The Balance of Capitalism

Debate over economic structures has ranged on since the brink of monetary development over bartering. Often mixed with political integration and upheaval, no subject of human debate beyond religion has ever caused such controversy, violence, and war.  Only within the past quarter century has Capitalism begun to truly win out and become the dominant economic force across the Globe. The purpose of this post however is not to callously drive blows of criticism upon the Capitalist Theory without proper justification or suggestions for improvement. A discussion over the superior rationale surrounding Capitalism fundamentals (basis for the value of money, definition of “need” etc.), although an incredible passion of mine is also beyond the scope of what we’re talking about here.

The purpose of this post is to open discussion, about the balance of our capitalist structure surrounding those key elements of our societal infrastructure so integral and touching so many aspects of our lives even a slight swing or alteration can have extreme consequences. Industries that have become so ingrained they are now essentially vital for our society to maintain a reasonable standard of living. These are elements such as: Residence, Food Supply, Education, Defense, Health Care, Communications Networks, Energy, Space Exploration, and Transportation. The delicacy of these topics has historically had far more significance then other industries and subject areas. Few people invested in the concept of Capitalism question whether the: manufacturing of consumer goods, consulting, entertainment, and hospitality industries would better serve the public in private or public hands. The Affordable Care Act, Internet Neutrality, Outsourcing of Space research to private companies, Defense Contractors, the Utility Grid Structure, these industries however, are all intense areas of focus in the private – public debate.

The Limits of The Economy

Before diving in too deep or stepping on any toes, lets lay a logical baseline of more universal agreement. Like almost all aspects of life, too much or too extreme of anything often bares negative consequences. Drink too much or too little water, work too hard or too lackadaisical, bad things happen. We’ve all experienced that. Balance, equilibrium, homeostasis, are all fundamental principals of nature. A constant ecological battle for the perfect middle ground. Applying this same concept to our discussion, clearly the extremities of Capitalism would also have negative consequences as discussed in Michael Sandel’s book “What Money Can’t Buy” As an example, Mr. Sandel discusses with Stephen Colbert about the potential free market application to things such as citizenship or politics. Should an American be able to sell their vote or even their citizenship? http://www.justiceharvard.org/2012/05/michael-sandel-the-colbert-report-video/

Mr. Sandel in this case illustrates not only a prime example, but also provides wonderful insight into of the limits of the Free Market System. Still, the vast majority of our society would likely concur, there is logically speaking, clear and sever consequences of breaching the logical limits of the free market. Selling votes or quite literally selling get out of jail free cards would  bring society to its knees with chaos. Billionaire drug lords free to steal and murder with no true consequences. If we look beyond these types of extreme example though, what if we were to look at a more mainstream concept? Does it make sense to higher defense contractors or privatize the health care system?

To answer these questions, let’s pose 4 questions, and the resulting answers will help define how said industry would best be handled. We’ll call these the Questions of Capitalism.

  1. Do customers enter the market voluntarily? (ex. Being robbed vs. buying a lawnmower or having a heart attack vs. buying cable TV)
  2. Do customers have alternative, choice, or market competition (ex. is there a monopoly?)
  3. Does the market have reasonable price sensitivity (ex. is there any reasonable correlation between price and demand?)
  4. Do incentives align with the industry and firm’s mission, vision, and purpose in society? In other words, does the drive for short term or long term profits corrupt the firm’s ability to fulfill its societal purpose? (ex. does the strive for wealth force a hospital towards a path that’s isn’t in the absolute best interest of patients?)

Why these questions in particular, why are they of significance? In the same way anti-trust laws protect from corporate interests overpowering those of the general consuming public to within a reasonable extent, these questions can help to decide how an industry deemed to be integral to our current quality of life, would best be structured. In other words, should it be run solely of, or to within certain constraints of, non-profits? Should it be government run but open to private competition? Should it be solely privately held within a limited range of regulation as the free market proves to best serve the public interest? Objectively, analytically, and from the mindset of critically thinking about these issues without bias, what best suits our society’s needs?

I’m not going to pretend to be an expect on the intricacies particular to each of the elements noted earlier (Residence, Food Supply, Education, Defense, Health Care, Communications Networks, Energy, Space Exploration, and Transportation) and as such, in the interest of time and accurate information, I won’t delve into the specifics of each. That said however, the Questions of Capitalism are conceptually and logically general without conflict or bias to any one elemental industry. They are based simply to create a fair system which is most beneficial to society as a whole. They can be applied to the specifics of any industry, and particularly, those considered to be the vital elements. So let’s take a look at a few examples.

Screen Shot 2014-05-19 at 1.13.13 PM

Percent Change in Bankruptcy Filings, 2011 to 2012. Digital image. uscourts.gov. Administrative Office of the U.S. Courts on Behalf of the Federal Judiciary. Web. 19 May 2014.

