A clear-headed, moral economic understanding…

I’ve been doing some reading for a class I’m taking at Xavier, and in the midst of a wonderful essay by Wendell Berry, I found one of the clearest statements about the present economy and our economic goals. So often, you have to read the words of brilliant writers and thinkers ten times through, looking up their million-dollar words in dictionaries, to finally get their meaning. This writing, however, is clear, accessible, and easy to understand with a little bit of work.  If we apply the same energy to thoughts like these that we do to clearing out our schedule to watch the X-Factor, we might find our intellectual capacities expand beyond where we thought we were previously capable.

Enjoy, chew on this gift from Wendell Berry, and let’s practice this vision of a better economy together!

We live, as we must sooner or later recognize, in an era of sentimental economics and, consequently, of sentimental politics.

Sentimental communism holds in effect that everybody and everything should suffer for the good of “the many” who, though miserable in the present, will be happy in the future for exactly the same reasons that they are miserable in the present.

Sentimental capitalism is not so different from sentimental communism as the corporate and political powers claim.  Sentimental capitalism holds in effect that everything small, local, private, personal, natural, good, and beautiful must be sacrificed in the interest of the “free market” and the great corporations, which will bring unprecedented security and happiness to “the many”- in, of course, the future.

The economic theory used to justify the global economy in its “free market” version is again perfectly groundless and sentimental.  The idea is that what is good for the corporations will sooner or later- though not of course immediately- be good for everybody.

That sentimentality is based, in turn, on a fantasy:  the proposition that the great corporations, in “freely” competing with one another for raw materials, labor, and market share, will drive one another indefinitely, not only toward greater “efficiencies” of manufacture but also toward higher bids for raw materials and labor and lower prices to consumers.  As a result, all the world’s people will be economically secure- in the futureIt would be hard to object to such a proposition, if only it were true.

The “law of competition” does not imply that many competitors will compete indefinitely.  The law of competition is a single paradox: Competition destroys competition.  The law of competition implies that many competitors, competing without restraint, will ultimately and inevitably reduce the number of competitors to one.  the law of competition, in short, is the law of war.

This idea of a global “free market” economy, despite its obvious moral flaws and its dangerous practical weaknesses, is now the ruling orthodoxy of the age.  Its propaganda is subscribed to and distributed by most political leaders, editorial writers, and other “opinion makers.”  The powers that be, while continuing to budget huge sums for “national defense,” have apparently abandoned any idea of national or local self-sufficiency, even in food.  They have also given up the idea that a national or local government might justly place restraints on economic activity in order to protect its land and its people.

Unsurprisingly, among people who wish to preserve things other than money, there is a growing perception that the global “free market” economy is inherently an enemy to the natural world, to human health and freedom, to industrial workers, and to farmers and others in the land-use economies; and furthermore, that it is inherently an enemy to good work and good economic practice.

John Mackey, health care, Friedman, and wisdom…

The problem with the free market is that the profit motive trumps all other concerns, which leads to monopolization of societies by powerful corporations. – Me

I’ve been pretty hands-off with the whole health-care debate in more public settings.  I don’t shy away from talking about it around the dinner table at our community house, I talk about it with friends on the phone, and I listen to wise people like Tom Ashbrook and Howard Dean and Bill Frist talk about it on the radio.  I watch interviews on major news outlets.  I watched President Obama’s major speech before both houses of Congress and spent time reflecting on it with friends.  I’ve even read some of the legislative language of bills being considered.  But I haven’t taken a strong stance on the issue for several reasons.

1.  I just know health care reform needs to happen, but I don’t know specifics.

2.  Bethany and I have opted out of insurance to some degree by joining a Christian healthcare sharing co-op, so this isn’t a terribly “present” thing for us (to be more specific, we joined one Christian healthcare sharing group, but were unsettled by newsletter after newsletter warning us of “socialism” and “big government” and all sorts of Obama conspiracies.  I thought I was reading Fox News rather than reading Christians with wise, reasonable perspectives.  So we switched to a group much more even-handed and wise in their approach to the issue of reform).

3.  And this is the big one.  I’ve just been too involved in trying to stay afloat in the series of challenges that have followed moving to Cincinnati to spend a whole lot of time reflecting on larger issues.  It’s been hard enough to be intentional thinking about larger issues, let alone processing those issues outwardly in blog form.  After several years of being out of whack (reflecting much more often than acting), I’ve slid to the opposite extreme here in the short-term (acting not reflecting).  This post, however, will be an attempt at thinking more deeply.

The real instigator for choosing to write is this intriguing op-ed Whole Foods CEO John Mackey wrote in the Wall Street Journal.  When I heard that a whole lot of mess was going down around this op-ed, I read it with the eager expectation that the CEO of a company committed in some ways to a more sustainable, more just economy would have something substantive to say, something to draw us deeper as a society.  And a couple things he said do make sense, but they struck me as isolated and disconnected from the larger problem; like driftwood aimlessly floating on the ocean’s surface.

