Laissez-faire Capitalism Has Failed Us

Laissez-faire capitalism has failed the United States again. It hasn't failed us in the Marxist proletariat revolution sense, but in a narrow, select number of fields. It failed us in the fields of banking, health care, and energy production. It shouldn't surprise anyone that laissez-faire capitalism failed us. It has failed us in the past and will fail us again in the future. Government management has also failed us on an equally substantial level. It's failed at project housing, the war on drugs, the war in Afghanistan, public education, etc... What America needs is an honest debate about how to balance the failings of laissez-faire capitalism and failings of public sector.

Laissez-faire capitalism has failed us before. Teddy Roosevelt knew this. Before the FDA, medication was the trade of snake oil salesmen and patent medicines. Most “medicines” were either useless, poisonous, or large doses of narcotics. Factory meat packing gave us the world of Sinclair's The Jungle. Without basic environmental laws we had rivers that lit on fire.

Franklin Roosevelt saw what happened to an unregulated banking sector. It is human nature to be swept up in collective hype, put short-term personal gain over long-term institutional stability, and run outright scams. More recently, a large number of economists, experts, and politicians became convinced that we are smarter and more knowledgeable than bankers in the 20's and no longer need New Deal era regulation. Sadly, that knowledge wasn't used to create a self-regulating finance sector, but better ways of creating fake wealth.

Only an ideological fringe with the mentality of an ostrich believes that deregulation of the banking industry was good for America. Even most Republicans acknowledge that we need to re-regulate the finance sector. Laissez-faire capitalism in the banking sector has failed us not once but twice.

In the health insurance industry, laissez-faire capitalism has not failed us as spectacularly, but maybe even more completely than in the banking sector. We pay twice as much per person for health care as the average industrial country, yet as a whole we are dramatically less healthy. Our life expectancy is shorter, our infant morality rate is higher, and the number of uninsured is greater here than in basically every other first world nation combined. Most first wold countries spend about 10% of their GDP on health care while we spend roughly 17%. That is $1 trillion dollars wasted on health care a year. Over a few years, the amount wasted on health care will dwarf even the losses of this recent collapse of the stock market.

From one perspective, laissez-faire capitalism in health insurance has been a big success. The problem is its goals are very different than that of the country's. The nation's goal is to have healthy citizens who aren't bankrupted by health care costs. The goal of the health insurance companies is to make money. They make money by charging large premiums and doing what they can to not pay for health care treatments. We shouldn't be surprised that our health care costs more but treats less.

The failure in the energy sector is simpler. It is widely agreed that producing large quantities CO2 is bad for the world and bad for human society. The cheapest way to produce energy also produces the largest quantities of CO2. The problem is that producing CO2 is free but will eventually cost a large number of people around the world a lot of money. To fix our energy sector we need to determine the real monetary cost of excess CO2. We need to attach a cost to CO2 like attached a cost to SO2.

On the public sector side, the government has failed the country in several spectacular ways. No example is more evident than the failure of our high schools. We have gone from the best public education system to one of the worst among our first world nations. Our drop out rates and test scores are unacceptable.

What America needs is policies based on careful empirical observation and not ideological talking points. Unfortunately, it is always easier to paint the world in broad brush strokes of black and white than to carefully study every issue, evaluating the pluses and minuses of every move.

Almost all Americans are willing to accept the fall of the USSR as proof that communism (complete government control of the economy) was a failure. Yet, there are many Americans who refuse to accept that complete laissez-faire capitalism has been equally debunked by historical evidence. The end of the 19th century was the golden age of laissez-faire capitalism, and it was not good. It was a time of robber barons and oppressive monopolies. There were rivers so polluted they burned, sausage filled with rat meat, and medicines more likely to kill you than cure you. There was actual violent class warfare between labor unions and factory owners. It was a world of unrest and mass popular uprisings.

I'm cautiously optimistic things can change because Barack Obama's top priorities are to reform the financial sector, the health insurance sector, the energy sector, and the educational system-- three areas where poorly regulated capitalism has failed us and one where the government has failed. He campaigned on post-partisanship, but I hope he governs post-ideological. He recently talked about taking politics out of science, but what we need is more science in our politics.