Capitalism Makes Markets More Efficient For Those In The Market

Someday I want to do a series of posts, attempting to unpack how free market capitalist ideology evolved. There are some interesting characters who have stepped forward and said things about markets that seem just flat-out goofy, to me – such as Hayek’s unsupported insisting that any regulation of capitalism results in totalitarian “serfdom” for the people.

Then you have follow-ons like Milton Friedman, an old hypocrite who grew up poor and hated the poor for it, who promoted near-religious capitalist ideology by grabbing a microphone and preaching directly to the choir. I have listened to some interviews with him that make me want to do sentence-by-sentence deconstructions, but I’m not sure I can bear it. Capitalists have used these people to market their idea as a necessary adjunct to democracy – i.e.: completely unrestrained capitalism is the only path to freedom. There are huge swaths of the American population that believe that, because most Americans – until recently, and look out! – bought the idea that “if you strive and work hard you’ll be rich and can get on television and rain shit down on people like Milton Freidman does.” Or something. The system has been constructed to make everyone believe in it, in spite of the really obvious fact that it is wrong. For example, the capitalists’ claim that markets will improve customer outcomes has resulted in the US having the most expensive, lowest-quality, dishonest, and confusing medical system. Markets make things more efficient the same way the US Marines are renowned interior decorators: they fuck things up and then blame some “externality” or other.

Here’s a good example of that burgeoning efficiency. The only hospital in Wellington, Kansas’ management decided that it was not going to be cost-effective to fight the coronavirus, so they closed the hospital. [guard]

Two weeks ago, as the virus crept closer and people in other parts of the state started dying, the owners of the city’s only hospital thought it a good time to close down with just a few hours’ notice on the grounds the facility was losing money.

“We lost our hospital abruptly and without warning,” said Dr Lacie Gregory, a family practitioner in Wellington. “Even as the healthcare providers here in town, we did not hear that it was closing until it was a done deal. We received a text message from the director of nursing saying as of now there’s no hospital. So really, really unfortunate timing.”

“Unfortunate” does not begin to describe it.

The hospital served a small area, of only 8,000 people, but those people depended on that hospital. Remember, this is one of the fundamental assumptions of pure capitalism: if the profit margins aren’t there, get out. This has become a refrain: if California wants to sue PG&E because of wildfires caused by badly maintained lines, PG&E can potentially take their marbles and leave. “OK, ‘power grid’ with someone else.” Or, in the case of Wellington, “Dearie me, we just discovered running hospitals is hard, we’re going to buy a Chuck E Cheese franchise and a golf course, instead, see ya!”

For every Friedman or Hayek who is talking about “freedom” they are also talking about an environment where the people have no control over anything. To paraphrase the Roman, “they create a smoking wreckage and call it ‘liberation’.”

A postcard from capitalism: so entitled!

There are heroes in this story, of course: the doctors and nurses and janitors who used to work at the hospital, have adapted and are continuing hospitalling:

The physicians had assumed the 63-bed Sumner community hospital’s emergency department would deal with people contracting coronavirus while they went on treating more routine conditions of cuts, broken bones and high blood pressure, and that the two would remain safely at a distance. But now the Family Care Center is the first line of defence for the city of 8,000 people.

The doctors improvised, setting up a separate drive-thru clinic at the back of their building for people complaining of coughs, fever or showing other symptoms of Covid-19. But even finding the protective equipment for the physicians handling those patients is a challenge.

The county’s emergency management office in Wellington has put in orders for masks, visors and gowns but been told by the state that only part of the request will be delivered. So far nothing has arrived.

It ought to escape nobody’s notice that Kansas generally breaks republican, and is a state that has deeply absorbed the capitalist ideology and American Exceptionalism. I wonder if this will help them get over it?

The doctors at the health centre went looking elsewhere. At the local farmers cooperative they found masks designed to protect workers on the city’s grain elevator from dust. At another store they bought face shields farmworkers use when working with chemicals. They are not medical grade but better than nothing. The doctors still face a shortage of gowns and gloves.

