Solo geniuses who scorn the society that provides the shoulders they sit on

By Pete Dolack

The lone inventor is an archetype of long standing. The image remains, but, particularly in the United States, the image of the inventor has morphed from Thomas Edison and his cluttered laboratory to the hard-charging entrepreneur who single-handedly builds businesses.

The change in imagery mirrors the emphasis on wealth in U.S. popular culture, and the tendency to either defer to or scorn people based on perceptions of their wealth. Such imagery also serves as a particularly enticing carrot to dangle in front of those who aren’t millionaires, allowing them to entertain ideas that, if only they work hard enough, they too can accumulate fortunes.

Nobody creates a product, builds a company or makes a scientific discovery all on their own. There are engineers who design the product’s physical form, assembly-line workers who assemble the product and advertising agencies who create the demand for the product. For scientific discoveries, there are public investments in equipment or laboratory facilities, and scientific discoveries are often the basis for new products. For any of these, there are schools and universities, often paid for with public money, that provided the education that developed the skills of the creator or discoverer.

Then there is the social structure that enabled the millionaire to become wealthy through an invention or the creation of a popular product or through rising to the top of a large corporation or simply through being a popular entertainer or athlete. (We’ll set aside for now the fact that inheritance is the path most often trod to wealth.)

It appeared that the foundation of financial success was going to become a focus of the otherwise intellectually arid presidential campaign between Barack Obama and Mitt Romney. For one day last week (prior to the movie-theater massacre in Aurora, Colorado) the two campaigns traded barbs over a speech President Obama made the previous week in Roanoke, Virginia, in which he pointed out that business leaders often ignore the social capital behind their success. He said:

“There are a lot of wealthy, successful Americans who agree with me — because they want to give something back. They know they didn’t, look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something, there are a whole bunch of hard-working people out there.

“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business, you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

“The point is, is that when we succeed, we succeed because of our individual initiative but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.”

There is nothing in the above quote that should strike any rational U.S. citizen as controversial. President Obama made the requisite genuflection to “American exceptionalism” — an ultra-nationalistic slogan used within the United States to portray the country as superior to all others in all categories, a vapid capitulation to xenophobia that is mandatory for any major office-holder. But in this specific context, “this unbelievable American system” is not out of place since the subject at hand is the ability to amass wealth. Having made the ritualistic genuflection, the president felt free to acknowledge that government investment is behind many a private fortune (or perhaps he accepts he has to do something to recapture the populist image he crafted in 2008 after spending most of first term thumbing his base in the eye).

Government research, after all, did create the Internet; President Obama did not mention that government research created the World Wide Web, perhaps because it was European, rather than U.S., money that created that. Private businesspeople simply found ways to get rich off what others invented. Thus we have the spectacle of Microsoft founder Bill Gates becoming for a time the richest person on Earth because his company aggressively wields its monopoly status in personal-computer operating systems while making inferior products at the same time the people who invented the Internet and its architecture earned no fortunes.

Mr. Gates’ billions enables him to be a prime mover behind the privatization of education and compels the corporate mass media to portray him as a genius whose every word is a golden pearl. The inventors of the Internet and its architecture — although it is their work in government laboratories that made possible the Silicon Valley moguls’ fortunes — are obscure. Indeed, we would have to do research to learn their names.

There are many examples of industries similarly booted up by government investment — among them, cellphones, GPS technology and medical equipment. That is a simple fact; it is only the pervasiveness of capitalist ideology that makes such a statement in any way controversial. The Obama administration bends over backwards to benefit business: Showering subsidies on them, giving bailouts with no strings attached, promoting their interests with “free trade” agreements with a variety of countries, and discarding most of his promises to ease the extreme tilt against employees in labor relations.

Indeed, one of the very first people President Obama picked to staff his administration was Lawrence Summers, one of the leading ideologues of neoliberalism. Mr. Summers has distinguished himself in various ways, including in imposing austerity on Russia and other countries from posts at the World Bank and the U.S. Treasury Department. He once infamously, while the World Bank’s chief economist, wrote in an internal memo that Africa was “vastly UNDER-polluted” (emphasis in original) and “I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.”

So said the person whom President Obama picked to be his lead economic adviser. During the 2008 campaign, the public’s exhaustion with George W. Bush and Dick Cheney and their administration’s unilateral foreign policy led to Barack Obama becoming the embodiment (realistically or not) of a widely desired change. At the same time, the disapproval of a significant number of capitalists over the narrowness of the Bush II/Cheney administration in promoting the interests of a handful of industries (in particular energy) instead of pursuing more general business interests and a desire for a White House that would be less quick to alienate allied countries led to an unusual split among elites who normally overwhelmingly prefer Republicans.

The interests of powerful capitalists and the interests of the rest of the country are far from aligned, and it should come as no surprise that the interests of capitalist elites are dominant in the Obama administration. The capitalist elites who backed him desired a calm, steady hand at the helm of empire, and that is what they have received: Military interventions are coordinated with allied capitalist countries, the fig leafs of United Nations resolutions are obtained, Nato allies are treated as partners (albeit junior partners) and not as flunkies to be ordered about; a soothing public demeanor to mask harsh policies; and conducting the arm-twisting of foreign governments behind closed doors. Those elites are dependent on selling their products in stable foreign markets.

It is precisely the concept of “American exceptionalism” that provides a crucial ideological underpinning for unending interference in the affairs of other countries. All presidents have to carry out the duties of the belief in “American exceptionalism” and could do not do so without a firm personal belief in it themselves. A president or any other high government official can (and does) convince themselves of their duty to act on the “exceptionalism” but all that is exceptional is that it happens to be the United States that is the center of the capitalist system and possesses the military muscle to maintain it.

