LESSONS IN POLITICAL ECONOMY
As the latest mid-term election results are digested, and as we prepare for the onslaught of the 2016 elections, perhaps thinking about political economy is a more fruitful exercise than separating the two domains of our lives, the economy and politics.
The idea that the economy has nothing to do with politics is untenable, even in the ideal market capitalism of Adam Smith: who takes care of executing and enforcing contracts? Who ensures fairness of exchange?
There is an easy, somewhat cynical and definitely real way of thinking about the overlap of the economy and politics: the rich buying elections (through media advertisement). This has become especially true since Citizens United v Federal Election Commission (2010).
But there is a sober way of combining the two: the political and legal domains provide the conditions for markets—the economy—to thrive. Without the rule of law, markets become outrageously inefficient (and costly, if you have to hire the mob) if not outright dysfunctional (when no one can be trusted).
So, political economy encompasses the legal and political frameworks that reinforce the fairness of markets, the safety of exchanges, providing agencies and courts to make markets as efficient and inexpensive as possible.
Incidentally, this view isn’t limited to leftists who argue for market-socialism, but has been fully understood by the heroes of Milton Friedman and his Chicago School, namely, the Austrian School of Economics.
Two recent incidents reinforce this long-held belief. The first has to do with the newly appointed chairwoman of the Federal Reserve, Janet Yellen. While monitoring interest and unemployment rates, the flow of the money supply and the strength of the dollar, she reflected publicly about the hazards of inequality.
To be sure, chairwoman Yellen is concerned about economic and not political inequality; she cares less about the systematic disenfranchisement of voters in states like Texas and much more about income and wealth inequality.
As far as her comments can be interpreted, she’s channeling the view that financial inequality (of income and wealth) leads to reduced overall national demand (for goods and services) and therefore hampers economic growth.
Gone are the Reagan days of trickle-down economics, the theory that the very rich are supposed to spend so much that eventually the very poor will benefit as well. Likewise, the view that lowering taxes for expanded expenditure of the overall economy has been empirically discarded.
So, it’s reasonable to ask an economics question—is inequality undermining growth?—without having a moral question necessarily being asked as well (Pope Francis has taken care of raising the moral alarm bells).
But the economic question cannot be answered without changing policies associated with minimum-wages and closing tax loopholes for the corporate elite. All these, then, are political hot issues. Economics without politics is barren, and politics without economic consideration absurd.
The second case is less ideological but more frightening: the threat of the Ebola epidemic. Here we have political hot-button issues related to the balance that should be stricken between public health policies and individual privacy rights.
Should we quarantine those suspected of having been in the proximity of those infected by the Ebola virus? Should they be isolated from the general population? Where? When? For how long? Is this a state or federal policy?
How does this public health issue become an economic nightmare as well? Simply put, when a federal agency, like the Centers for Disease Control, wants to dictate a policy that affects private businesses, also known as hospitals. Where does one jurisdiction begin and the other ends?
Must private hospitals treat Ebola victims even if they have no insurance whatsoever or when the costs of treatment can never be recouped (even partially) by private or federal insurance agencies? Not every hospital takes all cases, and not every hospital has expensive and specialized units for rare disease: it’s not cost-effective.
But when it comes to public health, should economic questions even enter the equation? While the Affordable Care Act has been debated endlessly on ideological grounds, not much was heard from the private insurance companies that are the main beneficiaries from the Obama Administration’s largesse: the larger the pool of insured, the lower the risk; the lower the risk with additional premiums, the greater the profit.
Once again, the ideological debate cannot remain exclusively in the political domain, where candidates for political office can raise the issues without really dealing with them. For those wanting to blame Obama personally or his entire administration for the Ebola cases that were discovered on US soil, they should remember that health care remains a market-driven enterprise with federal mandates.
If we had universal health care like other industrialized nations across the globe, then of course the government has the power (and therefore the responsibility) to monitor and control the spread of an epidemic. But until we are more consistent in the application of our ideological differences, we cannot expect much progress.
Thinking of political economy as an interwoven set of ideas and practices that require a delicate balancing act between economic and political interests is the only way forward. With this in mind, we should expect piecemeal engineering, fine-tuning of policies that ensure the balance between the well-being of the nation as a whole and individual privacy.
Raphael Sassower is professor of philosophy at UCCS. He can be reached at firstname.lastname@example.org See previous articles at sassower.blogspot.com