“It’s been really frustrating. It’s been what we have been able to piece together,” said Gregory. “All of us as physicians are reading and researching and relying on colleagues across the country for information on where they are getting equipment and what’s working for them. This is going to overwhelm our system and we won’t be ready to to treat people. We won’t have the resources to treat people.”

The makeshift clinic is seeing about 20 people a day but even then there is only so much they can do. The director of the Sumner county health department, Laura Rettig, said that at any one time it has only a handful of coronavirus test kits for the entire county of 25,000 people. They have to be sent to the state laboratory and the results take days.

Because I’m a cynical fellow, I’m going to see if I can learn more about the management of the clinic – they are almost certainly part of some conglomerate health care “provider” and that means the company’s going to be going to the government with its hand open asking for a bailout.

As Malcolm X would say, “the bailout or the bullet.”

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The democrats ought to be all over stories like these, but instead they are busy making fun of geriatric Don, in order to make geriatric Joe look better. The US is run by chucklefucks put in place by capitalists who want to defend their abusive free market.


  1. cartomancer says

    That same Roman on post-crisis financial management:

    “The next concern was money, and it seemed most just to those scrutinising everything that it be sought from those who were the cause of the deficit. Nero had doled out 2200 million sesterces in gifts to his cronies: Galba ordered the recipients to be called back individually, and left them a tenth part of their payments. But barely a tenth of this money remained: the recipients had wasted other people’s money with the same lavish spending as they wasted their own, and in the end there remained to these most rapacious and depraved men no fields nor capital but only the instruments of their vices. Thirty Roman knights were put in charge of the extractions: a new class of officials, burdensome both in their numbers and the corruption that accompanied them. Auctions and speculators were everywhere, and the city was abuzz with legal cases. And yet there was great joy, on the grounds that those to whom Nero had given money were now as poor as those from whom he had taken it.”

  2. brucegee1962 says

    Capitalism gets sold to people by extolling the virtues of competition. Supposedly, competing businesses will drive down their prices, increase their services, and enhance efficiency to win out. And I agree with this — except that the end state of competition is monopolies unless the government ruthlessly intervenes.

    But the example you give doesn’t even qualify as an exemplar of capitalism to me. There are certain things that are natural, automatic monopolies from the get-go: utilities are one (since we can’t choose whom to buy our electricity or water from), and rural hospitals are another.

    I’m not quite as thoroughgoing a socialist as you are, Marcus, but I do agree that all natural monopolies should be run by state or local governments. In my area, my electric company uses millions of dollars that it takes from me in order to lobby the state legislature to do more to guarantee profits for its shareholders in the form of expensive, greenhouse-gas-causing power plants that we don’t need. And these rural hospitals are exactly the same.

  3. springa73 says

    I think that it’s inevitable that lots of people suffer when a society (US in this case) treats medical care as a market-driven commodity rather than a basic right, as many other countries do. The free market only serves people well if they can afford it.

  4. aquietvoice says

    “The democrats ought to be all over stories like these, but instead they are busy making fun of geriatric Don”


    I’ve been trying for a long time to work out how to phrase just how unimportant Trump’s daily personality reveal is and how meaningless his daily stupid outbursts are.

    I will be the first to admit: insulting Don has been fun. Accusations of “making fun” are true in an unusually literal way.
    Fun is enjoyable enough, and a break from the real world is a great way to keep enduring in the long term.

    But it’s nothing more than that, a break from the serious reality of the harm that has been happening to people.
    That people are being harmed in all this is nothing new – I can’t imagine the fallout of “mexicans are rapists” was good for anyone, but the creeping collective takeover of all news and information with only the most trivial of bullshit is something that is slowly solidifying in me to a core of solid hate.

    That hospital was closed for being unprofitable in the face of a pandemic, and it’s fucking disgusting. Also important was the fact that this is something that happened without consequences and therefore will be happening again soon.

    We need to know this stuff as citizens to keep society running. There’s no way around that.

