There’s a saying that goes like this: “No matter how far you’ve gone down the wrong road…turn around.”

Neoliberals are the worst at admitting when they’ve caused harm with their policies.  Neoliberal policies have put us on the wrong road.  It’s a road that doesn’t lead to prosperity.  But they won’t turn around.  So, we live in the neoliberal age of denial right now.  Government sponsored corporatism is rife with economic interventionism.

Interventionism is regulations, taxes and subsidies that provide advantages to some economic players but not to others.  Neoliberal interventionism has harmed our grassroots economy partly because of supporting (with tax incentives) the pursuit of short-term corporate profits in transnational companies that obtain cheaper labor abroad.  Our market economy consists of jobs and workers who produce products and services that can be sold.  It’s terrible when a person who wants to work can’t find a job.  A lack of work can cause harms that spread everywhere.  Because no one can buy much unless they do so with debt.  There’s burgeoning debt in student loans, for example, but little opportunity to pay off those loans in a bad job market.  Even when loan requirements are lower and interest rates are lower, people can’t get by without a good job.

When corporations outsourced labor in order to benefit from cheaper worker wages, they caused many Americans to lose their job.  So many jobless people made statistics about employment look terrible.  So the government stopped counting people who stopped looking for a job (when they couldn’t find one).  President Obama ignored those working age people without a job for the sake of economic braggadocio.  But changing the way that unemployment is measured to make unemployment look less awful doesn’t fix the problem of slack in our worker populations.

With so many now unproductive and displaced workers the need for welfare increased and the need for medicaid also increased.  But the ACA didn’t really help with healthcare inflation even though it increased the amount of charity healthcare paid at ever increasing prices (which caused even more healthcare inflation).  And the performance of the ACA was so bad that insurance companies started abandoning it.  And anyone who could avoid it did so.

Bank deregulation also has harmed our economy.  It may still doom us.  There are many examples of economic harm caused by banking deregulation.  Repeal of the Glass Steagall provision, for instance, set up the opportunity for default contagion in the case of bank failure.  Alan Greenspan, the former head of the Federal Reserve, promised that he would help banks if they defaulted and that encouraged more riskiness and innovation in finance.  Cheaper loans obtained at lower interest rates under Federal Reserve policy, fed the hostile takeover epidemic during the 1990’s.  That further damaged American enterprises.  Many businesses shut down, further displacing people from their former jobs.

The subprime mortgage crisis started by ramping up home prices under false appraisals, and made use of securitized loans that moved the risk away from bankers and externalized it to others in the stock market.  After the real estate market crashed, it failed to recover.  So it can’t lead us out of economic stagnation as it has during previous recessions.  The U.S. now has the lowest home ownership in the last fifty years.  And that caused more suffering as many people lost their home investment and became homeless.  But TARP and QE haven’t returned us to prosperity.  Our economy has courted risk and shunned production.  And that leads to more workers who can’t find jobs.  Even today, the banking system is mostly unregulated and continues to seek the most risk while it externalizes its losses to the grassroots.

With twenty trillion dollars of government debt, the idea that our government should continue to intervene in the economy is ludicrous.  Why continue to do what isn’t working?  The neoliberal road is the road to ruin.  It’s time to get off that road.

If you’d like to learn how neoliberalism got going after WWII, buy a copy of Political Catsup with Economy Fries available at Amazon.com today.

 

 

Trains were the first large-scale industry in the United States.  And it was an enormous challenge to get railroads built.  The government got involved in the rail industry by means of transportation regulations and land grants which gave large pieces of land to the railroads that could be sold for a profit or used to build track.  Trains were profitable at first because they offered a much cheaper alternative to overland transport when marketable goods were moved from place to place.  Passenger fares were less profitable than commercial fares.