The Health Care Example

According to Forbes and a study done at Harvard University, in 2010, 62% of all personal bankruptcy filings were due to medical expenses. Keeping in mind by the way that 78% of those 62% had some form of health insurance, this clearly indicates a fundamental flaw in the system. A very large cause for this financial epidemic was covered far better than I could have ever hoped to approach by Steven Brill in his Time’s article “Bitter Pill: Why Medical Bills are Killing Us.”

What is fundamentally wrong here, what rules does this system seem to break? How about the first one for a kick off? Do “customers”, better known as patients in this case, enter the market by choice? Perhaps an argument could be made for yes but a better one can certainly be made for no. Health Care in modern times is for all intense and purposes a human necessity. No one in 2014 throws their hand up in the air says “oh well!” when the person next to them has a heart attack or is shot etc. You call 911 and go to the emergency room. In other words, no, no one enters the market voluntarily in the same way one would enter the market for a refrigerator.

What about the second question, do patients have any alternatives or choices? Few if any statistics are published on this but I think its a fair assumption to say the very vast majority of stroke patients or stabbing victims take the time to peruse their options for emergency room care before going to the hospital. Let’s even take the example of a non-emergency situation where maybe you are interested in taking the time to choose your physician. Well, if you are one of the 42.6million Americans said to be living in rural counties, how many hospitals capable of taking care of your needs do you have within a reasonable distance of you, maybe one, two if you’re very lucky? This isn’t your neighborhood coffee shop we’re talking about, serious resources and skill sets and needed here. In other words chances are no, the average patient has few if any alternatives, though please feel free to contact me if you have contrary examples and I’ll be happy to publish a follow up.

Alright so how about the third question, is there reasonable price sensitivity? Well as discussed in the first answer we know the effect on demand due to price is slim to nil since customers don’t generally enter the health care market by choice. So how much do prices fluctuate, and based on what? Brill’s article details very well the absurdity of how these services are priced, but who then decides how much you as the patient actually has to pay? For the most part that’s certainly not you. That battle is usually left up to your doctor’s office and insurance company to fight out. What about price equivalency? While the care one person receives from a doctor is theoretically equivalent to the care another receives for the same services, how those costs are outlayed to each patient can be completely different. On top of that, how one person pays could in fact effect how much another has to pay quite easily. Because Health Care is a necessity, no one is turned away meaning many patients may in fact walk away without actually paying the provider a dime. Say a drug addict enters an emergency room in an attempt to score a fix, well chances are they leave without any form of payment yet the enormity of the costs associated with the visit, whether justified or not, are still incurred and passed on to paying individuals instead.

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And if you think those economics are screwy, how about the ones behind the scenes, hospital suppliers, medical equipment manufactures, pharmaceutical companies, etc. So lets look at the fourth question here, incentives. Not to be misinferred as a money hating hippy here but let’s get real, is it really in the public interest to structure industry incentives towards developing treatments, rather than cures, for illnesses? Can we objectively say its beneficial for our society to take a reactionary approach with over medication rather then to simply work with physicians to incentivize and employ a healthier life style and diet? See Forks over Knives if you’re really interested in a life changing health decision. Again, don’t get me wrong here. How any individual chooses to live their life within the confines of the law is the barest essence of freedom, but I’m not talking about laws limiting consumer choice, redistribution of wealth, or anything of the sort. Simply put, do we as community of human beings choose to collectively incentivze an expensive, immoral, and unbalanced health care system structure or proactively, logically, and critically discuss on an open forum how to restructure ourselves for the genuine benefit of us all?

Sure enough there are a few assumptions here and I’m not going to pretend all of these examples are the norm, but the fact is they exist. Whether or not its company policy or the CEOs will admit it, the system is nonetheless structured in such a way as to allow for these inefficiencies and adverse societal effects to occur.  I challenge you all to continue the conversation here, to discuss, and challenge the status quo. The United States and its people have built themselves into a reputation as world leaders across so many aspects of life and society. Let us continue that pursuit and question our content with these scenarios:

 CT SCAN (HEAD)  APPENDECTOMY  CORONARY BYPASS

ARGENTINA        $78            $1,030        $9,319
AUSTRALIA       $254            $4,926       $38,891
CANADA          $122            $5,606       $40,954
CHILE           $184            $5,509       $20,505
FRANCE          $141            $3,164       $16,140
GERMANY         $272            $3,093       $16,578
INDIA            $43              $254        $4,525
SPAIN           $123            $2,615       $17,908
SWITZERLAND     $319            $5,840       $25,486
U.S.            $510           $13,003       $67,583
Average cost, 2011
 Brill, Steven. “Bitter Pill: Why Medical Bills Are Killing Us.” TIME Magazine 4 Mar. 2013: 16-55. Print.
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