Things are looking up for the uninsured in America this week. Not so up that the approximately 46 million uninsured Americans should start relaxing about their perilous well-being, given that it was known all along that the bill would have a much harder time passing in the Senate than in the House of Representatives. Still, the passage of the health care reform bill in the House is a good sign for millions in need. But, is in a good sign for the American economy?
Health Care Bill: How Will it Affect The Economy?
Many people have discussed the economic repercussions of the reform on small business that are now mandated to provide health insurance for their employees (not so great), or for the health care industry (perhaps not zero, in the end) and even gays (who won out in this bill). But no one has discussed the effect of universal health insurance on the ethos of innovation in this country.
It has been posited by many political theorists that there are two different types of capitalist system. One is oftentimes called “liberal”–this is the system at work in Anglo-Saxon countries, including the US. The other is usually referred to as “socialist”, though these days it is far from pure socialist. This system is found in continental Europe. Liberal regimes are guided by a faith in the market and a belief in the importance of the individual. They therefore are characterized by residualism, mean-tested assistance, and stigmatized relief. Socialist regimes have universal entitlements at middle-class standards.
Firms act differently in the different systems. A liberal market economy is made up of firms that coordinate via hierarchies and markets. Socialist or coordinated market economics are comprised of firms that depend on non-market relationships to conduct their business. Importantly, in these economies, production strategies rely on highly skilled labor, which requires industrial relations institutions that equalize wages and skill level across an industry as well as specialized education and training systems. Furthermore, the internal structure of the firm reinforces the networks that facilitate that information sharing, through a bias towards consensus making and incentives.
In liberal market economies, on the other hand, the educational and training systems of emphasize general skills that can be applicable in many ways in a fluid labor market. Inter-company relations are based on standard market relationships and formal contracts.
The coordinated economies have a health care system that looks out for its workers, because workers stay in a specific industry for all of their lives. In liberal economies, the market lets everyone sink or swim, with only meager assistance to those that seem to be sinking.
Political theories have posited that the liberal economies, such as the US, have a comparative institutional advantage in radical innovation, while coordinated market economies have the advantage in incremental innovation. As the United State’s system changes and the market loses its all-encompassing power, with this competitive advantage in radical innovation be lost? Will workers stay at ease in firms longer, no longer needing to come up with the next brilliant idea to maintain their position? Will firms become more cooperative as market signals cease to be the only determinant of their behavior?
I am not suggesting that the US doesn’t need universalized health care — of course it does. But it is worth asking what this really fundamental change in our very economic ethos will have on the country. Will America lose its best edge — the sharp minds that think out of the box and innovative wildly? Only time will tell.
The CEO Game.
Recent Comments