When trains raised the rates that passengers were paying, the government stepped in to regulate the fares.  After years of transportation regulations, trains were less profitable.    Like the railroads, the interstate highway system was built with government investments from tax dollars.  Both of the American transportation systems, rail and highway, were aided with government money. When the interstate highway system was built, trains met with new transportation competition. And increasing competition between two government subsidized industries didn’t help the railroads.

If you study the effect of regulated train fares what you find is that the public seems to win for only a short time because they get cheaper fares.  But their taxes eventually have to supplement the money that the passengers aren’t paying.  So there’s no real savings.  Public taxation subsidizes train fares (which externalizes costs to non-users).  What also happens is that government regulation of train fares undermines the train industry until it stops being profitable.  When the government remains involved, the trains lose their ability to manage and run their business until it becomes less well maintained, less well-managed and unable to improve.

I read and hear people commenting about healthcare.  Some of them wishfully think that a single payer system will get rid of the insurance middleman and make healthcare more affordable.  But the healthcare system is already showing huge inflation that has been caused by government programs like Medicare and Medicaid.  In fact, government interference in the healthcare marketplace started during the Great Depression.  In 1933, FDR wrote government sponsored healthcare into his social security bill.  The 1933 AMA opposed this move as government sponsored healthcare, so that version of it didn’t pass into law at that time.  But soon thereafter, insurance companies like Blue Cross got started selling health insurance under hospital sponsored plans.  And nowadays, health insurance co-pays hide the very high rate of inflation in pharmaceuticals and the costs of healthcare generally.

With 20 trillion dollars of government debt, the idea that more government interference in healthcare will reduce prices is only a wish.  There’s no historical reason to believe it would happen.  If you look at railroads, government involvement destroyed a once profitable industry which had to receive government subsidies in order to run at reduced fares.  That was taxes paying what the trains couldn’t charge customers according to regulations.  Government was powerful but it couldn’t use its power to change the nature of the train business.  Lower fares weren’t enough to keep the railroads healthy.  And the railroad industry became less nimble and less robust.  Some would say that it wasn’t even a real industry anymore–just a hollowed out shell of its former self.  Eventually the government had to buy it.

The healthcare industry is larger and more complicated than the railroad industry.  Government interference in healthcare has already raised prices and encouraged monopoly.  Single payer would further harm or even destroy the healthcare marketplace and it would serve interests outside of caring for sick people.  Government intervention in the healthcare marketplace has already harmed both doctors and patients.  “Single payer” isn’t any kind of remedy to our healthcare problems.  It would only worsen harms to patients and doctors.

If you would like to learn more about how we got to our current place in history, buy a copy of Political Catsup with Economy Fries available at Amazon.com today.

sources:

Wikipedia, History of Health Care Reform in the United States, https://en.wikipedia.org/wiki/History_of_health_care_reform_in_the_United_States, accessed 20 Mar 2017.

R. Kent Weaver, The Politics of Industrial Change: Railway Policy in North America, The Brookings Institution, Washington D.C., 1985.

What if the idea of a national healthcare program is flawed because we can’t afford it under current economic conditions?  Setting aside the twenty trillion dollars of government debt for a moment, consider just the question of a patient’s payments.  What if there’s (1) no way to tax the people (over there) in the shrinking middle class living with less money every year to (2) pay for the poorest people (over here) who can’t afford to pay for the inflated price of healthcare in order to (3) make a huge profit for insurance companies everywhere and (4) make a huge profit for pharmaceuticals and (5) create inflation in the economy that disguises poor GDP performance?

What if that government sponsored healthcare model can no longer be sustained and that’s why Obamacare is failing and why it must fail?  Of course, it may also be failing just because it was a bad product that served as (1) a vehicle to inflate healthcare costs while (2) offering less care, and (3) less healthcare security and (4) virtually no privacy or information security.  One example of healthcare inflation is the cost of Novolog insulin.  It has gone up in price over the last five years by 248% (see note below)!  No one in the pharmaceutical industry can explain why this product should cost diabetics ever more money in our shrinking economy.  Why does it cost so much?

