Robber Barons or Communist Central Planning

Imagine for a minute that you own a fruit stand. You sell oranges, grapefruit, lemons and limes. Perhaps in season you sell apples, peaches, and strawberries. What would you think if the government came in and forced you to sell broccoli, asparagus, and pecans? Hopefully you would be horrified. After all, wouldn't that smack of failed Soviet command economics?

Well sad to say that is exactly the proposal made by the attorney general of Mississippi, Saturday February 17, 2007. Please consider Miss. AG Seeks Legislation on State Farm.

Mississippi Attorney General Jim Hood said Friday he will seek legislation aimed at blocking State Farm Insurance Cos. from refusing to write new homeowners and commercial policies in the hurricane-battered state.

Hood's plan would require any company that writes automobile insurance in Mississippi and also writes homeowners policies in other states to offer homeowners and commercial properties throughout Mississippi.

Hood said his plan is modeled after actions taken by Florida. Florida's legislation primarily deals with preventing policy cancelations and non-renewals, but Hood said a model could be crafted to force companies to write new policies.

"We're looking at a robber baron in the face that is trying to make an example of Mississippi," Hood said of State Farm.

State Farm, Mississippi's largest homeowner insurer, said Wednesday it has had enough of the "untenable" legal and political climate in the state and is suspending writing new homeowners and commercial policies. The company said the suspension would begin Friday and continue until the business climate in the state is more palatable.

In a statement Friday, U.S. Rep. Bennie Thompson, D-Miss., said he was "deeply disturbed" by the decision and said Congress would hold hearings on the insurer's conduct.

State Farm spokesman Phil Supple said Friday that Hood's rhetoric, including his comparison of State Farm to a "robber baron," is a "remarkable response to what was purely a business decision."

Hood's plan prompted criticism from other Mississippi officials, who say the Florida legislation it's based on is driving insurers out of that state. "Florida did something similar and we're seeing companies leave Florida daily," said Lee Harrell, Mississippi's deputy insurance commissioner.

Robert Hartwig, vice president and chief economist for the Insurance Information Institute in New York, an industry-funded group, said Hood's proposal isn't likely to succeed in compelling State Farm to continue writing new homeowner policies.

Automobile insurance isn't profitable enough to offset losses in the sale of homeowner insurance in a hurricane-vulnerable region so the company may be inclined to stop selling auto policies if they also must sell homeowner policies there, Hartwig said. "The only losers in this situation are consumers facing fewer options for automobile insurance," Hartwig said.

Should Mississippi be stupid enough to pass legislation forcing "the farm" to sell asparagus when "the farm" only wants to sell grapefruit and oranges, what will happen should be obvious: The price of grapefruit, oranges, and asparagus will all rise when "the farm" rightfully tells Mississippi to shove it and takes its produce stand elsewhere.

The government has no business telling "farms" of any sort what kind of fruits and vegetables they can sell, nor does the government have any business setting prices for "produce". Wasn't Soviet command style economics discredited long ago?

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/