that any human activity wouldn’t be subject to lying, cheating and stealing, including the sacred market? It must be some kind of quasi-religious fervor that deadens people to the reality slapping them in the face, rapt in their ecstatic vision of perfection without cost.



I read a lot of books.