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 V.19 No.7 | February 18 - 24, 2010 

Feature

Righting the Left

The best way to achieve liberal goals? Embrace free markets.

Liberals, the conventional wisdom goes, are the protectors of the poor and downtrodden, the environment, and everything that is good and holy in our society. Conservatives (and libertarians), on the other hand, are nothing but greedy supporters of big business, corruption, and those who would rape and pillage society for the benefit of a small oligarchy of elites. At least this is how I interpret many of the articles and letters I see in the Alibi.

But is it really so? Are liberals always on the side of virtue? Do people like me—who believe that government is usually the source of, not the solution for, many of society’s biggest problems—simply not care? Are we hardhearted, or just misguided?

I Was a Liberal Once ...

I have a relatively unique perspective on the matter. I’m the president of the Rio Grande Foundation, New Mexico’s only free market think tank—I don’t call the organization “conservative” because we don’t take stances on social policy. And I was once a left-liberal as well.

In college back in Ohio I was quite active in the campus environmental group. I successfully brought once (and perhaps future) California Governor and environmentalist Jerry Brown to campus to keynote our Earth Day activities. After college I moved to Washington, D.C., and interned for self-avowed socialist Congressman (now Senator) Bernie Sanders of Vermont. My first job involved in Washington was working for democratic Sen. Daniel Patrick Moynihan of New York.

Eventually, however, I decided that free market capitalism—not taxes and government dictates from Washington, D.C., or state capitals—was the best way to achieve many of the goals that I believe most of us share. These include: easily accessible quality health care, a clean environment, raised living standards and poverty reduction. After reading this, I hope you’ll agree with me.

Health Care: First, Government Should Do No Harm

Despite the rapidly changing political landscape, there is no bigger issue facing Congress today. Before even discussing the topic, we must dispense with the idea that we have anything resembling a free market in health care in the United States. Consider, for starters, that government directly pays for about 50 percent of all health care in this country. What they don’t pay for directly, federal and state governments strictly regulate: Price controls, coverage mandates, professional licensing (which limits supply, thus raising prices) and demands for government permission further conspire to drive up costs.

The “original sin” of American health care is the third-party payment system that gives massive tax subsidies to employers in order to purchase health care for their workers. President Obama rightly pointed to the accidental development of this “system” as a response to wage and price controls that were enacted during World War II as a major driver of health care costs.

Why is employer-based health care a problem? Because the third-party payment system encourages employers to provide insurance for their employees, those employees (aka health care consumers) don't have a reason to price shop for health care. They are not directly affected by prices. Specifically, think about the last time you went to the doctor. Were you aware of the price associated with a particular service? Did you shop around? With little information in terms of costs and little reason to care about them, health care consumers expect everything to be “free” or close to it. In turn, this inflates the role insurance companies have in terms of paying for care and standing between patients and their doctors.

If you are concerned about putting food on the table, you are less worried about saving bald eagles.

This system also reinforces medicine as a “fee-for-service” industry as opposed to a collaborative, health management system. After all, doctors don’t get paid if they don’t administer treatment. This further detracts from the patient-doctor relationship because, after all, patients are not the doctor’s only customer. The health insurance company (and, by extension, your employer) is the other customer since it pays the bulk of the costs.

Lastly, because Americans get their health care from their employers, if you are out of work and want health care, you are forced to pay for health care with after-tax money—an expensive proposition.

For this reason, I think left and right can probably agree that the monstrous health care bill now dying in Congress is not the answer. Forcing poor Americans to buy health insurance when they may be struggling to buy food or pay other bills is nothing if not “anti-poor.” Instead, it is a fantastic bailout for the health insurance industry. While often associated with Republicans and other opponents of reform, that industry has given Democrats more money during this election cycle, according to the nonpartisan, nonprofit Center for Responsive Politics.

While “Medicare for All” and the various European and Canadian models may seem attractive, the fact is that we can’t afford Medicare as it exists now, much less a dramatically expanded program. Medicare's expected future obligations exceed premiums and dedicated taxes by an astounding $89 trillion. That's about 5 1/2 times the size of Social Security's unfunded $18 trillion liability and about six times the size of the entire U.S. economy.

Reforming American health care—and wresting it from control of the health insurance companies—will not be easy. But it is a starting point from which left and right may find some common ground to retake health care.

An Inconvenient Truth: Free Markets = Cleaner Planet

As complex as health care is, the environment is that simple. In the United States and worldwide, free markets have led to dramatically improved environmental factors. Why is this? For starters, inherent in free markets are property rights. Property rights avoid the tragedy of the commons. This has been most vividly represented in Africa where certain tribes have been given "ownership" of certain endangered species like lions or elephants. Because they benefit materially from tourism generated by this "ownership," the tribes protect the animals rather than killing them for immediate gain. Thus, property rights actually promote short-term sacrifice for long-term collective gains.

As a force for poverty relief, Wal-Mart’s $200 billion-plus assistance to consumers may rival many federal programs.

Free markets also spur technological developments. And technology improves the environment in many ways. For starters, the automobile has resulted in vast improvements in terms of urban cleanliness. Prior to the automobile, horses were the main mode of transport. The manure they produced was a huge health problem, particularly in big cities.

Lastly, wealthy people have the money to be concerned about their environment in ways that the poor are simply unable to. If you are concerned about putting food on the table, you are less worried about saving bald eagles.  

Consider some of the environmental “crises” over the last 30 years that have been solved or improved dramatically. Deforestation, water quality, air pollution and wildlife habitats have improved dramatically in nations that have relatively free market policies and strong property rights in place.

