Big Pharma: free market economics run amok

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From a very early age, I was taught the theories of free market economics. As Americans, most of us are taught the same: that the free market is the best system in the world; that it produces more goods and services for consumers; that it raises the standard of living; that it works better than centrally-planned economies, and so on. And for decades, I believed it all. But as I've realized today, some of these economic truths are falsehoods. In the real world, free market economics doesn't pan out as promised. Here's why:

The classical theories of free market economics say that entrepreneurs will turn greed into solutions. Out of a desire to get rich, they will invent new ways to produce more goods and services. They'll devise new manufacturing and logistical solutions that reduce costs and speed delivery to consumers. And they'll keep costs low through competition.

Through supply and demand of finished goods or services, resources (money) will then flow to those entrepreneurs who do the best job of delivering those goods and services to consumers. Those entrepreneurs will grow their companies, discover new efficiencies of scale, and pass on even more savings to consumers who benefit handsomely.

So far, it sounds like college-level Economics 101, right? But here's where the theory goes wrong: in reality, resources flow to those companies who are best able to EXPLOIT consumers, not serve them.

Case in point: pharmaceutical companies. These organizations -- and all the companies that feed off them (like pharmacies) -- offer nothing of real benefit to consumers. Their drugs cause untold harm to consumers and are right now the 4th leading cause of death in the United States. And yet they are hugely profitable. Billions of dollars each year are flowing into the coffers of drug companies and the local retailers who serve them: CVS, Walgreen's, Wal-Mart pharmacies and the like.

It's big, big business. So big that the industry can afford to practically buy off the entire U.S. press with hundreds of millions of dollars in advertising funds each year.

This is the free market at work. But is anyone better off?

The customers who are taking the drugs are no healthier. In fact, many of them are dying from the drugs, and those who aren't dying are living their lives in a state of mental stupor due to the side effects of popular drugs like statins and antidepressants.

The workers in the industry aren't adding any real quality of life to anybody: imagine literally millions of doctors, pharmacists, pharmaceutical drug reps, and Big Pharma administrative staff sweating away at their jobs all day long, yet doing absolutely nothing to enhance the quality of life of the general public.

The GDP (Gross Domestic Product), of course, records all of this activity as "progress!" Yep, it's economic activity. Somebody is selling something to somebody else. That counts as wealth under the rules of classic free market economics. And yet nobody really benefits.

In fact, it's all really an economic loss. To understand why, let's take a look at Grandpa Joe. Joe is an investor in the pharmaceutical industry. He thinks he's "making money" as his stock valuations go up. But Joe is also on four different prescription drugs himself. He pays over $600 / month just for his drugs, and his health insurance is now up to $900 / month.

Joe is both a consumer and an investor in the drug racket. If drugs were actually good for genuine economic growth and quality of life improvements, then Joe's life would be improved on two fronts: personal health and personal finances. In other words, if this was all good for humanity, then Joe would be both healthy and wealthy.

But in reality, Joe is sick and broke. He's sick because the drugs merely masked his symptoms and didn't do a thing to make him healthier. He's broke because the money he spends on medicine costs more than he receives in dividends or stock gains as an investor.

In other words, Joe is conning himself! His own money is flowing out of his pockets, through a system of retailers and manufacturers, and then he's getting a tiny fraction of that back in his own pockets as an investor. It's sort of like paying somebody $100 for the benefit of receiving a dime back.

Multiply this by a few million people and you get today's "free market" system of the pharmaceutical economy. It's a giant con, and no one truly benefits. Sure, there's money shifting from the hands of some people to others, but there is no net benefit to society. The people aren't any healthier (as a nation, we're sicker than ever), families have no more money (personal bankruptcies continue to skyrocket and family credit card debt is as record levels) and the nation is no wealthier than before (the U.S. government is not merely broke, it is spectacularly broke to the tune of trillions of dollars that politicians seem to conveniently forget).

This isn't all due to Big Pharma, mind you, but with around 25% of GDP going to health-related expenditures in this country, it's a huge part of the problem.

Every time I drive around town, I see another new pharmacy retailer under construction. I think to myself, "What a waste of space." All those resources: concrete, building design, construction, electricity, water... it's all being wasted on creating a building designed to sell more toxic chemicals to hoodwinked consumers through the drive-through window.

It's all a waste of resources. How could this happen under a system of free market economics? Because, again, the free market rewards those companies best able to EXPLOIT consumers, not serve them.

And this realization has shattered my former belief in free market economics. What I've realized is that when there is sufficient market domination by any industry to the point where government regulators and the popular press is bought off, the traditional checks and balances of the free market are thrown out the window.

Now, I'm not dismissing the entire system of free market thinking. I still strongly believe that centrally-planned national economies are a disaster (just look at Cuba or Russia). Entrepreneurs are very, very important for productivity and growth in any national economy, and greed is in fact a powerful motivator for many. But I am realizing that in the U.S., Big Business has taken far too much control. It's almost as if Big Business is the new dictator, and it's the Big Business centrally-planned economy instead of the Big Government centrally-planned economy.

The free market, it seems, needs some intervention from time to time in order to keep it honest. And I'm talking about real intervention, not some panzie-slapping FDA acting like it's regulating drug companies (which it clearly isn't). Government has a legitimate role in keeping Big Business honest, and while I am no proponent of Big Government, there are times when it must stand up to industry and make decisions on behalf of the people.

We don't see that happening much today. Our present government is basically just an extension of private industry. In fact, many new legislative initiatives have been designed precisely to protect the profits of private industry (the Cheeseburger Bill designed to make fast food companies immune to lawsuits, the mandatory mental health screening initiative designed to hook more children on prescription drugs, the new bankruptcy laws that make it more difficult for consumers to file for bankruptcy, etc.)

It's not enough to say that Big Business and Big Government are in bed together... they are, in fact, nearly indistinguishable.

And so the classical theories of free market economics we've all been taught are ideal in theory. In the world of academic books and mathematical models, all consumers benefit from the greed of private industry. But in the real world, people die broke and sick. The power of the free market doesn't stand up to the reality of collusion between private industry and government. And in the end, it's all just another giant scam to extract time, money and effort from working class people everywhere.

In other words, business as usual.

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