The “duty” carried out in the name of this “exceptionalism” is a “duty” to assert the interests of multi-national corporations. That the country voted by a solid majority to put an end to wars and corporate domination was of no consequence.

Having low expectations for the president, I did not expect “change,” although the extent of the willingness of the Obama administration to give almost nothing to its base is a surprise. For some time, it is has been apparent that the main theme of the re-election campaign would be “You have to vote for us, the Republicans are even worse.” But it is useless to see this in terms of “selling out” or “ineptitude” or “softness.” The Obama administration is simply reflecting the dominant sources of power within the U.S., and that is not going to change without a countervailing mass movement.

Governments around the world are at the mercy of the largest capitalists within the advanced capitalist countries; interests that are distilled into the pressures applied by financial markets. A country at the center of the world capitalist system, the United States, experiences such pressures primarily from its domestic capitalists, although those capitalists’ business interests are intimately tied with peer capitalists around the world in today’s global economy. Most countries experience market pressures as external forces.

As an example, let us briefly examine South Africa in its first years after the apartheid system was overthrown in a negotiated process forced by a massive international popular movement backing the African National Congress. During the long years of struggle by the ANC and pitiless repression by the National Party, the apartheid-era rulers in South Africa, the guiding document of the ANC was its “Freedom Charter.”* The charter, adopted after democratic consultations in 1955, calls for the right to work; to decent housing; freedom of thought; and nationalization of mines, banks and “monopoly industry” and land distribution so that all South Africans can share in the wealth of their country.

Although the ANC had the moral authority to carry out its program, its negotiators tragically (and unwittingly) gave up all economic control, forfeiting their ability to carry out any aspect of their program, with the result that, two decades later, the economy is firmly in the hands of its numerically minuscule White business elite (which is tied to international markets) and South Africa remains among the world’s most unequal countries. The country’s eyes were on the political talks between Nelson Mandela and F.W. de Klerk, in which the ANC decisively was the victor against the National Party’s attempts to dilute its loss of government control.

But in the parallel economic talks, which drew little attention, the ANC gave everything away. The central bank would be independent of government (as financiers demanded), National Party government finance officials would remain in office and the ANC government would sign on to everything demanded by the World Bank, the International Monetary Fund and all international trade agreements. Having done so, the ANC took office handcuffed, and having tied themselves to financial markets, those markets applied further discipline by attacking the South African economy at the first sign of anything that displeased them. From pleasing markets and giving financiers repeated assurances, it proved a short path to President Mandela’s successor, Thabo Mbeki, imposing austerity — a 180-degree turn from the Freedom Charter.

The mythology that markets know best is intimately linked with the mythology that the economy should be entrusted to financial elites and those elites’ intellectual servants, neoclassical economists. The mythology of the solo genius justifies massive inequality because the “solo genius” single-handedly created a popular product and thus single-handedly brought prosperity upon the land. For such selfless services, the solo genius must be compensated with fantastic wealth.

The “magic of the market” takes care of the compensation. For a young, growing company, the preferred route is the initial public offering. The IPO does indeed shower riches upon the founder, a small circle of his or her insiders, and the investment banks who take care of the details. If that money comes out of the wallets of everyday investors, well that’s the market for you. This system reached near-perfection in the Facebook IPO earlier this year. The key to an IPO is to price the stock high enough so that the money largely accrues to the insiders (who possess most of the stock through pre-IPO awards) but not so high that the stock price plummets afterward (making the scam too obvious) nor so low that a significant post-IPO stock-price rise means that some money was lost to investors.

Thus Facebook chief executive Mark Zuckerberg wound up with $18 billion, Facebook’s investment bankers and insiders received substantial windfalls and all those who bought in after the opening bell are out of luck. The stock price never has returned to its opening-day level. Oh well, a “long-term hold” as they say in financial-analyst circles.

Facebook’s current popularity is undeniable, but what of value did Mr. Zuckerberg create? Perhaps Facebook will be an exception, but Internet sites tend to be cyclical fads. What was once popular can rapidly become passé. Does he, or anyone, really deserve $18 billion for a few years of work? Did he work tens of thousands of times harder than the average employee of a U.S. company? Remember, what he, and other Internet moguls, created was built on the creation of people who didn’t get rich or famous, and who created it through public investment — that is, in a government facility.

It would seem that the carrot of a multibillion-dollar payoff is not necessary for technical progress. People invent, people create works of art, people write, people aspire every day without outlandish renumeration. Often without it at all. Inventions are made routinely in government laboratories, in university laboratories and in corporate laboratories — and in each of these, it is the government, university or corporation and not the inventor who owns the rights to the invention. Many others toil on their own to create an invention, with only slim chances of making a fortune out of it. Some of these people undoubtedly are motivated by the potential for enrichment, but the overwhelmingly majority will never see it — either they will fail, or their success will lead to little or no money.

Why should one person amass $18 billion and so many other get nothing? Why should a lucky handful of people amass billions of dollars and then get to claim they did it all on their own with no help at all? President Obama’s reference to “this unbelievable American system” is true here in the sense that a few people are able to amass fantastic riches. But it is glaring inequality that enables the accumulation, and the accumulation comes on the backs of employees. Without a system that does not simply tolerate, but celebrates and causes, massive inequality, the superrich whom Governor Romney is so fast to promote as solo geniuses who had no help (no surprise as this is the myth he spins for himself) would not be the superrich.

