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 rsassower@gmail.com See
previous articles at sassower.blogspot.com