My heart fell when Mackey started with a nifty context-setting quote from Margaret Thatcher, that “the problem with socialism is that you eventually run out of other people’s money.”  “Seriously?” I thought.  “He’s going to perpetuate that either/or stuff further?”  The amount of leaders in our country willing to abandon the “we’re drifting toward totalitarian communism!” every time something is discussed with the role of government involved is extremely, extremely low.  I could go through a list of them, but the most compelling quote in recent memory for me calling us beyond the either/or extremes of total socialism or total free market was Obama’s in the health-care speech.  Wherever we fall on the political spectrum, this statement deserves serious reflection;

“You see, our predecessors understood that government could not, and should not, solve every problem.  They understood that there are instances when the gains in security from government action are not worth the added constraints on our freedom.  But they also understood that the danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited.

And they knew that when any government measure, no matter how carefully crafted or beneficial, is subject to scorn; when any efforts to help people in need are attacked as un-American; when facts and reason are thrown overboard and only timidity passes for wisdom, and we can no longer even engage in a civil conversation with each other over the things that truly matter — that at that point we don’t merely lose our capacity to solve big challenges.  We lose something essential about ourselves.”

“There are instances when the gains in security from government action are not worth the added constraints on our freedom.”
“The danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited.”

These words are the kind of political leadership we desperately need when we have such big issues to grapple with as the American public. To shape the conversation in wise ways. To be a constant voice for wisdom and good conversations where we hear one another well even as we disagree and try to find commonality. It is because of a desire for that kind of leadership that my heart fell with the Thatcher quote coming first in Mackey’s op-ed. I read further with a heavy heart, expecting it to be one of “those articles,” the ones that could’ve been written just as easily in the 60’s in the heart of the Cold War. It was.

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment.

In these initial remarks, Mackey established for me that he doesn’t understand the health care issue very well. By casting the issue as fundamentally about government takeover vs. individual empowerment, Mackey showed himself either to be dangerously naive or immorally pretending to ignore the elephant in the room. John Mackey should know just as well as any other educated citizen that the heart of the issue is not government vs. individual. The heart of the issue is, first, that health care is a for-profit business in our society. And second, in a much deeper sense, that business (in general) is defined almost purely by financial profit at the expense of any other factor. I’ll deal with these one after another.

1. Health care is a for-profit business in our society.

What this literally means, in strict business understanding (and the raw numbers and incentives of health-care corporations will bear this out) is that human beings are considered no different than, say, coffee mugs. They are a cost-bearing object in a system that seeks to minimize cost and maximize profit for the good of the company. Shouldn’t that strike persons with any moral sensibility as deeply wrong? And shouldn’t that change the national conversation about “rationing care” (usually cast in terms that “the government will ration whether you receive treatment”) so people understand that health care companies ration care every day in our society in order to maximize profit?

Pure free-market advocates proclaim that a purely free-market system would minimize cost and inefficiencies, streamline the process, and provide the best quality service for whatever issue they’re speaking of. Mackey is one of them, and says here

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges.”

That all sounds well and good in theory, but when we get down to the nitty-gritty, we are forced to confess a simple foundational fact.  The human being’s actual health care is the cost to be minimized in order for the health care company to be successful and profitable.  So the business that is founded on care seeks to minimize care. The fact that this isn’t a bigger, more obvious issue to us is utterly absurd.  Utterly, utterly absurd.  And even more absurd is our lack of awareness that free-market advocates (like Milton Friedman himself) believe the “invisible hand” has no moral responsibility. It is not the business of business to decide what is moral or not.

But health care is a different kind of business, when human lives are directly at stake. And when humans are in fact a cost to be minimized rather than people to be dignified and served, we have lost our way.

2.  Business (in general) is defined almost purely by financial profit at the expense of any other factor

I’ve stated above that health care should not be thought of like any other business, but I believe in a larger sense that business itself, in a virtuous society, should not be defined by financial profit alone.  Milton Friedman’s basic commitment to a completely free market and his interpretation of Adam Smith has led to the state of the American economic system today, and Friedman himself states that his economy runs on self-interest and greed as virtues. Committed Christians, if they’re Biblically rigorous, realize this sort of thinking is insane.

Friedman explicitly stated this perspective in his now-famous 1970 article “ The Social Responsibility of Business Is to Increase Its Profits,” in the New York Times where he stated,

When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system,” I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoid ing pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are–or would be if they or anyone else took them seriously–preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.

It is precisely on this point that I find Mackey’s op-ed so disappointing and deflating.  Why?  Because he sounds exactly like Friedman.  Why is that a problem?  Because what’s been lost in all the hullabaloo following the op-ed (with liberals boycotting Whole Foods and conservatives backslapping and thinking Mackey is one of them) is that Mackey is deeply different than Friedman and the average conservative.  In fact, Mackey believes this, that

The most successful businesses put the customer first, ahead of the investors. In the profit-centered business, customer happiness is merely a means to an end: maximizing profits. In the customer-centered business, customer happiness is an end in itself, and will be pursued with greater interest, passion, and empathy than the profit-centered business is capable of.