Without the infrastructure that government provides in the form of educational institutions, a court system that adjudicates commercial disputes, means of coercion such as police and the military to suppress dissent at home and abroad, an ever larger basket of subsidies, “free trade” agreements that promote corporate interests above human rights, and a transportation infrastructure such as expressways that are mostly free, billionaires would not be able to become billionaires. And yet they continually whine that “government” is in the way.

In a better world, government would be the product of public demand and benefit. Instead, it is the reflection of the arrayed social forces within a given society — in an advanced capitalist country, that is its most powerful industrialists and financiers. The constant chatter of government “getting in the way” of business interests and of entrepreneurial geniuses single-handedly creating wealth should be laughed at for the joke those mythologies are.

* This and the next two paragraphs based in part on Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism, pages 194-217 [Metropolitan Books, 2007]

A medieval present of austerity, a future of feudalism

By Pete Dolack

Austerity is just another word for punishment. The corporate mass media serves us a daily diet of central bankers, government ministers, financiers and industrialists lecturing us that we must swallow bitter medicine as repentance for living beyond our means.

Those who caused the economic collapse ask everyone else to swallow the medicine, and those financial doctors are not yet done writing their austerity prescriptions. Saddled with high unemployment, a shrinking job base as production and services are steadily moved to overseas low-wage havens and a lack of incentive to invest as the products that are made can’t find a market, the solution, we are told, is: Cut wages and social programs more. Medical doctors long ago stopped using leeches and blood-letting as their primary “cure.” Mainstream economics, sadly, has yet to evolve beyond that medieval stage and its practitioners have no licenses that can be revoked.

The costs to working people who have been forced to pay for the excesses of financiers has been high in many countries. Rather than isolate individual countries, a tactic used to enable finger-wagging at Irish, Spanish, Greeks & etc., let us instead look at several countries at once, and see if we can spot patterns.

Spain: Pain for people, bailouts for banks

  • 25 percent unemployment
  • 52 percent unemployment for people younger than 25
  • Spending cuts and tax increases biggest in Spain’s modern history

Spain ceded its remaining sovereignty on July 10, when the so-called “troika” — the European Central Bank, International Monetary Fund and European Commission — agreed to give Spanish banks a bailout in exchange for the usual harsh conditions. The twist here is that the bailout will go directly to Spanish banks, rather than the previous European practice of using a national government as an intermediary. This is a bookkeeping trick so that the deficit of the Spanish government is not technically increased, but Madrid nonetheless will now have its finances directly supervised by the troika.

The next day, Prime Minister Mariano Rajoy dutifully wielded the ax. According to a report in El País, the national sales tax will rise to 21 percent from 18 percent; cuts in wages and benefits to civil servants and the unemployed will be imposed; tax benefits for employers who hire will be reduced; Christmas bonuses will be eliminated; tax setoffs on mortgage payments will be eliminated; and energy prices will increase. Those measures are on top of earlier rounds of austerity, including new rules to make firing workers easier. In just the first three months of 2012, about 375,000 jobs were lost, representing an estimated loss of about 950 million euros in income tax receipts.

The hard-line vice president of the European Commission, Olli Rehn, strongly hinted that more austerity will be expected: Spain “will have to comply fully” with the new conditions and impose more cuts if told to, El País reported. The Spanish economy was already expected to contract this year, and these measures will depress consumer spending further. Yet consumer spending is the engine of economic activity in Spain, as it is in any other advanced capitalist country. Blood-letting.

Spain is the one country that experienced an even larger housing bubble than the United States. When the bubble burst, Spain’s system of community banks, known as “cajas,” were hit hard because they had lent heavily in real estate and construction. The cajas were consolidated in an effort to create banks with more assets, but instead larger banks with bigger debts was the result. Debts that are to be repaid by austerity imposed on Spanish working people.

Ireland: Asserting ‘sovereignty’ by keeping taxes low on corporations

  • 15 percent contraction in economy
  • Middle-class wages have been cut by about 15 percent
  • 15 percent unemployment

Fifteen does not appear to be Ireland’s lucky number. Seeing no future for themselves at home, Irish students are leaving in droves — more than 1,000 per month. Irish banks engorged themselves on loans to fuel a housing and construction bubble at home, with bank executives and speculators making fortunes but homeowners left holding the bag when the bubble burst and prices collapsed. Ireland’s three biggest banks were bailed out when Brian Cowen, then prime minister, unilaterally stepped in and announced that the government would assume all the debts of the banks.

The ex-prime minister put on a show, huffing and puffing that Ireland would not give in to unreasonable demands, would not surrender its sovereignty. Where did Mr. Cowen draw the line? Was it cutting wages, lowering the minimum wage, drastically raising water rates, raising university tuition or reducing health care services? No, none of those were of concern to him. What he did get worked up about was Ireland’s ultra-low corporate tax rate — set far below what working people must pay. He demanded, and received, one concession: No increases of corporate taxes.

The result was an 85 billion euro bailout of the Irish government by the European Central Bank and International Monetary Fund, all of which goes toward paying back speculators. Ireland has already seen five austerity budgets since 2008, and its repeated raising of taxes and cutting of spending is likely to last for at least three more years. The sales tax is now a punishing 23 percent, while taxes on incomes, cars, homes and fuel are all higher; government-benefits payments have been cut.

An Irish economist, Morgan Kelly, who nearly alone in his country predicted the housing crash, summed up the bailout this way:

“Everyone is a winner, or everyone who matters, at least. … The Germans and French banks whose solvency is the overriding concern of the [European Central Bank] get their money back. Senior Irish policymakers get to roll over and have their tummy tickled by their European overlords and be told what good sports they have been. And best of all … the senior management of the banks that caused this crisis get to enjoy their richly earned rewards.”

