The Free Market That Never Was

A comparison of “socialized” versus private health care

According to some critics, Barrack Obama’s efforts to work out a federal solution to the health care crisis implies that he is a socialist. Indeed, free market logic tends to assert that any form of state interference in private enterprise is, by definition, socialism. Fair enough, but if we use such stringent criteria, then, by extension, we would also have to conclude that the past dozen or so Presidents have all been socialists. Regardless of party affiliation, the vast majority of 20th and 21st century Commanders-in-Chief have been big supporters of federal economic intervention–the extent to which that establishes their credentials as died-in-the-wool socialists is somewhat debatable. Nonetheless, troubling as it may seem, US government “interference” in the private enterprise system has actually been far more common and, dare I say, more beneficial than we often like to admit.

Of course, such a declaration is certain to be viewed as sacrilege by free market enthusiasts. The received wisdom among free marketeers is that any form of governmental intervention is synonymous with bureaucratic bungling. Beginning with Adam Smith, economic theorists have insisted that free markets work best when they are unregulated. That is, in the ethereal absence of government regulation, an “Invisible Hand” magically optimizes market relationships. It’s an inspiring image and, although somewhat Utopian, the fabled Invisible Hand nonetheless affirms many of the fundamental rights and values of free market-worshippers, i.e., small government, individuality, private property.

It’s also pure baloney.

Free marketeers are forever clamoring for economic deregulation. Without doubt, deregulated economies open up extraordinary opportunities for profiteers to bag short term gains. However, an environment of diminished regulation also amplifies the likelihood of economic catastrophe. The financial crashes of 1929 and 2008 offer two instructive examples. In the period immediately preceding each collapse, laissez faire economic philosophies monopolized the hearts and minds of policy-makers. Thus, free marketeers generally see naught but virtue in economic deregulation, however, the reality is that deregulated economic systems are train wrecks waiting to happen. The unfettered pursuit of profit consistently consumes and destroys its very own means of survival. Invisible Hand, indeed!

I suppose the true meaning of the Invisible Hand is that, in the aftermath of financial disasters, the Invisible Hand is nowhere to be found. When free marketeers need a helping hand in the wake of an economic meltdown they don’t turn to Adam Smith, instead they call upon the much-maligned, but ever-dependable federal government.

Indeed, not only is government regulation the most effective means of preventing free marketeers from destroying the economy, but government intervention is perhaps the most essential ingredient in the process of creating a vigorous and stable economy. For example, FDR engineered a miraculous recovery from the Great Depression by imposing unprecedented federal control over the economy. In doing so, he also laid the foundation for creative new public-private synergies (a.k.a., the military-industrial complex). Quite literally, the partnerships that FDR orchestrated between the federal government and private industry not only laid the groundwork for US success during WWII, but those partnerships have also secured America’s enduring status as a super-power throughout the post-war era.

Jumping ahead to the economic fiasco of 2008, the same-old pattern has played out: free marketeers deregulated the economy to the brink of oblivion and then foisted responsibility for disaster recovery onto the feds. Yet, if there is a silver lining to the 2008 financial meltdown, it’s that, right on cue, Adam Smith’s Invisible Hand has taken a powder. For example, from the very moment that Hank Paulson (arch free marketeer, and former Secretary of the Treasury under G.W. Bush) realized the full scope of the 2008 financial disaster, he instantly became a profligate socialist: overseeing the most costly bailout of the US financial system in the nation’s history. Free marketeers are unrepentant advocates of privatized profit and socialized risk. Damage control is–always has been and always will be–the domain of the federal government.

Fortunately, having accumulated lots of experience with the malign influences of the Invisible Hand, the feds have developed a well-oiled capacity to coordinate post-meltdown recoveries. For example, isn’t it amazing how in the space of only a few short months all of the bankrupt banks, having been bailed out and propped up by the feds, have returned to profitability? Also, like a phoenix from the ashes, General Motors has emerged from bankruptcy under Big Brother’s watchful eye with a brand new focus on innovation, customer service, and 21st century profitability. Isn’t it extraordinary what wonders can be produced with a well-timed dose of governmental intervention?

Thus, there is no such thing as a “free market.” On those occasions when the US economy has undergone “enhanced market freedom” (i.e., periods of excessive deregulation), disaster has been quick to follow. Experience has demonstrated that best form of governance involves a close, carefully-managed partnership between public and private initiatives. Interestingly, that is precisely the type of collaboration that Barrack Obama has advocated as a solution to the health care crisis. If that makes President Obama a “socialist”, then I suppose that means that every major public-private endeavor–including initiatives such as national defense, the interstate highway system, communications infrastructure, etc.–that the United States has undertaken has been a form of socialism. Frankly, I think that gives socialism way too much credit. Socialism generally propagates atrociously monolithic, tyrannical and stagnant socio-economic systems (the two most shining examples being the Soviet Union, and Maoist China). The US owes its success as a superpower not to socialism, but to its unique ability to develop a dynamic equilibrium between “managed market” enterprise and public welfare. Ongoing success is assured so long as the US can preserve and enhance its dynamic climate of synergized public and private interests.

Up till now, Americans have permitted the free market to determine the cost and quality of our health care. Not surprisingly, the result is a nightmare that could only be the product of the ham fisted Invisible Hand: substandard health care that’s too expensive for most Americans to use. We can do better. As illustrated above, the best way to fix the health care system is to engage federal oversight and regulation to curb the free market excesses that have brought about the health care crisis. The solution is much simpler than most of us dare believe. If the feds can kick General Motors in the pants and turn it around in just a few short months, then they can do the same for health care.

President Obama is on the right track. With a bit of intervention and guidance from the feds, we can put an end to the free market crisis in health care and thereby improve the health, welfare and longevity of our nation and every one of its citizens.

Tweet This Post

Posted by Timothy McGettigan on July 26, 2010.

Categories: Columnists, Featured Articles, Health, Political Economy, Timothy McGettigan