  5. says

    It’s a pandemic! There is something inherently disgusting in the idea that it would be profitable, therefore hospitals should expect things to be a bit unprofitable for a while.

    For one thing, we expect well-run businesses to be setting aside resources in case they need to respond to unusual circumstances, someday. What this is showing us is that capitalists don’t know how to run profitable businesses unless they are abusive, extractive, or cut corners.

  6. xohjoh2n says

    if the profit margins aren’t there, get out

    Ah, but then people will realise that they’ve undervalued the service, and be prepared to pay more for it. At which point a host of other hospital providers will rush in to the dynamic competitive environment. Soon, when the ambulance turns up to scrape you of Pennybags’s limo wheels, they’ll be able to say “well Mercy is much closer, and Nightingale has rude nurses, but their trauma care is 5c/hr cheaper” and you’ll be like “who cares about rude nurses! I’m a Rational Economic Actor! Take me to Nightingale forthwith!”

  7. says

    This reveals one of the ways in which capitalism is inherently broken.

    If you run with reserves that allow you to survive rare events you’re wasting resources in the short term and will be ruined by competitors willing to run with smaller reserves. This leads, inevitably, to nobody having the resources to survive rare events.

    It’s baked in. The system, by design, cannot cope with pandemics unless they occur quarterly.

  8. voyager says

    There should be serious consequences for closing a hospital during this crisis – like no future business licenses or a claw back of profits. Healthcare should never be considered

    In Canada, many hospitals are adding beds and coronavirus clinics by building temporary shelters in their parking lots.

  9. says

    Meanwhile, in Latvia doctors who treat Covid-19 patients just got bonuses added to their salaries. They politely asked, and the government agreed to give them extra money. Granted, the politicians had little choice, because there exist laws regulating overtime work and the payment for it.

    As I am reading news from the USA, I am happy to live in a country where hospitals are state owned and their supply chains are centralized (thus hospitals aren’t bidding against each other in order to buy stuff like disinfectants or protective equipment).

    So far things seem to be doing relatively well here. Politicians aren’t saying anything stupid to the media (it helps that here the minister of health has a degree in medicine, and other politicians don’t do anything stupid either), government response to the pandemic has been mostly adequate. Testing is sufficient, and there are no terrible shortages of equipment. (Obviously, there is an increased need for some stuff, but so far it is manageable. Latvia’s largest alcoholic beverage manufacturer now makes hand and surface disinfectant. Pretty much every business that could possibly make protective equipment of any kind is now seizing the opportunity to earn some money during what looks like the beginnings of an economic crisis.)

    So far 493 people have been infected, 18198 people have been tested. Today I read news about the first person dying from the virus. Sort of. It was a 99 years old lady who supposedly died from her other health problems while being also sick with Covid-19.

    Unfortunately, now it’s only a matter of time for things to get worse. Up until recently, epidemiologists could trace where each patient got infected, but now some of the patients get sick in unknown conditions, which means that the virus has started to spread freely. Oh well, at least here it is spreading more slowly than in the USA, given how various measures that slow down the spread were implemented long before the situation got out of control.

  10. cvoinescu says

    For one thing, we expect well-run businesses to be setting aside resources in case they need to respond to unusual circumstances, someday.

    Do we really?

    Banks, for instance, know by now that they can rely on bailouts, so it makes no sense for them to prepare beyond the minimum legal requirement (or less, if they can get away with it, or if the expected value of the fine* is likely to be less than the cost of compliance). Most small business probably just scrape by in the best of times, so they rarely have spare resources they can set aside. I’m pretty sure large companies have solid-looking contingency plans, but, in practice, I’d be surprised if they were worth significantly more than the paper they were written on. The incentives simply don’t stack the right way: to the people who make the decisions, success comes with a reward, but they don’t bear the cost of failure personally (they may stop receiving the reward, but that’s not the same as having to pay the cost). This is most evident in publicly-traded companies, but even outfits where the investors and decision makers are the same people can easily create externalities.

