Socializing Political Power and Socializing Capital

This is a summary of an interesting post by Larry Hamlin over at the Barefoot Bum.

I think many of us forget, or at least take for granted, the profoundly radical nature of democracy. We know we have freedom of speech, religion, association, etc and of course, we can vote. We cannot be deprived of our life or liberty without due process. In a fundamental sense, democracy is the socialization of political power.  Political power is simply the ability to use human and natural resources to some specific end. One aspect of political power is that societies have to concentrate that power to accomplish anything. Simply directing a group of people to dig a well is an example of the concentration of power. Traditionally, at least until the last several hundred years, individuals owned political power. Those who owned the greatest concentration were called warlords, emperors, kings, or priests. People took this for granted, since after all, who else should own the political power than the person who could directly use it and had “earned” it. One characteristic of privately owned political power was that the owner could employ it, in a sense, arbitrarily. A king could kill you, order someone else to kill you, place you in jail, take your land or wife, make you his slave. He might treat you nicely and fairly, but this would be his whim. It is not to say that every act a king might do was always wrong, per se. It might be to the benefit of the society if  the king ordered you dead or if he ordered you to jail. The king might have fantastic ideas about agriculture or science and might do much for the poor and desperate–all of these actions require the concentration of political power.  Because the king owned the political capital, he could exercise his power purely on his whim to his benefit. It was only through blind luck that any leader might happen to use this power to the collective benefit of society.

But with the development of democracy this picture changed. The radical aspect of democracy is that it socialized political capital. This means that we divide all political capital among all citizens. No one person or group arbitrarily controls what others can and cannot do. The state, through legal and constitutional frameworks, controls all acts of coercion–and we control the state.  Although we take this form of government for granted today, it was not obvious in the seventeenth and eighteenth century that democracy was either “good”, efficient, wise, or workable. We praise our founding revolution, but we had many privileges, not the least of which was our relative isolation and connection with the English enlightenment. The French Revolution, so easy to critique (much of it justified) faced serious problems, including a recalcitrant  nobility and continuing wars in Europe and an entrenched feudal culture. The French nobility was typical of much of Europe. These private owners of political power were not going to give up their privileges without a fight.

I think we face the same situation today in regards to economic capital. A society needs to concentrate economic capital in the same way and for the same reasons that it needs to concentrate political capital (in many cases, they both are equivalent). Economic capital tends to concentrate in private hands in the same way that political capital tends to concentrate in private hands. Our economy functions only to the extent that those who own the capital and means of production can make a profit (a promise of a greater concentration of capital.) In other words, much of our economy is tied to the arbitrary whims of the capitalists. There is no reason that we could not socialize capital in the same way we socialize political power. It might not happen this decade or even this century. I suppose it might never happen, but I believe it will and some day people will look upon the private ownership of capital as a quaint relic of the past in the same way we look upon the private ownership of political power today. The arguments against socializing capital are similar to the ones employed 300 years ago against socializing political power. The arguments in favor of socializing capital are similar to those for socializing political power.

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What Americans think they know about government spendings

Tom Schaller over at fivethirtyeight.com looks at some polls that question what Americans believe about government spending.

He says:

I don’t know about randomly-selected Americans, but I do know that undergraduates in my POLI 100 classes tend to think the government spends more on defense than it does and less on Medicare and Social Security than it does. In surveys, the median American thinks that we spend about 20 percent of the federal budget on foreign aid, and would like that amount reduced to about 10 percent–when, in fact, actual spending amounts to less than one percent. This may explain why some Americans foolishly believe that tort reform will solve our health care cost problem or that eliminating earmarks will eliminate our deficit problem, even though they will not. I know I’m going to sound like an elitist, but the fact of the matter is that most Americans have a very weak grasp of how the government raises revenues and what it spends those monies on.