Latvia: “Solving” problems through emigration

  • Unemployment peaked at 20.5 percent
  • Real gross wages fell seven percent in 2009 and another eight percent in 2010
  • Population has fallen from 2.7 million in 1991 to 2.2 million in mid-2011

The return to capitalism as Latvia regained its independence with the fall of the Soviet Union in 1991 has not been smooth sailing. First there was hyperinflation, as prices rose more than 1,000 percent in each of 1991, 1992 and 1993; a widespread loss of savings during economic turmoil in 1995 and 1996; and another crash in 1998 as the Russian ruble collapsed. A credit boom sparked by cheap loans from Swedish banks following Latvia’s ascension to the European Union in 2004 did not last long — and times have become so difficult that Latvia is undergoing a demographic implosion as Latvians see no choice but to leave.

Lativa’s unemployment rate has fallen to 16 percent — a decline due to the heavy rate of emigration. The economy contracted by 25 percent for the three years of 2008 through 2010. Assisting in that decline was a 30 percent cut in public-sector wages and cuts to pensions — a so-called “internal devaluation” as the Latvian government refuses to devalue its currency to make its export products more competitive; it maintains a peg to the euro in hopes of joining the eurozone. A slight rebound in 2011 is hyped by neoliberal apologists as “proof” that Latvia is on a sound course, but a look at the bigger picture reduces that claim to rubbish.

The U.S. economists Jeffrey Sommers and Michael Hudson, in a tart analysis, note that nationalism keeps austerity-minded parties in power because the main opposition to austerity comes from a party that represents Latvia’s sizable Russian minority; anti-Russian sentiment continues to remain strong enough to override all other considerations. They write:

“Birth rates fell during the crisis – as is the case almost everywhere austerity programmes are imposed. Only now is Latvia seeing the social effects of austerity. It has among Europe’s highest rates of suicide and of road deaths caused by drunk driving. Crime is high because of prolonged unemployment and police budget cuts. There is less accessible, lower-quality education and there is a soaring brain drain alongside blue-collar emigration.

“The moral for Europeans is that a Latvian economic and political model can work only temporarily, and only in a country with a population small enough (a few million) for other nations to absorb émigrés seeking employment abroad. Such a country should be willing to have its population decline, especially its prime working-age cohort.”

Lithuania: Another Baltic Tiger “stabilizes” through emigration

  • Unemployment peaked at 18.6 percent
  • Three consecutive years of economic contraction, including by 15 percent in 2009
  • Highest emigration rate in Europe

Latvia’s Baltic neighbor has feared little better. A fast-falling economy has led to an exodus out of Lithuania. As in Latvia, unemployment has declined because so many have left. And although the economy did grow last year, that does not mean all the losses will soon be made up: the International Monetary Fund projects that by 2015 Lithuanian gross domestic product will remain 12 percent less than it was in 2008.

Most the emigrants are young people. In 2010, eight percent of all Lithuanians ages 25 to 29 emigrated. The European Institute reports Lithuania’s austerity measures include a two-year freeze in public-sector salaries; a 30 percent cut in public spending; an 11 percent cut in public-sector pensions; and cuts to parental-leave benefits.

Portugal: Forgoing investment in exchange for a dictated bailout

  • Unemployment has reached 15 percent
  • New laws making it easier for employers to fire workers
  • Rent controls eliminated

Portugal last year accepted an 80 billion euro bailout, in return for which the government had to postpone the building of two high-speed rail lines and a new airport, cut spending, impose yearly layoffs and sell off state energy companies. As a result of the austerity, the economy is expected to contract by another 3.4 percent this year.

The European Union did not leave any room for democratic discussion — although the bailout was negotiated during an election campaign in Portugal, E.U. finance ministers announced there would be no release of bailout funds without an agreement by all Portuguese parties. “We call on all political parties in Portugal to swiftly conclude an agreement on the adjustment programme and form a new government after the upcoming elections with the ability to fully adopt and implement the agreed fiscal consolidation and structural reform measures,” the statement said.

Greece: Experiencing the logic of neoliberalism first

  • 22 percent unemployment
  • 40 percent wage cuts
  • 13 percent shrinkage of economy, with another seven percent decline expected this year

With all the coverage of Greece, no more than a brief summing up is necessary here. Two crucial results of the 130 billion euro bailout agreed to early this year are that Greece was required to change its constitution to ensure that banks are paid back before there is any spending on social programs and that the bailout is used almost exclusively to service the interest on Greece’s debt — not even to pay down the principal. Small businesses, the backbone of the Greek economy, are closing by the tens of thousands because few people can afford to buy what they once could.

As I have previously written, Greeks worked, on average, 42.3 hours per week on their main job — the most working hours of any people in Europe). Their reward is the most punishing austerity of any European country. One aspect of that austerity is the crumbling of Greece’s health care system, which has endured a 25 percent cut in spending since 2009. The result of those cuts is under-staffing, shortages of medicines, dangerously long waiting periods for operations and increased out-of-pocket expenses that many can’t afford.

Greece’s largest industry is shipping. Not only do Greek shipping tycoons pay no taxes (not unusual among Greek big business), but the industry’s tax-free status is enshrined in the constitution. Greek business leaders don’t pay taxes, but the people who can’t avoid paying taxes — government workers — are demonized as the cause of Greek’s problems, and are being laid off in large numbers, while those who remain have been saddled with draconian wage cuts. Similar wage cuts and layoffs are imposed in the private sector.

Austerity for who?

It would seem to defy understanding how more of the medicine that has made most of the world’s economies sick could possibly be seen as the solution, until we observe the pattern.