    * expected value of the fine: simplifying a bit, probability of being fined times the amount of the fine. Plus, don’t forget to look at it from the perspective of the CEO: probability of being fined during my tenure times the amount the fine is going to reduce my compensation by, compared to cost to my stock options of not investing every penny into tricking pension funds into buying the maximum amount of lucrative subprime thingamabobs du jour.

  11. jrkrideau says

    Pity the staff at the Wellington hospital did not follow the French tradition, seize the hospital, and hold the CEO hostage.

  12. publicola says

    It is a scathing and shameful testament to American greed that a tiny country like Latvia, so long oppressed by the USSR, can emerge from that nightmare to be a model of reason and planning and effective action that leaves the USA looking decidedly like a third-world country. Pure Capitalism is social Darwinism at its very worst– survival of the most ruthless. Comrade Trumpski is taking newly-acquired medical supplies and giving/selling? them to private entities who are selling/auctioning them off to the highest bidder. Really? This is why we pay taxes? Chumpski wants to make sure his rich friends profiteer handsomely while Americans die. Sure, let the old die– we’ll save money on SSI and Medicare payments. Sure, let the poor die– we’ll save on Medicaid. Besides, more of them are Democrats– it’ll help the GOP in the election. Without social programs and govt. regulations to restrict capitalism, the powerless die. That assumes, of course, that we have people of integrity running the Executive and Legislative branches. If Only! What We the People really need to do is storm Washington, D.C., surround the White House and the Capitol, and keep the bastards trapped in there until they get it right! It just might be time for a revolution.

  13. billseymour says

    publicola @12:

    Pure Capitalism is social Darwinism at its very worst …

    I think that’s a straw man, although a common one. It’s certainly not the positive-sum game that Adam Smith suggested in The Wealth of Nations.

    The problem we’re having right now seems to me to be that we’ve lost all the laws and regulations that keep capitalism from reverting to feudalism. We were doing pretty good around the middle of the last century (OK, it was good for white straight cis males, but that’s a different argument), and they’re currently doing pretty good in most Scandinavian countries.

  14. says

    publicola @#12

    It is a scathing and shameful testament to American greed that a tiny country like Latvia, so long oppressed by the USSR, can emerge from that nightmare to be a model of reason and planning and effective action that leaves the USA looking decidedly like a third-world country.

    I wasn’t trying to imply that things in Latvia are perfect or that this country should be seen as a model for others. My point was that here the pandemic was (and still is) handled relatively better than in the USA. The same can be said also about numerous other European countries where healthcare systems are more functional and better prepared for handling emergencies. Healthcare system in the USA is so terrible, that creating something better is a very low bar, and most countries have done exactly that. Trump is also such a terrible president that no matter how much I dislike Latvian politicians, no one of them is nowhere nearly as bad. Having politicians that handle a pandemic better than Trump is also a very low bar.

  15. says

    Sorry, didn’t mean to go off. But I feel better now.

    Considering that this blog is basically a couple years of me “going off” I think it would be selfish not to allow others to. So, please be my welcome guest.

  16. says

    Andreas Avester@#15:
    Trump is also such a terrible president that no matter how much I dislike Latvian politicians, no one of them is nowhere nearly as bad. Having politicians that handle a pandemic better than Trump is also a very low bar.

    Trump is going to create more anarchists than any president since Jackson. The problem is that they’re mostly going to be libertarian tea party-oids who want to see government more destroyed because they are stupid.

  17. says

    Pity the staff at the Wellington hospital did not follow the French tradition, seize the hospital, and hold the CEO hostage.

    That would have been nice. The CEO of the hospital chain is probably holed up in a mansion in The Hamptons.

  18. says

    So I did a bit of research. The hospital is run by “RHG” – Rural Hospitals Group, a “non-profit” hospital system headquartered in North Carolina. The “not for profit” routine is one that Johns Hopkins Hospital and many other extremely profitable hospitals use: they pay the executives damn well and all the extra money is spent on more properties and acquisitions and gear – it’s non-profitable the way a Hollywood movie is – all the expenses get front-loaded so the business barely breaks even.