This has frustrated me for a long time. McCain built his campaign on the theme of significantly cutting the deficit by cutting earmarks which are nearly, proportionally speaking, non existent.  What we spend on the poor is significantly outweighed by what we spend on our two wars and the middle class or for that matter on maintaining huge banking establishments. We need to increase overall consumer demand which will force an increase in government spending. It does not follow that we should spend our money on anything. We could start by ending our two wars, pass a comprehensive health care bill, provide extensive jobs stimulus, break up the banks, and end some of our more egregious subsidies to the middle class. We can certainly afford to increase taxes on the wealthiest Americans. But we can’t do that if people honestly believe our problems are earmarks and foreign aid.

The Public Option Has a Problem…

…and no, it isn’t Joe Lieberman.

Slate Magazine has an article pointing out that the Congressional Budget Office (CBO) has found that "[A] public plan paying negotiated rates … would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges."

What? I thought the public option was good to go. Now, this quote will be all over the air waves and the blogosphere (it already is) which will put more pressure on Congressional and Senate weenies moderates to capitulate on this important and necessary aspect of healthcare reform.

But not all is lost. The CBO is also clear that a public option will be more efficient than the private sector and will force overall prices down. The trouble is that the insurance industry are experts at not paying premiums especially for those who are very sick. This is the time honored way to keep costs down and profits high. The government-run option will tend to take all comers and pay a higher benefits to a larger proportion of its members. Consequently, the public option will tend to attract the people with serious health risks and those who cannot afford to take a chance that Blue Cross will deny payments. This means that the pool of members in a public option will tend to have more expensive needs than the private industry, which will tend to drive up premiums. As premiums go up, those who are healthier will flock to private insurers exacerbating the problem.

The trouble then is not a flaw in the public option, but in the fact that congress is requiring that the public option run completely as an insurance group that will require no governmental help. If that is to work, the government needs to insure that the insurance companies take users with pre-existing conditions and pay out premiums to one and all.

…well, Joe Lieberman is still a problem.

This is disturbing…

This video is disturbing on several levels. But I am bothered most by the response of the audience to Sen. Coburn’s comments about how we should help this lady by individually offering our neighborly services. Notice the applause he gets when he says this. This is a women who is facing either financial ruin or a life of suffering while her husband slowly dies. And she had insurance! How can you convince a nation to take this issue seriously when people are like this?

I get so tired hearing how government is not the solution. It isn’t the solution to everything, but is the only solution for some things. Medical expenses are not “fairly divided” among our citizens. Medical problems that lead to financially crushing burdens do not happen only to people of poor character or to those who deserve what they get. We have one of two choices: we can figure out how to fairly spread the cost of health care among our citizens or we can just look the other way until something happens to us. This does not mean we stop debate and pass whatever proposed legislation the Democrats happen to have on the table. But we need to have true debate. The “government is not the answer” argument is certainly an improvement over yelling and screaming, but is still mind numbingly inane. I have to wonder how any elected government official could ever say this. If government is not the only possible solution to the health care crisis, then what is?

How about capitalism? Nope, don’t think so. It is in Aetna’s and Blue Cross/Blue Shields interest to make a profit. They can only do so if they can get a pool of people to give them more money than they pay out in settlements. According to standard free market dogma, if insurance companies charge too much for premiums then they lose customers. If we let the market work, the argument goes, then premiums will fall (or rise)  to the price people are willing to pay. Sounds fair. But insurance is not like buying a TV. We are buying a service for which we do not want but for which we cannot afford to ignore. Because of the high potential (and eventually, inevitable) cost of medical care we have to buy insurance. In economics, this is referred to as inelastic demand. We desire insurance no matter what the cost is. Standard fee market theory falls apart at this point. If a company produces a product that has an inelastic demand, they can charge far more for the product than they could in a situation with elastic demand (where people will only buy the product if the price is low enough.) Therefore the big insurance companies have all the power to charge more for “potentially” sick people, but also for denying coverage for those who are already insured but are facing high medical costs.

In a situation like this, where we do not want close friends and relatives dying on the street for want of health care, the only solution is government intervention. To say “government is the solution” is not only idiotic, it is also morally wrong.

Income inequality reaches new high

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From Emmanuel  SAEZ, Economics Professor

h/t Paul Krugman

Another good economics blog

If you follow some of these economic blogs you see some mathematics at times.  Makes it relevant in class. That he is left of center is just a bonus.

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Robert Reich