Financiers can’t tolerate losses flowing from their own greed and reckless gambling. Their solution is to have the state guarantee their stratospheric profits, bonuses and salaries. Governments can only do so through extracting money from their citizenry and facilitating the upward flow of wealth within corporate structures. Industrialists don’t mind those subsidies for financiers because the banks will be more willing to lend to them in a time of economic uncertainty and the “market discipline” applied by financiers boosts their own profits.

Markets do not serve people; rather, people exist to serve markets. And “markets” are simply the aggregate interests of the most powerful capitalists, both financiers and industrialists. Entire countries — a list not limited to those sketched above — have been harnessed to the dictates of “markets.” This has long been the pattern imposed by the North on the South; now the stronger countries of the North are imposing it on their weaker neighbors. Taxpayers in those stronger countries are on the hook, also, as some of their taxes go toward the bailout funds, for which bailed-out countries are merely a conduit to send the money to financiers.

The race to the bottom, of which austerity programs and the continual shifting of production to locations with ever lower wages constitute critical components, represents an intensification of market dominance over human life. It is also a result of a scramble to maintain profits, which have been under continual pressure from the economic crisis.

All that is on offer is more pain, more austerity. The most any government, all of which lie prostrate at the feet of their biggest capitalists, is able to offer are weak, unfocused attempts to inflate another financial bubble or to indulge in fantasies of “green capitalism” whereby the same economic system that causes massive environmental destruction will somehow be re-tooled to profit further by cleaning up its own mess.

We are to be servants of the richest, so say “markets” — more a resemblance to feudalism than to a democratic society. Continuing to do so is not simply irrational; in the long run it will be suicidal.

The high cost of private profit in health care

By Pete Dolack

The United States spends huge amounts of money on health care. But it is only in comparison to other countries that the magnitude of health care spending becomes clear. Because the U.S. health care system is designed for private profit rather than public health, the U.S. spends an extra $1.15 trillion per year beyond what it would otherwise.

If that total astounds you, you are not alone. When I first began making calculations to determine excess spending in health care, the figures were so large that I had difficultly believing them and performed the calculations over again. The result was the same.

The excess spending on health care is not only growing, it is growing much faster than the rate of inflation, in concert with overall health care spending. For instance, the annual average of excess spending for the period of 1990 to 2000 was $685 billion. For the period of 2001 to 2010, the annual average ballooned to $1.15 trillion.

And despite all that extra spending, U.S. residents have poor health results in many key indicators, in comparison to the world’s other advanced capitalist countries. Still more amazing, 51 million people in the U.S. are without health insurance, while all other peer countries have universal care. This is the system that millions of U.S. citizens believe is the best in the world thanks to the world’s most developed public relations and misinformation industries.

The rest of the world is quite in disagreement, to the point that even the harsh austerity-minded Conservative prime minister of the United Kingdom, David Cameron, has repeatedly had to deny (whether or not sincerely I will leave to others) any intention to emulate the U.S. system as he attempts to impose changes on the country’s National Health Service.

U.S. health care is by far the world’s highest

Let’s do a bit of digging under the surface of numbers. First off, an explanation of where the $1.15 trillion in annual excess spending comes from. I calculated the number by first obtaining total health care spending per capita* of the three largest economies within the European Union (France, Germany and the United Kingdom) and of Canada, the neighbor of the United States. I then averaged the numbers for the years 2001 to 2010 (the latest for which full statistics are available) as compiled by the Organisation for Economic Co-operation and Development (OECD), the club of the world’s advanced capitalist countries and the largest developing countries.

The composite average of Canada, France, Germany and the U.K. for 2001 to 2010 is US$3,479 per capita per year. That number is less than half of the U.S., which had by far the world’s highest health care spending at $7,325 per capita per year. The differential was then multiplied by 300 million, the approximate U.S. population during the past decade. If you prefer a different measure, the U.S. spent 17.4 percent of its 2009 gross domestic product on health care expenditures, again the world’s largest by a wide margin. The average of the 34 countries of the OECD is 9.6 percent.

And if that is not enough, here is one more astounding comparison: Not only are out-of-pocket expenses by U.S. health care consumers higher than in any of the four comparison countries (no surprise there) but per capita government spending in the U.S. is higher than in any of the four comparison countries. Those four have varying versions of what U.S. right-wing ideologues venomously denounce as “socialized medicine” — health care systems either run or closely regulated and supervised by a federal government paid for through taxation — and yet each government nonetheless spends less than does the U.S. government on a per capita basis.

Despite the massive transfer of money to private insurance companies by employers and employees, on a per-capita basis government health care spending by itself in the U.S. is higher than total health care spending in Canada.**

The authors of the paper “Why is health spending in the United States so high?” (a supplement to an OECD statistical report) attempted to draw conclusions from a mass of data on health care expenditures:

“It does not have many physicians relative to its population; it does not have a lot of doctor consultations; it does not have a lot of hospital beds, or hospitals stays, when compared with other countries, and when people go to hospital, they do not stay for long. All these data on health care activities suggest that U.S. health spending should be low compared with other countries.”

The reason that spending is anything but low is because of the high prices extracted throughout the system. The costs of a range of medical procedures or surgeries are much higher in the U.S. than elsewhere, as are pharmaceutical prices. The authors write:

“Overall, the evidence suggests that prices for health services and goods are substantially higher in the United States than elsewhere. This is an important cause of higher health spending in the United States.”

The OECD is an organization that is representative of the world’s most powerful capitalist countries, so the report does not inquire into underlying causes or in any way challenge the economic system that leads to such results; it merely reports facts and figures. Those facts and figures, however, give us a useful starting point. The wasteful spending on health care are subsidies for pharmaceutical manufacturers, hospital-chain operators, insurance companies, managed-care companies and medical-products manufacturers. Money flows to those corporate entities directly from your pocket and indirectly from you via government spending.

