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Obama Administration Misunderstands Capitalism

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On Wednesday, Kathleen Sebelius went in to chide the health insurance companies. Or at least that's what she was supposed to do according to the notes they handed the press before the event. Instead she wound up being very polite as usual and just pleaded with them to do the right thing and care about their customers. She can't help herself, she's so soft. That's why Obama picked her.

It wouldn't have really mattered either way. She could have yelled, screamed, beseeched, begged, groveled, demanded or requested. The answer would have been no different all the same.

The Obama administration has a habit of doing this. Every once in awhile we'll see a story about how Obama went and upbraided some Wall Street executives or demanded that they have some shame. What a comedy.

This fundamentally misunderstands the nature of public corporations and of current day capitalism. Pleading with a publicly held corporation is like pleading with a rock. It is unmovable. They have a fiduciary responsibility to make as much money as possible no matter who is asking them to do otherwise. They are bound by law to maximize profit. No amount of yelling or cajoling will change that.

In the old days when more corporations were privately held, this strategy might not fare much better, but at least it had a chance. Because back then some human being actually owned the company. And you could make a case to that person. You could appeal to logic or emotion. But publicly-held corporations are not people, they are machines. Screaming at the machines will do you no good.

You have to provide proper incentives and disincentives, rules and regulations. Corporations must abide by the law. They don't have a choice there (except, of course, when they take over the government as they have now). They don't listen to reason, but they must listen to the law. That is where the focus has to be. Asking corporate executives to be less greedy is absurd.

Even if Obama's grand plan worked and he finally melted the heart of one of these executives, what difference would it make? That person would be replaced with someone who will not be prejudiced by emotion. The system self-selects the people who care most about the bottom line, care the least about societal obligations and who will maximize profit no matter what. Once someone goes outside of that paradigm, the system will remove them and try new people until it gets someone that will do the job -- maximize profits! If one person tries to buck the system, in time, the system will buck him.

The corporations are the Borg. Resistance is futile. There is a way to beat the Borg but it isn't by asking them nicely. It's by understanding how the machine works and providing the right regulations and incentives for it. That is what the government is supposed to do. Otherwise, the Borg will take us all over.

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