But the average reader of Mackey’s op-ed didn’t get that, because he wasn’t intentional enough in the words he used to lead them in that direction.  In short, Mackey wasted a prime opportunity to speak truth to the system, and given that he was writing for the influential Wall Street Journal, he is either incredibly dense or has spent so much time in his Whole Foods and sustainable food ivory tower that he didn’t consider the effects of such an article.  I think the answer is clearly the latter.  He was and is naive about how much the average citizen doesn’t “get it,” so he shoots off a few words and thinks he’s contributed well.

Does the average reader know that Mackey wrote a letter in 2006 to all of his staff announcing that he would reduce his own salary to $1 a year, donate his stock portfolio to charity and set up a $100,000 emergency fund for staff facing personal problems? Do they know that while CEO of Whole Foods Market in 2008, he earned a total compensation of just $33,831, which included a base salary of $1, and a cash bonus of $33,830?  Do they know he’s instituted caps on executive pay at the company?  No, they don’t.  And won’t now, because Mackey didn’t encourage more reasonable thought on health care.

And, in a wider sense, Mackey’s writing is simply naive to the fact that America’s economy isn’t run the way he envisions it. Ours is not “enlightened capitalism” (at least not in the direction of the policy of the last 25 years), but financial profit-centered capitalism.

And what free-market purists overlook often to the neglect of the public they are shaping is that in the free-market system, several companies (and eventually one) will emerge from the dog-eat-dog world of competition because they streamline costs better, are more “efficient” at what they provide, and we will have entered the situation of monopoly. When companies get so big, and they can leverage economies of scale in buying mass amounts of raw products for their service, competition cannot survive. And not only will competition be eliminated through economies of scale (a dispassionate cost-analysis), it will be eliminated through the massive company purchasing all competitors that would challenge their rule and absorbing them into their corporate structure.

In case any reader would think this could never happen, this is a reality in a great majority of American society. Banks, computer companies (Microsoft), news companies (Time Warner, News Corp), pharmaceutical companies (Bristol Myers Squibb, Merck, Pfizer), financial service companies (Goldman Sachs, Wells Fargo) and health care companies (Aetna, Cigna) have centralized control of the marketplace, limiting competition while intensively lobbying government for legislation that benefits them at the expense of all others.

When these monopolistic companies with big pockets supply the money for expensive political campaigns, legislators and presidents are beholden to them to at least throw MASSIVE bones in their direction from time to time (President Obama is not exempt from this, by the way, with his biggest campaign contributor being Goldman Sachs). In a supremely ironic twist, the beneficiaries of free market success manipulate governance to ensure keeping their place. They institute with their political minions a corporate welfare system that dwarfs the poverty-targeted government welfare system.  Pure capitalism creates a sort of socialism where the distribution of wealth is continually sucked upwards to the elites, both through corporate profit and governmental payouts.

The reality is that there is very little real competition in the American marketplace, and that most “competition” we observe is not real competition, but different brands of the same company that use different messages to bring business to different brands, while all the profit goes into the same coffers.

So the average consumer is naive to how monopolized their world is.

Which makes John Mackey that much more naive when he is a “captain of industry” and refuses to acknowledge the elephant in the room.

Which makes me very, very sad.

Who’s Ralph talking about?

“So extreme is the President’s corporatism that he is finding more genuine conservative groups taking sharp issue with his policies.  In a little reported evolution that may change the future complexion of American politics, organizations that call themselves conservative populists are teaming up with their progressive counterparts to oppose corporate bailouts.  Last year this coalition defeated the breeder reactor boondoggle- a high _________  priority.  In _____, it nearly defeated the legislation regarding the Alaska gas pipeline that would coerce consumers into paying for the pipeline even if the project isn’t completed and consumers did not receive any natural gas.  The synfuel industry’s welfare project is under similar pressure, though its predicted mismanagement and awful economics appear to be self-dismantling.  This new coalition put up a strong fight against the _______-ite bailout of the big U.S. banks that made such imprudent loans at skyhigh interest rates to foreign countries.  ________, who spent years lecturing around the country from General Electric on the virtues of sink or swim free enterprise, has become the most prominent advocate of big business bailouts in American history.

If this all goes against his philosophic grain, it demonstrates the contrary power of giant business over his government.  His formerly strong belief in states’ rights is surrendered when companies want his backing for a weaker federal law replacing the adaptable common law in the fifty states that gives people injured by dangerous products rights to sue and recover compensation from manufacturers.  It is surrendered when the banks demand that his agencies preempt stronger state regulations designed to protect depositors and borrowers.  It is surrendered again when the nuclear industry wants him to strip state and local governments of their police power over the transportation of radioactive materials through their communities.  Corporatizing the ex-conservative _________  __________ is a routine matter these days, even when Wall Street’s economic and tax policy demands result in placing Main Street, with its small businesses, at a comparative disadvantage.”

Ralph Nader  “On the corporate state and the corporatizing of America”