Each U.S. citizen’s annual share of wasteful, excess spending on health care — excess spending that goes into the coffers of some of the country’s largest corporations among the many industry profiteers — amounts to $3,846. Business leaders, their lavishly funded think tanks and pressure groups, and the public-office officials who represent them continually assert that private enterprise is always more efficient. It would seem that the efficiency lies in extracting money and wealth.

Government more efficient because goal isn’t private profit

Noting that “high administrative costs and lower quality have also characterized for-profit HMOs” (health maintenance organizations funded by insurance premiums that supervise health care), a Journal of the Canadian Medical Association article provides the following figures for the percentage of revenue that is diverted to overhead:**

  • For-profit HMOs: 19 percent
  • Non-profit plans: 13 percent
  • U.S. Medicare program: 3 percent
  • Canadian Medicare: 1 percent

In contrast to the rhetoric so often employed, government is far more efficient at delivering health care than the private sector. (This is also true in retirement plans, where the U.S. Social Security program’s overhead is much lower than mutual-fund managers or other financial-industry enterprises.) An important reason is that the government does not skim off massive amounts of money for bloated executive pay nor does it need to generate large profits to enrich financiers.

Such large expenditures also flow from a lack of competition. Few people in the U.S. have a choice of insurance provider, which is dictated by their employer, and insurance companies and HMOs frequently limit choice of doctors, and often deny coverage so as to maximize profits. A company that has stock traded on exchanges is legally required to maximize profits above any other consideration; it is no different because health care happens to be the product.

A few summers ago, I found myself in a debate with a Canadian woman who was critical of her country’s health care system. I acknowledged that Canadian health care is not perfect, but then gave the example of a friend who had recently died in his 50s of a heart attack because his insurer decreed that he did not require medication for his weak heart and he could not afford it on his own. Does that happen in Canada?, I asked. She replied with silence.

As in any other mature industry, most market share has consolidated into a few hands, a condition that is known as an “oligarchy.” Although competition in younger or more fractured industries does result in price reductions, when an industry is reduced to a small number of dominant corporations, price competition is usually a casualty.

Health care constitutes several industries — insurance, pharmaceuticals, hospitals and medical equipment, among others — and each adds to the cost. Giant pots of government money are involved, always a lucrative source of private enrichment. And insurers have people over a barrel because health insurance comes through their employer, who make deals with a single insurer, take it or leave it.

Health care provision also has unique attributes that further inflate costs. In “The high costs of for-profit care,” by Steffie Woolhandler and David U. Himmelstein (the Journal of the Canadian Medical Association article quoted above), the authors write:

“Why do for-profit firms that offer inferior products at inflated prices survive in the market? Several prerequisites for the competitive free market described in textbooks are absent in health care. First, it is absurd to think that frail elderly and seriously ill patients, who consume most health care, can act as informed consumers (i.e., comparison-shop, reduce demand when suppliers raise prices or accurately appraise quality). …

“Second, the “product” of health care is notoriously difficult to evaluate, even for sophisticated buyers like government. … By labeling minor chest discomfort “angina” rather than “chest pain,” a U.S. hospital can garner both higher Medicare payments and a factitiously improved track record for angina treatment. It is easier and more profitable to exploit such loopholes than to improve efficiency or quality.

“Even for honest firms, the careful selection of lucrative patients and services is the key to success, whereas meeting community needs often threatens profitability. … [For-profit] hospitals duplicate services available at nearby not-for-profit general hospitals, but the newcomers avoid money-losing programs such as geriatric care and emergency departments (a common entry point for uninsured patients). The profits accrue to the investors, the losses to the not-for-profit hospitals, and the total costs to society rise through the unnecessary duplication of expensive facilities.”

U.S. fares very poorly in a comparison of national systems

In the spirit of comparison-shopping, here is a brief examination of the five countries under discussion, the United States and the four comparison countries.

  • German health care system: Everybody is covered. Workers pay eight percent of their gross income into a “sickness fund,” a nonprofit insurance company; employers pay the same amount. These contributions account for almost all money in the system. Workers choose among 240 sickness funds. There are no deductibles. Everything, including drugs, is free for children younger than eighteen. The government regulates all insurance companies closely.
  • French health care system: Everybody is covered. Workers pay 21 percent of their income into a combined retirement and national health care system; employers pay about half that amount. Payroll and income taxes largely fund health care. There are no waiting lists for elective surgery or to see a specialist. Doctors’ fees are negotiated with medical unions, while hospital fees are regulated. Patients with one of 30 long-term and expensive illnesses pay nothing for care.
  • British health care system: Everybody is covered. The National Health Service is funded by income taxes, employs physicians and nurses, and owns most of the hospitals and clinics. The service also pays directly for all health care expenses, with prescriptions and dentistry being the two exceptions. There are sometimes long waiting lists, which are commonly attributed to there being no restrictions on services, particularly hospitalization.
  • Canadian health care system: Everybody is covered. The federal government sets standards; provincial and territorial governments administer the system. Medically necessary hospital, physician and diagnostic services are free, although most dental care and prescription drugs are not covered. Services are primarily through private providers. Long waiting times for specialists are a problem, with reduced government payments cited as an underlying cause.
  • U.S. health care system: 51 million are not covered. Coverage is through an employer (of which the employee pays a portion), or through own purchase of private insurance, but most can’t afford to do so. Insurance companies frequently dictate what, or if, services will be provided. Coverage generally requires out-of-pocket expenses and includes a “deductible” before payments begin. Patient bankruptcies due to inability to pay bills are common.

