Anne Case and Angus Deaton. 2020. Deaths of Despair and the Future of Capitalism. Princeton: Princeton University Press. (Part 1)
Review by Stephen W. Hiemstra
The last serious debate on economic policy occurred in the Reagan Administration in the 1980s. The high inflation rates that dogged the U.S. economy in the 1970s prompted this debate that focused on U.S. competitiveness in world markets. The debate focused on excessive government regulation, high labor costs due to union influence, and restraints on growth of U.S. corporations that were considered too small to compete effectively with large, vertically-integrated Japanese and German firms. The Administration accordingly promoted deregulation, reducing union influence, and merger of firms into large conglomerates. Since then, large conglomerates have not only dominated U.S. markets, but also U.S. politics and cultural life.
The Cost of U.S. Healthcare
Probably the most stunning observation that Anne Case and Deaton make in their book, Deaths of Despair and the Future of Capitalism, is that:
“In 2017, the Swiss lived 5.1 years longer than Americans but spent 30 percent less per person; other countries achieve a similar length of life for still fewer health dollars. Expenditures on healthcare in 2017 was 17.9 percent of GDP [gross domestic product] om the United States; the next highest in the world was Switzerland at 12.3 percent. If a fairy godmother were somehow to reduce the share of healthcare in American GDP not to the average of rich countries but, less ambitiously, only to the second highest, Switzerland, 5.6 percent of GDP would be available for other things, freeing up more than a trillion dollars. That is more than $3,000 a year for each man, woman, and child in the U.S., or about $8,300 for each household.” (194)
If this money were well-spent, we would expect that life expectancy would be higher in the U.S. than other developed countries, but the opposite is true. Among the 25 other members of the Organization of Economic Cooperation and Development (OECD), the U.S. has the lowest life expectancy. The next lowest life expectancy is seen in Germany, where people live an average of two and half years longer than in the U.S. (195). Case and Deaton basically argue that our healthcare dollars are not only poorly spent, they are a drag on economic growth.
If healthcare costs are so high and retard economic growth, how come most people are unaware of the costs and how come more people aren’t covered by health insurance? The short answer is that healthcare costs are billed indirectly, showing up as employer contributions and tax expenses. Hidden charges are more likely to encourage overcharging. Case and Deaton report:
“In 2018, the healthcare industry employed 2,829 lobbyists, more than 5 for each member of Congress…It is the largest-spending industry, larger even than the financial industry, and spends more than ten times as much as the total spent by organized labor…Obamacare was passed without consideration of a single-payer system [to reduce costs] or a public option…Hospitals, doctors, and pharma companies were effectively paid off in order to support the passage of the Affordable Care Act.” (210)
Case and Deaton observe:
“Medicaid rose from 20.5 percent of state spending in 2008 to an estimated 29.7 percent in 2018, while spending on primary and secondary education fell from 22 percent to 19.6 percent.” (207)
Medicaid benefits those unable to pay, often single mothers and the elderly, while education subsidizes presumably serve to increase the productivity of our young people, promoting economic growth.
Because healthcare costs are a larger percentage of the salaries of lower-paid workers, the incentive to hire lower paid workers from separate staffing firms that do not offer such benefits is enormous. The employment of temps lowers firm costs, but has the unintended effect of making it harder for less-educated employees to progress into better paying jobs that offer such benefits—the career ladder effectively that might have existed in years past simply no longer exists. Class distinctions have hardened as college graduates are employed by separate firms whose separation is motivated by the high cost of healthcare.
Although Case and Deaton fail to mention it, attaching the higher cost of healthcare to firms rather than to the government makes U.S. firms less competitive in world markets. Most other nations pay for their healthcare through taxes rather than employer contributions. This is factor in the off-shoring of U.S. manufacturing since the 1980s.
In part one of this review, I offered an overview and focused on changes affecting individuals. In part two I have discussed the broader economic environment that brought about these outcomes.
Anne Case and Deaton’s Deaths of Despair and the Future of Capitalism provides a detailed look into the disturbing problem of declining life expectancy in America. While in the past poor economic performance has usually been attributed to the entry of poorly educated immigrants, racism, or a multicycle of poverty, the authors point to growing class distinctions correlated with college graduation, an oligopolistic corporate structure, and changing trends in the workforce. Deaths of despair uniquely affect non-Hispanic, white American men. Blue-collar European men face the same economic reality, but have a healthcare plan and have a longer life-expectancy.
This book is well written and documented. It should be required reading for those studying economics and cultural trends, especially presidential candidates
Case and Deaton Examine Rising Mortality Rates, Part 2
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