At Geopolitical Futures George Friedman has some interesting observations about capitalism and socialism as being discussed in the U. S. today:
Democratic socialism cannot be democratic because of the scope and scale of modern economies. It either evolves in a Soviet direction, to name one extreme, or, as in oft-cited Sweden, leaves most investment decisions to private investors, taxing them and transferring money to the rest of society. In the Soviet model, the state tries to manage mid-level civil servants by terrifying them with death. In the Swedish model, the battle is formed by demands of increasing social benefits and decreasing investment capital.
Under capitalism, the diversification of capital sources protects against bad decisions made by centralized governments. But it must, by its nature, create inequality and occasional social crisis. The flow of money into the hands of the investor class must generate crises as industries are shut down and as new ones are created. The speed of what Joseph Schumpeter called “creative destruction†generates rapid and intense crises that can turn just as rapidly into social unrest, chaos or repression. Capitalism has generally solved this in the same way that social democracy has: It has left investment to private investors and then imposed taxes on them to cushion social dislocation.
In short, the distinction between modern industrial capitalism and social democracy is minimal. Leaving aside socialist fantasies about the abolition of greed or capitalist fantasies in which a state will expect nothing from its citizens, the two systems have more or less merged. Capitalists and socialists accept private investment. Both expect economies to grow and from that growth they will pay taxes. In both Sweden and the United States, taxes are hated by the public, but the benefits are loved. Still, the political system decides the taxes and the politicians do what they were meant to do in a democracy – pander to the public. What may differentiate one politician from the next is the amount of taxation they propose, but even that is used to balance the system.
My complaints about capitalism and socialism are reciprocal. Capitalism is not nearly capitalistic enough and socialism not nearly socialistic. Capitalism in which you cannot bear to allow a business whose managers make terrible decisions to fail is not capitalism. Socialism in which somehow party apparatchiks manage to become millionaires is not socialism.
Slightly OT, but you might like this on health care. I dont always agree with Joe, but at least he writes like he knows the topic. He has been involved in health care almost as long as I have so maybe that helps. Anyway, this helps to illustrate that while capitalism may be the best economic system we have found, it has weaknesses.
https://thehealthcareblog.com/blog/2019/07/02/why-the-health-care-system-is-incapable-of-reducing-its-own-costs-a-brief-structural-system-analysis/
Steve
I certainly agree with his points. Point #2 in particular is right on the money. That alone explains why the market doesn’t reduce costs in health care.
I have a few quibbles but I basically agree with him. It’s why I’ve scoffed at “market-based solutions”. IMO anyone with firsthand experience of the health care sector (other than as a patient) knows that’s the case.
Could “market-based solutions” work? IMO only if we were willing to do things we aren’t and shouldn’t be willing to do.
“Capitalism in which you cannot bear to allow a business whose managers make terrible decisions to fail is not capitalism. Socialism in which somehow party apparatchiks manage to become millionaires is not socialism.â€
Both of those are true, although I’d suggest “business†should be qualified by large. The country is littered with failed small to medium businesses. In any event, it seems to me, as I’ve said numerous times before, that the flaws you cite inevitably evolve from ceding ever greater power to government institutions.
So….. it seems to me that strange comments like “capitalist fantasies in which a state will expect nothing from its citizens†are more than just incorrect, but reflect a dangerous attitude. I have no idea where he believes these capitalist fantasies gain traction. On the issues of taxes alone I’ve pointed out that it is not difficult to do an accounting at all levels of government that has a relative minority paying 25-45% of their income. Meanwhile a majority are paying a net negative number to, say, 15%. And they want more free beer. That situation doesn’t work either.
And before someone pops up and goes into their progressive taxation dissertation, of course we need progressivity in the tax code. But the numbers indicate the load is being borne by fewer and fewer. The powerful put a stop to it through their influence. And from there it’s just go down the income scale and print money.
On health care. Ok, I’ll bite.
“….when other payment systems such as competitive bundles, subscriptions, direct pay primary and others gain serious market share, the system will shift,.
How do we do that? I’ve been an advocate of direct pay primary for years, and true insurance, not maintenance, for major losses.
For one thing we could start moving to taxing compensation rather than wages. Unions would hate that like poison. It would equalize wages with taking benefits as compensation.
Well, yeah. That was FDRs mistake so it’s been a long time and expect no change there.
BTW – I found the author of Steve’s piece to be making points that pertain to most if not all businesses. It still is not clear to me what is so unique about healthcare services that traditional checks and balances inherent to business in general did not apply.
It’s just math.
https://hotair.com/archives/2019/07/02/vox-cant-build-bigger-welfare-state-without-much-higher-taxes-middle-class/
So to a large degree you are just recycling money – tax it/process it/dole it back out to the correct voting blocs – with the state taking a healthy cut along the way. And in the US I think you’d see a lot more apparatchiks. It makes for a nice story, but I’m not impressed that the poor are seeing cash rain down on them.
” It still is not clear to me what is so unique about healthcare services that traditional checks and balances inherent to business in general did not apply.”
People write books on this, but I will give you three reasons out of very many. First, you have insurance. As Joe noted, the insurers really arent that motivated to keep costs down. Patients are buying through insurance so a lot of the cost effects are mitigated. Next, there is such a big information mismatch. Most people are pretty clueless about what their docs tell them. They tend to just go along and most docs arent really cost conscious. Some are out and out crooks, but most just do what they think is right, without any regards to costs. Last, for many people costs are a secondary concern. They still worry about costs, but geographical concerns or family needs trump cost concerns.
Direct primary care is a good way to cut costs in a very small area of medical spending. Most medical spending occurs with big ticket items like chemo, radiation and surgery, or with expensive chronic care. DPC doesn’t really address these. The talk about insurance paying for maintenance is nonsense for the most part. The amount of money spent on that kind of stuff is small compared with the stuff we really spend on.
” 25-45% of their income. Meanwhile a majority are paying a net negative number to, say, 15%. And they want more free beer.”
Why is it that for conservatives only income tax matters? Payroll taxes, sales tax, etc dont matter. Also, with our income and wealth inequality, how do we avoid having the wealthy pay more taxes? Not that they dont already avoid a big chunk already.
Steve