Another weakness of the U.S. health care system is that is based on the concept of a “family wage” instead of a “social wage.” That is both cause and effect — unlike other countries where health care is a right, in the U.S. health care is a privilege, and the large disparities in the ability to obtain it reflects the canyon-like inequality there and also aggravates social inequities. Not only because health care is tied to an employer, giving a boss more power over employees, but because a family’s health care coverage is tied to the person who has the job that provides it — usually the man in a traditional family. But it could be any one person in a non-traditional family or within a gay or lesbian household.

Universal health care systems are gains of movements

Feminist pioneer and theorist Kathie Sarachild of the influential group Redstockings, in a July 4 interview on the Joy of Resistance: Multi-cultural Feminist Radio program, summarized this concept. She said:

“The family wage is another way of saying this old idea that men should support the family. [U.S.] society is built on the idea that men should get higher pay than women because men would support the family and women would stay home and take care of the children. … Even though there were always women who worked, they received less pay than men did because of this family-wage concept. …

“A lot of [the European social wage] came out of socialist and communist theory. … The labor movement and the feminist movement in [Europe] have been able to win a social-wage system, which pays to raise the next generation [through universal health care and paid leave when a child is born instead of being dependent on an employer to pay a ‘family wage’ to the man].”

Nationalized health care becomes part of a basket of social benefits, including more vacation time, life-long education and elder care that liberates working people from dependence on an employer. A shorter work week would also bring benefits, Ms. Sarachild said:

“If the work week were shorter … there would be more jobs. There’d be less unemployment because the work week is shorter so there are more paid jobs. There would be more time at home for the father and mother to be with the child. …. [With the introduction of a] social wage, the unfair family wage would not be necessary. … [Women] are not as dependent on the man, and both of you are not so dependent on the employer.”

The lower wages of women in the “family wage” system boost corporate profits on the backs of women, Joy of Resistance host Fran Luck points out, and many women are forced to stay in bad relationships because they would lose their health care.

For men and women, the price of private profit is enormously high: 22,000 people die and 700,000 go bankrupt per year as a result of inadequate, or no, health insurance in the United States.*** The U.S. ranks among the bottom five of the 34 OECD countries in per capita doctor consultations, hospital beds and average length of stay in hospitals,**** and is well below average in life expectancy and infant mortality.

The country’s people pay more than $1.15 trillion per year on top of what they should pay to swell corporate profits and executive and Wall Street wallets — in return, we receive worse coverage. That is the price of capitalism.

* OCED figures. Spending per capita in U.S. dollars adjusted to create purchasing power parity.
** Steffie Woolhandler and David U. Himmelstein, “The high costs of for-profit care,” Journal of the Canadian Medical Association, June 8, 2004, pages 1814, 1815.
*** T.R. Reid, “No Country For Sick Men,” Newsweek, Sept. 21, 2009, pages 43-44.
**** “Why is health spending in the United States so high?,” OECD report, page 5.

Attacks on critical thinking vs. cheers for scapegoating

By Pete Dolack

On the surface, it seems a mystery. Occupy Wall Street protestors organized peaceful protests, concentrated their critiques on the financial institutions responsible for the worst economic downturn in eight decades and consciously used inclusive language to unite people. Yet Occupy was subjected to brutal police assaults as part of a coordinated government campaign against it, and has increasingly faced volleys of disapproval in the mass media.

By contrast, “Tea Party” protestors routinely used threatening language, brought weapons not only to their own demonstrations but to public talks of government office holders, attacked government institutions in denunciatory language and sought to divide people through scapegoating. Yet the Tea Party was lovingly embraced by the mass media and allowed to operate unimpeded by law enforcement and other institutions.

These contrasting responses were not monolithic, and we can all cite exceptions. Nonetheless, there is no mistaking the general tenor of the responses. On the surface this may appear to be a mystery, but it is not at all mysterious once we examine a little closer.

Occupy was and is a genuine grassroots movement, and the hundreds of Occupies that spontaneously followed the example of Occupy Wall Street demonstrated that a large pool of discontent and anger about the corporate domination of the United States exists. That discontent may sometimes be unfocused — leading to a sometimes confusing plethora of messages at Occupy encampments and demonstrations — but it is very real, based on the reality of the lives of working people (including students). And it is precisely this bottom-up self-organization that engendered the wrath of the establishment.

The Tea Party seeks to deflect anger from corporate elites consumed by greed and arrogance who bend the country’s institutions to their benefit, and instead pin the blame on “the government,” on minorities, on immigrants and any other handy scapegoat. This movement, although calculated to tap into genuine grassroots anger, was manufactured and materially supported by corporate benefactors. And this is the key to understanding the warm embrace given it.

Both movements result from a pervasive feeling of anxiety over an economic crisis now measured in years with no end in sight; both movements are fueled by people who know that “something is wrong” and seek answers as to why the present is bleak, why the future appears bleak and what can be done to change the stagnation or downward trend of the economy and all the social problems that piggyback on economic distress. Anxiety is not only due to worries about today or fears of tomorrow in times of uncertainty and instability; anxiety also flows from a lack of understanding. Why has the economy turned so sour, why is the malaise so persistent, why is this happening to me even though I went to work every day and studied hard in school?

We naturally wish to find the answers to these questions. One way to seek answers is to channel anxiety, anger, fear and frustration into study: Read, watch, listen, observe and discuss, until a picture begins to emerge. Modern economics and society is complex and globalization only hastens further complexity. But these are human constructions, and so most humans can understand them. It is only when we understand what had seemed to work but no longer does that we can begin to construct ideas and plans to improve our lives and give ourselves stability.

