Minnesota’s Economic News — W/E 1/27/22
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Americans are dying. More specifically, non-college-educated, middle-aged white Americans are dying at higher rates compared to older generations of non-college-educated white Americans when they were at the same age, as well as compared to non-college-educated middle-aged whites in other countries. The big cause of this trend is an increase in what is termed “deaths of despair” –– an umbrella term for all deaths caused by suicide, alcohol liver problems, and drug overdoses.
In addition to increasing mortality among non-college-educated, middle-aged white Americans, there has also been an uptick in the number of people in this group living with pain. Non-college-educated, middle-aged white Americans report living with chronic pain in higher numbers compared to the same group of past generations or their counterparts in other countries.
Additionally, while pain levels, as well as levels of death, remain virtually unchanged among educated Americans, for non-college-educated middle-aged Americans, they have skyrocketed. This is not specific to some regions of the United States. It is happening all over the country in both rich and relatively poor states.
So, what’s causing this trend? This is the question Angus Deaton and Anne Case try to answer in their book Deaths of Despair and the future of Capitalism. According to Deaton and Case, the big culprit is capitalism through rising health care costs.
There are two ways through which health care costs contribute to this trend. Firstly, high health care costs discourage companies from hiring low-skilled workers, since the government mandates that employers provide health benefits to workers. The stress caused by these declining employment prospects contributes to unhealthy behaviors like heavy drinking and heavy drug usage, and in extreme cases it causes some people to commit suicide. All of this leads to an increase in deaths of despair.
And secondly, the health care system itself incentivizes aggressive prescription of addictive pain medication, which has led to increased overdoses. Whether the second is a result of capitalism or a defective regulatory structure is unclear, but the authors seem to suggest that greed has been a big contributing factor to the opioid epidemic.
There has been a growing trend with people blaming capitalism for all the ills of the world. This book reads like an extension of that trend. However, for all their efforts to paint capitalism as the underlying cause of these deaths, the authors fall short.
For one, there is hardly any direct link between capitalism and increased health care costs — that is, if we take capitalism to mean a free-market system wherein private interests (not the government) control the means of production. If anything, most of the issues that are associated with rising health care costs or declining employment prospects for non-college-educated Americans seem to stem from anti-capitalistic practices that are aided and sometimes even encouraged by government regulation.
The federal government, for instance, mandates that employers provide health care benefits to full-time workers. This raises costs for hiring low-skilled workers, forcing some companies to take jobs abroad or hire fewer workers. That is not a problem caused by capitalism, but rather government regulation through stringent labor laws.
Other issues contributing to rising health care costs mentioned in the book include the fact that medical schools, for example, limit the number of medical student slots. American rules also discourage or make it harder for foreign-trained doctors to practice here. Additionally, hospital consolidation has risen in recent years, contributing to higher costs. Interestingly enough, some research evidence suggests that this trend of consolidation has been encouraged by the passing of the Affordable Care Act, aka Obamacare.
Besides that, there are other issues outside of the health care system that discourage upward mobility for low-educated workers. These include restrictive housing rules that increase the cost of living, thereby discouraging low-skilled workers from moving into booming areas with better job opportunities.
The fact that our economy is not delivering for low-educated, low-skilled Americans should undeniably be a cause for concern. However, to say that such a trend is a ‘failure of capitalism’ –– which was supposedly the authors’ original title –– would be grossly misleading.
The market system is certainly not perfect, and it could be improved. However, the authors do a poor job of connecting rising health care costs to capitalism itself. But what they do manage to show is that the regulatory system and government interventions are what’s failing low-income, low-educated Americans by raising the cost of providing goods and services — including health care.
The authors are right that capitalism is an “immensely powerful force for progress.” But what capitalism needs in order to work better is not more government, but less.
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