I wrote about the effect of regulatory price controls on debit cards and ATM fees yesterday, and received some irate feedback that said the behavior of the banks was indefensible, because they’re greedy SOBs who just want to screw the consumer.
I think it’s high time for Americans to grow up and realize they’re all greedy SOBs… most definitely including the government.
Every market organization is “greedy” because it wants to increase its value and influence. It wants to sell more of its products, for the greatest profit margin it can realize. To this end, it wishes to increase productivity, keep costs down, and prevail over its competitors. Most individuals within the organization want to improve their position and earn more compensation.
In the debit card situation, banks stand to lose billions due to price controls on the fee they can charge per transaction. These price controls are being politically driven by retail stores, which pay the transaction fees, and pass the cost along to their customers through higher prices. If the new regulations go into effect, retail outlets won’t suddenly lower all their prices, out of benevolent concern for the beleaguered middle class. This is a struggle between banks and merchants, not a noble crusade to benefit consumers… who will suffer greatly reduced convenience, because the banks will respond to controlled transaction fees by placing tight limits on the maximum value of debit card transactions.
The banks are “greedy” because they want to rake in higher transaction fees. Retailers are “greedy” because they don’t want to pay them. Government is the “greediest” party of all, because only its compulsive power can resolve the contest in favor of the retailers, and even though it produces nothing, it expects to be rewarded for its role – through political donations, votes, and increased regulatory powers.
Every party involved in the capitalist enterprise is greedy. Insurance companies are selfish for squeezing high premiums out of their customers… and the customers are greedy for expecting cheap insurance and lavish benefits, especially the kind of irrational benefits that can only be created through government intervention, such as requiring medical insurers to become welfare agencies by covering pre-existing conditions.
The banks that issue mortgages are greedy, and so are people who want to live in fine houses on modest salaries. Credit card companies are as mendacious as the consumers who use those cards to purchase luxuries they can’t really afford, demanding the right to borrow money at very low interest rates.
The core belief of the socialist is that he belongs to an elite which has the right, and duty, to judge the greed of some as virtuous, while condemning that of others as sinful. Naturally, he begins by portraying the greed of the State as the highest form of virtue, as it seizes power and wealth to act on behalf of the people, and handle critical issues which cannot be left to voluntary charity or business opportunities. The same liberals who castigate private citizens for their appalling selfishness in agitating for a tax cut are struck dumb by the suggestion that politicians are greedy for refusing to make do with less.
What are the proper limits of self-interest? Leaving aside activities that are obviously dangerous or dishonest, and therefore illegal, the free market limits greed through competition, and the informed choices of consumers. If your bank is soaking you with outrageous fees, you can move your business to another bank. If you want relief from high insurance premiums, check out some other insurance companies. High prices are perpetually undercut by competitors, until the lowest acceptable profit margin for all competitors is reached.
Many would object that this rosy capitalist scenario turns darker when companies collude in some manner to loot their customer base. The most important thing to understand about such situations is that they almost always involve the exercise of government power in some form. Banks, for example, do collude in certain respects… and their vehicles for doing so all have the word “federal” in their names.
It is very difficult for private entities to create monopolies or block competitors from entering a sheltered market… but the State can do these things easily. It offers many forms of protection from competition, and its consequences, to its friends and clients… from licensing and regulation to bailouts and subsidies.
It’s easy to understand that fulfilling greed by violating the law is bad. It’s more difficult, but equally vital, to understand that fulfilling greed by using the law is at least as bad. We should enter the free market with our eyes wide open, by accepting that everyone involved will act in their own interests. If you’re not happy with the greedy SOBs you’re dealing with, your best bet is to find an even greedier SOB who wants to steal your business from them.