Another way to seek answers is to channel anxiety, anger, fear and frustration into emotional release: Designate scapegoats from groups that are either unpopular or are vulnerable. Those scapegoats can be immigrants, they can be racial, ethnic or religious minorities, they can be women. Or the scapegoat can be “the government,” reduced to an abstract entity that somehow hovers above society as an alien force. Scapegoats have in common that they represent an “Other,” somebody or something outside or different, and thus liable to be portrayed as an impurity “polluting” society.

Scapegoating is seductive because it taps into emotion. Very real emotion, for the anxiety, anger, fear and frustration felt by Tea Partiers, Occupiers, sympathizers of one or the other and people who do not identify with either movement is based on the concrete realities of their lives. A belief that tomorrow will be better than today, that our children will live more comfortably than their parents is woven deeply into the fabric of advanced capitalist countries, and perhaps that sense of optimism has been nowhere stronger than in the United States, where such beliefs are inseparable from the expansionism, dynamism and geographical diversity that are foundations of its traditional ethos.

When long-held beliefs crumble, answers are naturally sought. Easy answers tap into emotion. Emotions are real, genuine and should be taken seriously. We share many emotions; we share a desire to understand. A cliché that is often repeated because it is true despite being a cliché is the statement that a lie can travel halfway around the world before the truth can finish lacing up its boots. A parallel can, and should, be drawn: Emotions take root much faster than the concrete. In no way is that meant to suggest that emotions are “lies” — emotions, again, are very real. In our personal lives, we become upset, but we talk and analyze, and although we may still be upset, we come to understand and thus are much better equipped to do something to change the situation that made us upset.

Zooming out from the personal to the societal, we can see similarities. But, since we are back to discussing large, impersonal social forces and institutions, what if the controllers of those institutions want to deflect attention and avoid blame for their actions? Tapping into emotions is a sure way of achieving those results, and if those institutions are very wealthy and very powerful, they can create entire movements (and new institutions) to suit their purposes.

The Tea Party is a prominent example. Tea Partiers wanted answers as to why the foundations around them are crumbling. Just as the Wizard of Oz wanted Dorothy to look elsewhere, Tea Party organizers point in another direction and yell, “It’s them, over there.” And who are the organizers of the Tea Party? By that question, I mean the originators and, in particular, the funders of the Tea Parties, not the people who became involved and assumed leadership roles in their local communities. We can readily see that some of the most active members of Corporate America are the organizers.

At the very top of the list are three entities: the Americans for Prosperity Foundation, FreedomWorks and Fox News. FreedomWorks is a group of corporate lobbyists run by Dick Armey (a hard-line Republican Party operative who once was majority leader in the U.S. House of Representatives) that was the primary organizer of the early Tea Party protests. Americans for Prosperity is a lavishly funded and tightly controlled pressure group founded by David and Charles Koch dedicated to promoting the Koch brothers’ business interests and extremist political philosophies. Fox News is one of the most notorious pieces of Rupert Murdoch’s media empire, an empire dedicated to promoting Murdoch’s business interests and extremist political philosophies.

Other corporate interests have made their contributions, but without these three groups there would be no Tea Party. Americans for Prosperity is a crucial funder of FreedomWorks, and both organizations are behind a series of initiatives to deny the reality of global warming, attack any and all regulation of business and promote libertarian political ideas, such as eliminating Social Security. Fox News is an active promoter of these agendas. Together, bottomless sums of money, corporate muscle, the ability to control a myriad of institutions and the power to have their agenda adopted by the corporate mass media was leveraged to coordinate and tap into the anger felt by millions of people, creating the corporate-inspired Tea Party.

As many other corporate elites similarly backed these agendas, they were undoubtedly happy to free-ride on the money and influence wielded by Americans for Prosperity, FreedomWorks and Fox News, the three of which provided the Tea Party with organizers, money, material support and publicity. Within any group, there will always be those who are the most active; the Koch Brothers, who fund a network of institutions to do their bidding, are among them in the ranks of big capitalists. Such people have the immense wealth and all the power that goes with that wealth to have their viewpoints and messages suffused throughout a society through continual repetition via a spectrum of outlets.

A critical component of those messages must be a deflection of blame. Government is a handy scapegoat, and an easy one because very few of us has not had at least one frustrating experience with a bureaucracy. Government has to be portrayed as an alien force disembodied from society, demonized for “interfering” in the lives of people. But government is not an abstract entity, it is a reflection of the social forces inherent within a society; its actions and policies will most often harmonize with the most powerful.

No objective analysis of government can deny that corporations reap enormous benefits from government — through contracts in an ever increasing variety of industries, the passing of laws in legislatures that not only benefit them but are frequently written by their lobbyists, the building and maintenance of transportation and other public infrastructure, the public assumption of the costs of business such as pollution mitigation, and an ever widening collection of subsidies.

If government is part of the problem, than it is because it has become dominated by corporate elites. Corporate elites reap the benefits of inequality and want to keep it that way, or widen the inequality. It is corporate elites who benefit from moving factories to new countries, from mass layoffs and a system that funnels enormous sums of money upward. It is a big job to obscure these obvious facts. And only corporate elites have the money to fund such a campaign so they can continue to reap personal rewards from this system’s continuation.

Given the web of domination by corporate elites, it then becomes no surprise that their creation, the Tea Party, is lavished with affection while the Occupy movement that challenges them and fosters independent thinking is attacked. Today is the national holiday in the United States in which the country celebrates its founding and its defining themes of “freedom” and “liberty.” But, as always, we should ask: Freedom for who? Freedom for what?