A recent headline in the New York Times, “Health Insurers Making Record Profits as Many Postpone Care,” reveals the failings of a corporate capitalist economy. Let me first add the caveats that what we have in this country would be more accurately dubbed corporate socialism than corporate capitalism, and as with anything “failing” depends on one’s perspective. For stockholders and investors we have a terrific economic system!
Of course, stockholders reap the benefits of the record profits being made from an industry that does not really produce anything. Health care produces something of immense value, but not health insurance. Kind of fitting in a sense: stockholders who do not produce benefiting from corporations who do not produce. What a great system!
This reveals a failing at the deepest level of how our economic system is structured. Pick up an economic textbook and you will note three grand questions for the distribution of resources: who, how and how much. You will see no question of “Why?” because that is automatically inferred in western economics to be the maximization of wealth through trade. There can be no alternative to “trade is wealth” if you refer to an economic textbook produced in the west.
There indeed are alternatives to “trade is wealth” if you don’t have the myopic view of a laissez faire economist. In the earliest of times “self-sufficiency was wealth.” It’s fair to say that for some empires “consumption was wealth,” where consumption/wealth was maximized through conquest in addition to trade. Yet another possibility, one that admittedly gets little attention in a corporate capitalist system, is “production is wealth.”
“Production is wealth” is really the premise behind a free market. Freedom for humans means freedom to specialize given our diverse natures and abilities; freedom to specialize means freedom to produce different things of value that we distribute through different means, including but not exclusively trade.
Just so, capitalism could have been tailored to support free markets and production. Capitalism is the creation of profits through private production. If “production is wealth” then those profits are used to stimulate future, enhanced production by the same business that created the profits in the first place. If “trade is wealth,” which is the answer you’ll get from economists lacking critical thinking skills, then profits primarily serve investors/stockholders rather than producers.
Now you can make the argument that investors/stockholders are stimulating production through spending their hard, er, invested cash, but there are two problems with this stimulant. First, stockholders seldom spend their net dividends to stimulate the business that produced them. Second, when capital gets diverted from production to investment it gets concentrated. Wealth disparity is a problem for many reasons, one of them being something known as spending cascades. Wealthy people pay more for stuff because they can and the inflation of value cascades through the economy. Hey! This cascading inflation is no problemo for a “trade is wealth” economy!
So in the health insurance industry we now have a situation where the production of health care has been depressed by an industry that, rather than produce anything of value themselves, essentially serves as bookies for wagers people want to lose. Meanwhile health insurers, already profiting quite well, seek to raise premiums in order to guard against an anticipated “uptick” of demand in health care.
Think about that. The first priority of the corporate capitalist model is to maximize a flow of profits to investors, rather than use profits as a cushion to maintain a steady flow of production. Even if we are to assume like good little sheep that “trade is wealth” that model is heading for failure. If we want wealth through our production then our corporate capitalist economy already has been failing.