Has Charlie Crist been reading ‘The Octopus’ and ‘The Jungle’?

If you have ever read The Octopus, by Frank Norris, or The Jungle, by Upton Sinclair, or even any of the social critiques by Sinclair Lewis like Main Street, Elmer Gantry or Babbitt, you will find echoes of those books in the rhetoric of Florida Gov. Charlie Crist.  In its April 20 edition, the Wall Street Journal carried an editorial ripping on Crist for reckless endangerment of his state’s finances by pushing increasing amounts of risk onto Florida taxpayers in his confrontation with the insurance industry.  Yesterday Crist fired back in a WSJ op-ed piece, invoking the name and words of the great trust-buster, the Roughrider, the inspiration for the teddy bear — Theodore Roosevelt himself, and let us note, TR is of the same vintage as the authors mentioned above. 

Here’s a sample of Crist’s style:

While I applaud and welcome the motivation of business to profit, I will not abide profiteering on the backs of the people. Perhaps in time, the insurance industry will return to competitive free-market behavior without the need for government intervention or stimulus. In the interim, this responsible, bipartisan approach to a crisis threatening both personal quality of life and continued economic expansion was and is the only right thing to do. The "Trust Buster" would have done no less.

It’s hard to figure how state residents are the big winners in this battle Crist is waging, when they get man-sized portions of risk slopped onto their plates and are left to choke it down if a big hurricane season hits. That will sure show the insurance companies: let’s compete with them by making the state-run insurer take on lots of new risk, and at the same time force articificially low prices so that we make no money on running the insurer, and are left to pay losses out of taxpayer and homeowner assessments.  Let’s also be honest about it: the reductions in premiums state residents have seen so far have been pretty minimal, not at all what folks were hoping for.

I recall reading an economic study of the great newsweekly magazines of the first half of the 20th century — Collier’s, the Saturday Evening Post, Life, Look — all of which began to suffer circulation and revenue declines in the 1950s as other media began to meet consumer demands.  I think it was Collier’s that reacted by going all out, mouth-foaming mad to raise its circulation, and it did.  One problem: Collier’s was losing money on every copy it sold, so selling twice as much just drove them into the ground faster.  The magazine quit publishing in 1957.


Filed under Industry Developments

6 Responses to Has Charlie Crist been reading ‘The Octopus’ and ‘The Jungle’?

  1. Joe Bingham

    But at least Collier’s kept the moral high ground! Heh.

  2. Joe Bingham

    Here’s a copy of the letter I wrote to the WSJ:
    Dear Editor of the Wall Street Journal:
    It is difficult to imagine anything more offensive to the basic ideals of the American experiment than an economic system which creates state-run businesses to compete with private corporations, then cripples those private corporations with state-mandated prices and quotas, a system apparently based on certain European experiments of the 1930s and 1940s.
    My state’s governor, Charlie Crist, however, manages to make such a system more offensive with his unique brand of patronizing central planning. “Perhaps in time,” he writes, “the insurance industry will return to competitive free-market behavior without the need for government intervention and stimulus.” A market in which companies are only “free” if they set their prices and write their contracts in accordance with the whims of a modern Know-Nothing party, however, is not a free market, nor is it competitive. “If you’re good,” says Mr. Crist, “maybe you’ll get your capitalism back.”
    It’s worth comparing the mechanisms of a legitimate insurance market, in which consumers and insurers arrive at a mutually beneficial contract by choice–exploiting no one–with Mr. Crist’s central-planning model, in which the state prevents voluntary contracts from being written and offers its own underpriced contracts, exploiting an electorate entirely ignorant of macroeconomic principles. This is financialas well as political exploitation; since the state-run company cannot pay for its contracts, they will be paid for, in the event of a major hurricane, by enormous tax increases (per-household assessments, according to a report by Towers Perrin, could run as high as $14,000).
    Mr. Crist’s patronizing planning is not made excusable by his adorable (and likely feigned) ignorance of the most basic functions and mechanisms of a free economy. If he is looking for economic role models, he should look to the vision of America’s founders, rather than of the Berlin and Rome of yesterday or the Caracas and Havana of today. In my country, we think it’s a good thing for individuals to be trusted with their own financial decisions. I’ve been good . . . Mr. Crist, may I please, pretty please, have my liberty back?
    Joseph A. Bingham
    Florida College
    Temple Terrace, FL

  3. JAB

    First problem I notice in my letter: I didn’t mention how Crist seems to think that if insurance rates are going up, the companies must secretly be conspiring to fix prices. Apparently prices only rise in response to monopolies, never in response to, say, supply and demand. Who knew?
    (His references to an “insurance monolith,” his saying their practices were not “competitive,” and his reference to TR’s trust-busting imply a monopoly, though he doesn’t call it that, since that would be stupid in an industry as competitive as the insurance industry. Maybe that should tell him something…?)

  4. Joe, good letter. Crist is not the first nor will he be the last to exploit something people instinctively hate about insurance companies: unlike most contracts, you cannot “cover” or mitigate your loss if the insurer breaches. If I have a contract for a company to come and strip peeling paint from my eaves and they either fail to show up or show up and demand twice the price, I can get another company to come in and do the job and sue the first one for breach, claiming as damages the difference between the original contract and the price I eventually paid. If my house gets wiped out by a hurricane, however, and the insurer wrongly refuses to pay, I can’t go get another insurer to insure the property retroactively. If you categorize the political rhetoric about insurance companies, most of it revolves around this resentment, and touches on themes of conspiracy and market control by a cabal, much like the theme of The Octopus (which is not to say I disdain The Octopus, it is a great, great book that I have read three times). If I had to put forward a reason for the high jury awards in some of the Katrina cases so far, I would say the bad faith damages assessed have their seeds in that feeling that insurers take your money and then manipulate the process after it is too late for you to do anything about it. Crist is an interesting guy, very skillful use of the rhetoric of the oppressed, which hardly ever acknowledges that prices may in fact reflect unpleasant realities rather than avarice or maliciousness.

  5. Layne

    Great post, great links, and great comments so far.
    What really surprises me is Crist’s response to the WSJ. He seems to imply that he at least has an inkling of understanding of the huge ramifications Florida could be facing if a large Hurricane disaster strikes; but still has a cavalier, “it was the right thing to do anyway” attitude about it.
    Part of me looks at the situation, and thinks, “no-one that understands the situation could be for this plan and the potential for economic disaster it entails if they truly understood it.” And then, Crist comes along and basically says, “We know we are creating a huge potential economic disater, but gosh, no one can afford insurance anyway, so lets make it worse, and no matter what, I’m for the little guy.”
    If I was in Florida, and I wanted to create a business to “profiteer” on the “backs of the people”, I would go into construction. I get to build homes, and every year or two rebuild them as the hurricanes come through, and somebody else (whether insurance, or Citizens, or tax-payers) pays the bills.
    I don’t have a problem with construction contractors in general. I understand that they are not “profiteers”. But neither are insurers, in general. I am curious if anyone has done any studies on the economic impact insurers have had in Florida on the claims payment side. How may jobs are created by insurance payments in the construction trade? How many times do the claims dollars “turn over”. I would guess that the numbers are pretty astounding.
    Hopefully, I am not over-staying my welcome here David. If you get tired of hearing from me, just let me know. I enjoy reading your blog, and sometimes get a little fired up. This post doesn’t really deal with law per se, and I apologize for taking it even further off-topic.

  6. Layne, all comments are welcome, except those that are defamatory, which I don’t publish. Contributions by regulars is what makes a blog fun to read.