Conventional wisdom says growth through production is
highly desirable, yet economic axioms are rarely universally applicable.
Economic ideas tend to be born out of the immediate circumstances (and often
scarcity) that carry the day. Therefore, Galbraith looks to address the
fundamental issues of today’s largely
affluent societies, and does a pretty darn good job.
We find ourselves in a society of abundance and excess, but
simultaneously of great disparity and poverty. I don’t think anyone disagrees
with this basic assessment of the economic situation in the United States,
supposedly the best in the world. One ideological camp is steadfast
to its market principles and claims that inequality and excess are the
inevitable result of a successful capitalistic system. Others point to certain
phenomena in the economy, such as the fact that poor people are inherently
marginalized in a competitive society that is based on competitive prices and
willingness to pay. Certain market-distorting mechanisms, like marketing and advertising, prioritize
demand for extravagant wants while drowning out the demand for some very basic
needs of the less fortunate. For example, a pharmaceutical corporation rakes in
higher profits pushing Botox and other cosmetic products on a wealthy, wrinkly
demographic than providing life-saving medication or insulin at a reduced cost
to those who dearly need it but can hardly afford it.
As such, there seems to be two potential solutions to this chronic flaw in affluent socities. 1) The
government steps in with strong public spending on things such as healthcare, education,
infrastructure, etc. in order to fill the spaces oft neglected or disregarded
by the private sector and its profit motive. 2) Economic incentives can be
provided such that the private sector benefits from addressing these areas. In
theory, the competitive market is certainly more efficient at providing solutions
for a lower cost than the government is, but at this point in the game the incentives are not there.
Take healthcare as an illustrative example, an industry of every rising costs and need of significant cooperation and innovation. Health insurers, following their profit motive, wring profits out the consumers, even weeding out consumers with pre-existing conditions because they would essentially be ‘toxic assets’ on the books. The government, charged with protecting these consumers and affirming a right to universal health care, passes legislation prohibiting insurance companies from these engaging in these practices. The relationship between the private and public sector has many times been adversarial, when in reality it needs to be harmonized. The best solution is not pure free market or pure government spending, but an efficient use of the both, harnessing the competitive strengths of one system with the democratic safeguards of the other. One is driven by profit motive, and another by the protection of the consumers and baseline commitments to justice and equality. If the incentives are altered so that the goal is to drive costs and thus prices down (a race to the bottom of sorts, instead of the current, production-fueled race to the top), then both producers and consumers will benefit.
In certain tricky industries with a large public component, like healthcare and education, these types of nuanced solutions are needed. We can take lessons from other countries, perhaps those that practice a form of “cuddy capitalism” as opposed to our “cutthroat” model (as Ben's post details), while meanwhile providing compelling incentives for our private sector to get involved in these areas. Given that our public sector will continue to spend an enormous amount of money in these areas (just look at our spend numbers per capita versus other countries in these areas), we might as well see if the public and private sectors can’t tackle this together. Though counter intuitive at first, it makes good economic sense for us to focus on those most marginalized in our society, because as Jen points out, they provide the highest rate of return, and they tend to be the most costly.
The graph below shows that the government tends to be less efficient with their healthcare dollars than the private sector, providing good evidence for why it was likely wise to drop the public option and opt for a state exchange system that can harness the power of markets.
Take healthcare as an illustrative example, an industry of every rising costs and need of significant cooperation and innovation. Health insurers, following their profit motive, wring profits out the consumers, even weeding out consumers with pre-existing conditions because they would essentially be ‘toxic assets’ on the books. The government, charged with protecting these consumers and affirming a right to universal health care, passes legislation prohibiting insurance companies from these engaging in these practices. The relationship between the private and public sector has many times been adversarial, when in reality it needs to be harmonized. The best solution is not pure free market or pure government spending, but an efficient use of the both, harnessing the competitive strengths of one system with the democratic safeguards of the other. One is driven by profit motive, and another by the protection of the consumers and baseline commitments to justice and equality. If the incentives are altered so that the goal is to drive costs and thus prices down (a race to the bottom of sorts, instead of the current, production-fueled race to the top), then both producers and consumers will benefit.
In certain tricky industries with a large public component, like healthcare and education, these types of nuanced solutions are needed. We can take lessons from other countries, perhaps those that practice a form of “cuddy capitalism” as opposed to our “cutthroat” model (as Ben's post details), while meanwhile providing compelling incentives for our private sector to get involved in these areas. Given that our public sector will continue to spend an enormous amount of money in these areas (just look at our spend numbers per capita versus other countries in these areas), we might as well see if the public and private sectors can’t tackle this together. Though counter intuitive at first, it makes good economic sense for us to focus on those most marginalized in our society, because as Jen points out, they provide the highest rate of return, and they tend to be the most costly.
The graph below shows that the government tends to be less efficient with their healthcare dollars than the private sector, providing good evidence for why it was likely wise to drop the public option and opt for a state exchange system that can harness the power of markets.
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