    I just wrote the board of directors an “interview question” and if they respond I will share their response there. My question was:

    Is this the Board of Directors of “Rural Hospital Group” that closed
    the hospital in Wellington, KS during the middle of the coronavirus
    outbreak because it was losing $400,000/month? If so, would
    anyone care to comment on that, and the optics of a “not for
    profit” hospital shying away from a relatively minor loss?

  19. says

    A bit more on the story is here: [kake]

    Can’t pay time off, that’s a looming disaster. Capitalists tap out the second it looks like there’s a downside, but they’re all in when there’s an upside.

    Hospital managers tell KAKE News the Sumner Community Hospital was not making enough money because doctors were sending too many patients to Wichita, instead of admitting them in Wellington. Local doctors say that is not true, and anyone who could be treated in Wellington was admitted.

    Rural Health Group member Dennis Davis said the hospital took in zero new inpatients in the last three or four weeks. RHG took over hospital operations in November 2018 and tried to reorganize the hospital to make a profit. Davis said that was not working, and the hospital was in immediate danger of not being able to pay its employees.

    “We had a $400,000 loss in January,” Davis told KAKE News. “You might make payroll, but then you don’t pay the 401K, or you can’t pay P.T.O. [Paid Time Off] or what you call employee obligations. We could see that looming.”

    Davis also said the company gave notices required by Kansas regulatory agencies on Wednesday, but employees and hospital patients were still surprised by the locked doors Friday.

  20. says

    Rural areas tend to get screwed.

    The only reason they have electricity and phone in the USA is because, basically, the federal government made the utilities do it. They have not, as yet, forced them to provide decent broadband, or decent healthcare (although there have been incentive programs on the latter, which is probably the only reason there’s any healthcare at all outside cities).

    It legitimately costs a great deal more to deliver all this stuff to rural folks. Issues of capitalism and democracy aside, the question one needs to ask if how equitable we wish to be, and in what dimensions. If we allocated equal dollars (equal economic resources) to each individual, that’s “fair” in a sense, except that people get unequal services. If we demand equal services for each individual, that too is “fair” except that, arguably, cheaper-to-serve people are subsidizing the more expensive ones, and it begins to look like insurance with its can of worms.

    There are no easy answers here.

    It’s still pretty sketchy to close a hospital at this particular moment in time. It’s not like COVID-19 hits in a few moments, and proximity to high quality care is *particularly* needful, but, basically, we’re gonna want those beds. A Governor or a Sheriff with sufficient will could probably seize the facility, and require that it be made operational. And that would probably be a smart move about now.

  21. komarov says

    This should be a prime target for that defence production law. If Trump can order car manufacturers to make ventilators, surely he can – and probably should – order hospitals to reopen, bottom line be damned.* Besides, business folk are serious people and responsible adults, so naturally when they bought a slice of critical infrastructure, they accepted both the rewards and the risks that went with it. With that in mind, I shall await their response to Marcus’ question with bated breath…

    *Maybe if someone with a twitter account tweeted that at Trump it might even happen. “My friend said you can’t even reopen one measly little hospital because you’re the worstest president ever, even though that’s obviously not true and America has never been doing better.”

  22. says

    With that in mind, I shall await their response to Marcus’ question with bated breath…

    Just make sure you don’t stop breathing.

  23. bmiller says


    After the recent devastating California wildfires, there were people quoted demanding an even more direct taxpayer subsidy of their chosen “live in a subject to drought dry pine forest” lifestyle. “How dare you force us to live in an EVILLLLLL liberal city or suburb surrounded by queers and minorities (I am exaggerating a bit, but Butte County, California is very, very RED in its politics outside the precincts of the local university)>

    It’s an interesting dilemma. I mean, we NEED farm towns and farm owners and farm works (although the latter get crumbs, frankly). That possibly warrants the broader society subsidizing places like Wellington, Kansas. I less sure of the need for places like Paradise, California.

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