Part of our problems with healthcare begin with regulatory politics.  When you look at the regulations that came about during the modern liberal era from 1861-1944, there were a lot of regulations designed to prevent harms.  For example, regulations in the Food and Drug Administration established in 1906.  When a business failed to respect regulations designed to keep the public safe, it could be sued in civil court for monetary compensation.  A contrast can be seen by comparing the modern liberal and classical liberal period.  During the classical liberal era, which happened from 1776-1861, instead of trying to prevent harms through the growth of the regulatory state, courts allowed parties who were harmed to seek damage claims in criminal court and sometimes the court would revoke the operating licenses of businesses that caused harms.  During the neoliberal period from 1944-the present, damages have been pursued in civil court and large sums have sometimes been awarded.  In healthcare, that has increased costs by adding fees that doctors now pay for malpractice insurance.  And also now, doctors are ordering unnecessary testing just to avoid a malpractice claim under standards of care that create more billable tests.  That increases costs, too.

What if the Trump Administration isn’t able to revamp and reinstall the government’s involvement in healthcare?  Because it doesn’t work.  Healthcare inflation was always expected as a side effect of government healthcare programs.  And now we see that healthcare inflation has gone cost-crazy.  What if the government stopped guaranteed payment of pharmaceuticals at a constantly inflating price?  Wouldn’t the price come down?  What if the insurance middleman went away?  Wouldn’t that reduce costs?  What if people acted as their own agent in paying for healthcare and choosing their doctor?  What if this allowed them to re-energize their patient doctor relationship?  Instead of being at the mercy of insurance providers and doctors that don’t care about patients anymore?  Wouldn’t that decrease costs by increasing competition among doctors for patients?  What if the number of billable tests went down instead of increasing?  Wouldn’t that decrease costs?  What if bad doctors were removed from practice and the need for malpractice insurance went down?  Wouldn’t that decrease costs?  What if the government’s involvement in healthcare has been a terrible economic mistake that is now destroying the healthcare marketplace?  What if?

I realize that our media keeps banging the drum for “replacement” and not just for “repeal.”  In fact the very idea that fundamental changes are needed in healthcare is strictly avoided by the media which proposes that the U.S. government should continue to interfere with American healthcare, despite the obvious failure of Obamacare.  Media outlets that say we need to “replace” Obamacare are really saying, “we need government sponsored healthcare.”  Even though most Americans didn’t sign up for the healthcare exchanges.  Because they didn’t want Obamacare.  And I think that many Americans who have wanted Republicans to repeal the Affordable Care Act didn’t want to replace it.  They saw that the government’s involvement in American healthcare was bad.  It invades privacy because it allows government encroachment into people’s private health concerns.  It also invades privacy because computers are vulnerable to computer espionage.  Because we are mortal, government healthcare makes us vulnerable to healthcare denial and inflation.  Ouch!  Those are two harms we want to avoid.  Perhaps instead of replacing the ACA, it should just be allowed to die the death that it deserves.

Note:   It may be hard to imagine a 248% increase but that means that if a vial of insulin cost $113.59 five years ago, it now costs $281.72!  (A diabetic uses many vials per year.)  The same runaway inflation is happening in other medicines too.  Insurance companies, pharmacy companies and the subsidized and protected medical profession needs Obamacare and medical insurance programs in order to ramp up medical costs this dramatically.  Co-pays hide the real costs.  A real market wouldn’t hide these price increases and the public wouldn’t tolerate them.

For source material on date, see: US Food and Drug Administration, https://www.fda.gov/AboutFDA/WhatWeDo/History/, accessed 13 Mar 2017.

Would you like to understand how our laws have changed since the founding of the nation?  Would you like to understand what has motivated those changes?  If you want answers to those questions and more buy a copy of Political Catsup with Economy Fries: Liberalism, Pragmatism, Opportunism, available at Amazon.com.

