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Political Animal

Capitalism Monte

By Brian Morton | Posted 10/14/2009

About 10 years ago, there was a short moment where the lawmakers of New York City mulled over the idea of legalizing the three-card monte game, calling it "a game of skill." But really--it's not. It's not even a gamble. You play, you'll lose. It's that simple.

Slot machines, those are a gamble. You know when you stick your money in, you've got an infinitesimal chance that you may win more than you pay out. As small as the chance is, you can't exactly call it a rip-off. There's no intent to defraud per se; the operators of the game know (and you're tacitly agreeing) that they're taking advantage of either your avarice, your gullibility or, sad to say, your stupidity.

But the monte, now that's something different. As Penn Jillette once wrote in a New York Times op-ed, "The marks think they're cheating a dumb street guy, and meanwhile the dumb street guy (along with his five secret partners) is taking their money. You can't cheat an honest person. Really good pure people don't get ripped off by three-card monte, but really good pure people don't exist. Three-card monte is a beautiful bad thing."

Increasingly, regular day-to-day transactions are turning into the equivalent of playing a slot machine, if not the monte. When you go to buy food at the store, you're entering a transaction where the company who makes the food is tacitly saying, "You're giving us your money, and we're promising to sell you food that will taste good, be healthy, and ideally (at a minimum) not make you sick."

When you put your money in a bank, you're tacitly entering an agreement where you are investing your earnings there, and they are either paying you for the privilege of using your money to invest and allow them to make a profit, or perhaps they charge you a nominal amount for the services they are providing you: the ability to write checks, pay bills, or to use a debit card in order to bypass the inconvenience of using cash.

But what happens when the food store (actually, its suppliers), the bank, or (worse still) the credit card company decide that they do not want to work jointly in your mutual best interests and would rather actively cheat or deceive you?

For example: Let's look at the American packaged beef industry. The New York Times last week featured a story on how meat processors actively discouraged testing of ground-beef trimmings for the E. coli bacteria, because slaughterhouses selling the meat resisted the practice. A food-safety officer from American Foodservice told a Times reporter, "They would not sell to us . . .. If I test and it's positive, I put them in a regulatory situation. One, I have to tell the government, and two, the government will trace it back to them. So we don't do that."

The story points out how ground beef sold in the form of hamburger patties may have come from almost anywhere, and even large grocery concerns like Costco don't even have enough sway to get the industry to change its practices. The slaughterhouses and processors would rather take your money and take the risk of making you sick than spend the money required to clean up their act. The gigantic food-processing company Cargill, accused of supplying the beef traced in a recent E. coli outbreak, made $116.6 billion in 2008.

Look at the banking industry. After a year in which financial services have taken it on the chin in the media for their irresponsible actions, greed, and hypercompensation of executives, they are increasingly coming under scrutiny from lawmakers, with the possibility of more regulation in the near future.

Yet, in the arena where everyday consumers conduct a large amount of activity--credit and debit cards--the way the industry has gamed the rules is breathtaking. We've already heard of credit card companies changing interest rates at whim for little reason, but now with the advent of computer technology, the banks can actively work against their customers' best interest by charging extra fees by manipulating the order of how they clear transactions. Another Times story points out how banks are clearing more expensive transactions first, in order to trigger overdraft protections for which they can charge massive and onerous fees and penalties--often in cases where the customer hasn't even opted for the overdraft protection.

In another era, such usury (in the case of banks) or malfeasance (in the case of the meat) would be almost criminal, subject to sanctions and regulation. But between 30 years' worth of anti-government sentiment and eight years of the belief that regulation is something best left to commerce, such blatant actions, adverse to the wealth and well-being of the consumer, barely make a ripple in the public consciousness.

Libertarian instincts such as that the market can "regulate itself" might be fine and good in a theoretical construct, but when the real world rears its ugly head, real people get hurt while the wealthy, the well-connected, and the deceitful get off scot-free. Here we have two specific markets where the honest customer is being gamed, and the only way to change the rules is for government to step in. Otherwise, we've gone and legalized the monte.

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