Friday, March 10, 2006

The absence of universal healthcare reduces the Middle Class

This paper (.pdf) describes the middle class as being broad, politically powerful and the source of new businesses which innovate and replace older, large ossified businesses. It is important to recognize that middle class societies have realtitively little income inequality.

The paper focuses on the differences between the development of Poland and Russia since the end of Communism. Poland has maintained broad relatively equal incomes, while Russia has developed a much greater degree of income inequality. This can be seen in the low level of new firm development in Russia and a resulting continuation of very high rates of profit.
The specter of this constituency was joined by the predictions of the creation of an oligarchic elite based on the rents accruing to the new monopolies resulting from large scale privatization. These oligarchs would then use their positions and resources to capture the government and restrict the entry of domestic or foreign enterprises that would reduce their rents.
One thing about both Russia and Poland is that both have what we would describe as universal health care. The problem with Russia is that the oligarchs bought the massive soviet enterprises rather than developing them and were for the most part members of the government before that. They automatically looked to government to protect their monopolies from foreign and home-developed competitors.

In America, we are moving towards the Russian form of oligarchy. That is the lesson of the Republican corruption in Congress and the federal government. One element that makes this easier for the would be monopolistic oligarchs is the employer-based health care. People with employer-based health care who have chronic helath problems such as diabetus or high-blood pressure in their family are tied to their large employer. No matter what their abilities or ideas, they cannot afford to leave the monopolistic employer and start their own business.

The problem is not financial insecurity, it is health insecurity. We want Americans to take on financial insecurity and start new businesses, but if they also face health insecurity in their families, they can't. Most entrepreneurs fail the first two, three or four tries. If they also have health insecurity, they cannot afford this level of risk even the first time. Failing even once is too high a cost for sensible people to accept. So the American economy loses.

Keep this in mind as you read this article on universal health care from the TNR.


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