According to Thomas Sowell in his book Basic Economics, markets operate according to profits and losses.  The profits tell producers what to produce and the losses tell them what to stop producing.  When market forces are working, producers respond to what people need and want and also to what they can afford.  That makes the market responsive to society.  But under neoliberalism, economic interventionism creates a different less responsive marketplace.  Instead of responding to people want, need and can afford, the market produces more of what the government provides subsidies for.  Subsidies can be tax reprieves, for example.  Or, instead of a subsidy, a low-interest loan can allow a corporation that isn’t profitable to continue making what no one wants, what no one needs, and what no one can afford.  Another word for making things that no one wants, what no one needs and what no one can afford is “malinvestment,” and malinvestments waste economic resources and cause society to suffer.  Sowell writes, “Profits as a realized end-result are crucial to the individual business, but it is the prospect of profits–and the threat of losses–that is crucial to the functioning of the economy as a whole.”  And of course he’s right about that.

Something to ponder today, if you’re in the mood to ponder the economy, is whether low-interest loans and tax subsidies and imported cheaper labor serve the public’s interest in terms of keeping the market healthy.  Is the market providing what people want at a price that they can afford?  How much malinvestment surrounds us?  And since the market clearly isn’t healthy and hasn’t been healthy now for a while, maybe we can see a failure of economic interventionism and a failure of neoliberalism.  (A failure of TARP, a failure of QE, a failure of the ACA, a failure of Obama’s economic stimulus programs, a failure of wars in the Middle East, nearly 95 million working age people who aren’t working because the neoliberal economy is so bad that there isn’t enough prosperity in it to provide employment opportunities to those people).

The Commerce Clause in the U.S. Constitution was interpreted differently during the modern liberal period from 1861 to 1944.  Congress’s power expanded under the Commerce Clause to help the nation make the most of new markets that formed during railroad transportation improvements.  Article One, Section Eight is a long list of Congressional powers.  The Commerce Clause reads, “The Congress shall have Power To regulate Commerce with foreign Nations, and among the several States; and with the Indian tribes;”.  As the economy continues to lack prosperity, I hope that Congress will stop using the Commerce Clause for economic interventionism.  I hope that Congress will count the terrible costliness of their harmful interventions.  Because they have interfered enough to destroy the market mechanism of market self-regulation.  Not only have they interfered with the self-regulation of markets, they have stimulated the growth of monopolies across the nation.  In doing so they haven’t added to their influence but instead have undermined the U.S. economy and prosperity.

If you want to read more about how Americans have navigated challenging economic times over our history and through three different political ideologies, then buy a copy of Political Catsup with Economy Fries at Amazon.com today.

The quote came from:

Thomas Sowell, Basic Economics, Third Edition, (Basic Books, A Member of the Perseus Books Group, NY, 2007), 173.

 

 

I wonder how many more times I will read about globalization and discover once again that globalization is misrepresented.  Let me clarify twenty-first century globalization for you.  First of all, twenty-first century globalization comes with neoliberalism and financialization.  They are a triple threat to prosperity for most of the world’s people.  The combination of globalization, financialization and neoliberalism is why this 21st century version of globalization is so harmful.  Also, globalization isn’t new.  Even in the classical liberal past, from 1776 until 1861, well-to-do people in portraits wore finery imported from around the world.  Similarly, globalization was part of the modern liberal period, from 1861 until 1944.  As global populations grew, globalization grew.  Globalization sharpened competition for raw materials to use in industrial processes.  Nations competed for those raw materials until WWI and WWII broke out.  Now in the neoliberal period, mobile capital through international banking gives the largest capital holders financial advantages over people and groups that have less capital.  And that financial advantage becomes power over markets and even over nations.  And neoliberalism, or state sponsored corporatism, makes it all possible.

If you want to learn more about how we find ourselves in a lackluster economy with economic and political insecurity buy a copy of Political Catsup with Economy Fries available at Amazon.com.  I take you step by step through the political and economic changes that bring us to the present.