03/05/2007 02:45 pm ET Updated May 25, 2011

Capitalism 104, Part II

This is Part II of (probably) three pieces on economics. The first part of course 104 can be read here.

The over-riding theme is that economics is more like a popular mythology or theology than a science. Certain ideas come into fashion and when they do the vast majority of our economic dialogue fits the fashion and anything that falls outside of it is treated with disdain, in much the way that we would treat someone we met who was dressed in John Travolta's white Saturday Night Fever outfit. And for the same reasons, impulses that have little or nothing to do with any realities except style.

Here, in America, we began the 20th Century with a belief in old-fashioned laissez faire capitalism (opposed by minorities who had ideological beliefs in socialism and communism). Then, in response to a series of capitalist disasters culminating in the Great Depression, we avoided the isms, and moved to a mixed economy that adjusted capitalism with regulations, safeguards and safety nets. With the victory of capitalism over communism, and the vigorous support of big money, laissez faire capitalism experienced a revival. Call it neo-con capitalism. Post war Iraq was it's grand experiment. Which has revealed it as totally bankrupt (which is why nobody talks about it).

It is, therefore, time to re-invent our economic discussions. To not be slaves to fashion, either left or right, old Lefty dreaminess or neo-con idiocy, but look at what works and what does not work.

There are certain things that capitalism does very well. Better than any other system. Number one is the production of wealth. Number two is the production of material goods. Number three is the production of a great deal of freedom.

That being said, let's look at something that capitalism does not do well.

The delivery of health care.

The American health care system, as it stands today, is market driven.

(It's actually a mix of private and public and was formed, in many ways by the tax polices of the 1950s and 60s. But compared to other systems, it's fair to call it market driven.)

Since it's a market, let's look at the bottom line. The bottom line is that we spend double what other national health care systems do, without giving us better health.

In fact, the World Health Organization ranks the US at 37th of 191 countries in delivery of health care.

A lot of our health care money goes to advertising, profit, overhead, and multiple layers of providers, managers and administrators. I recently heard a representative from the Heritage Foundation on the radio, attacking (of course) the idea of a national health system, on the basis that markets are always more efficient. A national health care system, he announced,

would be so bureaucratic that doctors' offices would spend hundreds of hours filling out forms. But that's what they do already. Indeed, they have to fill out forms and figure out billing for hundreds of health plans. All of them different. With different deductibles, allowances and procedures. The nightmare is not awaiting us, it's with us.

But the issue - and it's an issue about capitalism, not just how to deliver health services - goes much deeper than that.

Even a cursory review of the history of our advances in medicine and health, demonstrate something very dramatic.

They have come from individuals - usually, but not always, in universities, hospitals, medical schools and genuine research institutes. These include the discovery of germs, vaccines, vitamins and the results of vitamin deficiencies, antibiotics, the pace-maker, oral contraceptives, sulfa drugs and a host of your other favorites.

This is significant because our giant pharmaceutical companies claim to be the engines of innovation, and therefore any assault on their profits, or the way they do business, would slow the march forward into our brave new world. History does not bear them out.

Even more important - in terms of our general health and well being - has been our vast public works systems. Water works, sewer systems, garbage collection and disposal, universal vaccinations, and health education in our public schools.

The third major source of better health comes from fighting business.

This often comes about because a single individual stirs up public revulsion against the way business is practiced and does so to such a degree that it results in government regulations. In 1906, Upton Sinclair wrote the docu-novel, The Jungle, which described how insects, rats and the human body parts of mutilated workers ended up in packaged meat products. That led to government food inspections and the creation of the FDA. William Doll (a Socialist) discovered the link between smoking and lung cancer in 1950. The tobacco industry has been fighting him ever since, often by funding fake science, a tactic that's been used by all the other industries that poison us, either directly or by polluting the planet. In 1962, Rachel Carson wrote The Silent Spring, which led to the control of the use of pesticides and from there to the Clean Air and Water Act and all the environmental regulations that have followed. In 1965, Ralph Nader wrote Unsafe At Any Speed. Today we have seat belts, air bags, crash tests, safety ratings and safety regulations. Now we have Al Gore, with his film An Inconvenient Truth. And it is going to create significant change. (By the way, if you have anyway to tell Al to run for president in 2008, please do, and do so quickly.)

The implications of all this are very significant.

First of all, people don't just work for money. They work because work is interesting. Because they're idealists. Because they see things that are wrong and they would like to make them better. They work for the pleasure of working. Sometimes they like helping people. Or God tells them to. The quasi-theological assumption of neo-con capitalism that people only work for profit, or even that they do their best work for profit, is, on the face of it, false.

Second, although Adam Smith's idea that individuals working for their own economic self interest will produce positive results that they're not even thinking of is true, it does not mean that they will produce all the possible good results that we want and need. Or, in many case, even the best results we would like. A lot of them come because of other reasons.

Third, markets often work against the common good.

Fourth, market forces may make it impossible for businesses to do better business, even if they want to. This was the case in the meat packing industry. Cheap products - produced in an unsanitary way by exploited workers - routinely drove out good products because it cost more to handle meat in clean, healthy ways. Only regulations - which leveled the field - allowed meat companies to sell you food that they could be reasonably sure wouldn't make you sick.

Fifth, the way markets work, inherently, and the way businesses operate, whenever they can do so, keeps certain costs off of their books. For example, the chemical industry does not want to pay for the health care costs of polluted ground water. Nor can the market driven health care system force the cost back on them. Recently, the pharmaceutical companies got Bill Frist to put an item in the Homeland Security Bill to protect them from being sued when the additives they use to stabilize their products cause autism. Here we had the health care industry trying to keep the health care costs incurred by giving health care off of their books. And make their victims, and society as a whole, pay for them.

Sixth, a market driven system produces distortions.

One of our number one health issues is obesity. Obesity - in it's current epidemic proportions - is a result of market forces: bad food - delivered by the fast food, agribusiness, and soft drink industries - and lack of exercise - created by our automobile culture and the television industry. All supported by vast merchandising and advertising industries which exploit our push button responses. And also by the capitalist campaign against taxes and public expenditure which has taken exercise and sports out of our schools.

A good diet requires the availability of healthy food, knowledge about it, and cooking skills. Who will profit by providing that? Enough to counter Archer-Daniels-Midland - who wants high fructose corn syrup in every food product on the planet - Burger King and Yum Brands, Coke and Pepsi.

Obviously the place to do it is in the schools. This requires public expenditure. And an active resistance to market forces when the major food corporations eagerly volunteer to provide 'educational materials' and shape the science.

So the next time a guy from the Heritage Foundation, or some other shill from the insurance companies and pharmaceutical industry, talks about free markets as the best way to provide health care, you can be confident when you say that's not true. It's not historically true, it's not currently true and it won't be true tomorrow. Because there are other things in life than money.