Forests in the United States are growing every year. According to the CIA’s World Factbook, we gained 1.5 percent forest cover, or around 10,973,950 acres, between 1990 and 2005. This process continues today. U.S. water quality and standards continue to improve, and air pollution has dropped dramatically in major cities. (Think of Los Angeles, which experiences significantly fewer high ozone days than it did two decades ago.)

Of course, wildlife habitats in the U.S. continue to expand. Wolves were only reintroduced to Yellowstone National Park in the early Clinton years, and now they are ubiquitous and firmly re-established. Bald eagles and humpback whales are just two additional large animals that have made major comebacks in recent decades. While government regulations did play a role, the fact that the United States economy is wealthy enough to pay for these worthwhile goals is inherent in their success.

These environmental factors have all improved in the relatively economically free United States. The record is more mixed (at least in the short term) in rapidly developing countries like China and India. But the fact is that these nations are investing billions of dollars in environmentally friendly technologies and ways to preserve the environment while continuing to pull billions of their people out of poverty. All of this is far superior to the truly impoverished areas of Africa, Asia, and Central and South America that continue to destroy wildlife and pristine habitat in order to provide subsistence living for rapidly growing populations.

How Wal-Mart (and Capitalism) Helps the Poor

This brings us to poverty reduction, perhaps the most important way in which capitalism achieves liberal goals. Improved rule of law and reducing tariffs that block free trade are just two ways in which freer markets help the poor. China and India are two nations that, since the fall of the Soviet Union in 1991, have embraced capitalism—at least to a far greater extent than ever before—with astounding results.

Since 1980, more than 200 million people have moved above the poverty threshold measure in these nations. The policy shifts allowing private holdings of land in China and greater freedom to create commercial enterprises to produce and exchange goods are revolutionizing life there. These changes were formally institutionalized in 2004 by constitutional revisions bolstering private property rights, and again in 2007.  In contrast, the number of poor people in Africa—a continent that has by and large not engaged in significant market reforms—continues to grow. Insecure property rights and weak regimes discourage investment, production, and exchange throughout much of the continent.

It is not the poor and working classes that hire lobbyists to patrol the halls of Washington and Santa Fe.

Economic freedom and freedom to trade are the greatest poverty eradication tools known to man. The single mother who shops at Wal-Mart and is barely scraping by does not benefit from tariffs. Rather, the tariffs are in place because well-organized and generally well-paid labor union workers lobby Congress to restrict trade. That in turn drives the cost of foreign-made products up and reduces living standards for low-wage workers. The most recent example is the Obama Administration’s tariffs on low-cost tires made in China.

Of course, that single mom who shops at Wal-Mart doesn’t just benefit from free trade; she actually benefits from the existence of Wal-Mart itself. As New York University’s Jason Furman (who has never received any payment from Wal-Mart) puts it, Wal-Mart is “a progressive success story.” Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart’s products.

These gains are especially important to poor and moderate-income families. The average Wal-Mart customer earns $35,000 a year, compared with $50,000 at Target and $74,000 at Costco. Moreover, Wal-Mart’s “every day low prices” make the biggest difference to the poor, since they spend a higher proportion of income on food and other basics. As a force for poverty relief, Wal-Mart’s $200 billion-plus assistance to consumers may rival many federal programs.

The Dirt on Farm Subsidies

Unfortunately, U.S. agriculture policy is an example of bad trade policies that take from the poor and give to the rich. The federal government spends billions of our tax dollars annually to subsidize commodity farmers of wheat, cotton and corn. Recipients of these subsidies are often simply wealthy land owners who don’t actually grow crops, but are instead paid for not planting crops. Former NBA star Scottie Pippen, television mogul Ted Turner, news anchor Sam Donaldson and corrupt corporate titan Kenneth Lay are just a few notable rich people who have received millions of dollars of subsidies in recent years.

The kicker is that American taxpayers are not the only ones harmed by these unfair subsidies. All those subsidies for corn farmers wind up pushing corn syrup into the food supply where we’d otherwise consume old-fashioned cane sugar. Worse, our agriculture policies inflict massive harm upon the poor in other nations.

A perfect example of this is cotton. In December, African cotton producers said they would consider taking legal action against Washington if harmful U.S. subsidies are not repealed promptly. Why would Africans care about U.S. cotton policy? Well, according to the anti-hunger (and anti-agriculture subsidy) group Oxfam, cotton is often the only source of cash income for African families who live on less than $1 a day per person. Added income from increased cotton prices could make a world of difference, but they can’t compete with wealthy, heavily subsidized, U.S. producers.

Oxfam is just one left-of-center group to oppose agriculture subsidies. The Environmental Working Group approaches the elimination of agriculture subsidies from an environmental perspective because, according to its website, “subsidies damage the environment and natural resources.” Unfortunately, too many on the left simply dismiss the benefits of free trade, both for domestic consumers and the poor who wish to trade with us.

The Poor Don’t Hire Lobbyists

I’ve always felt—even when I was a liberal—that the concept that many on the left have of government as a benevolent Robin Hood that takes from the rich to give to the poor is just silly. After all, as 19th century French economist Frédéric Bastiat said, “The state is a great fiction by which everybody tries to live at the expense of everybody else.” It is not the poor and working classes that hire lobbyists to patrol the halls of Washington and Santa Fe.

Rather than waiting patiently for the “right” person to get into power—Obama clearly wasn’t what the left was looking for—the left needs to embrace free markets and limited government for what they are: the best, fairest economic policies that have resulted in the greatest improvements in living standards throughout human history.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

The opinions expressed are solely those of the author.

 
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