[OPE-L:6077] Profiting from WTC demolition and Anthrax scares: Who? (fwd)

From: glevy@pratt.edu
Date: Tue Oct 16 2001 - 19:14:35 EDT

Re Gary's [6076]:

I'm not sure that you are right about whether the insurance 
companies can afford a pay-out of benefits without going bankrupt, but in what I write below I will accept that assumption for the purpose of further discussion.

Without a government bailout, what will be the consequences for US

As you note, the insurance companies could be expected to increase their  rates to a large degree. On which type of accounts? At least on commercial accounts sold to other capitalists.  If this were to happen, then capitalists (and real estate owners) would experience higher expenses, i.e.  higher costs of  production for the former group.  Yet, insurance costs form  part of the *faux frais*.  If  *faux frais* (which can no longer be  considered to be merely 'incidental' expenses for the 'modern corporation') increase
sharply this prevents a greater amount of surplus value from being used for the purposes of productive consumption and hence diminishes the accumulation  of capital, ceteris paribus. Moreover, this creates the possibility that US  firms will be for this reason increasingly put at a competitive disadvantage  against firms producing in other nations since the former will have  experienced  increasing costs of production. This might even contribute to some firms
deciding to re-locate production to other countries (especially if they were  considering such a move for other reasons before the increase in faux frais).

Now suppose that there is a bailout by the US government and the insurance rates stay the same. In that case, there would be no reason to anticipate an  increase in faux frais (NB: except on corporate security!) so the above  scenario doesn't materialize. And -- here's the rub! -- if the government  ends up paying to bailout the insurance companies then *all* classes end up paying for the bailout through taxation. Thus, the great 'advantage' of a
government bailout is that it forces the *working class* to pay a
significant proportion of the costs of bailing out the insurance companies which in turn bails out other capitalists from the possibility of increasing  costs of production.	This is a very significant advantage over regulation in this case -- from the perspective of the ruling class.

Well ... that's one answer. Do others agree or disagree?

In solidarity, Jerry

> >I see in today's NY Times that President Shrub and Congress are
> contemplating legislation that will protect insurance companies 
> from losses due to the Sept. 11 attacks, and possibly due to 
> >further terrorist attacks for some open-ended
> >period of time. <snip, JL>
>I guess what I'm asking is whether there is an economic rationale 
> for preferring a bailout over regulation in this case?
> It's now clear that the airlines sold legislators a bill of goods to
> obtain a sweetheart deal that won't benefit consumers or airline 
> employees.  Now Washington appears to be ready to do the same thing > for insurance companies. Insurance execs like to say that their 
> profits are a reward for taking risks.
> Well, OK, sometimes when you take a risk you get burned.  It's
> precisely  the  possibility of getting burned that is supposed to 
> justify the profits. Is  this another instance of "privatized 
> profits, socialized risks"?  Or am I missing something?

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