There is talk in America these days about the wisdom of including a public option in a healthcare bill that is being considered for the nation. The concern centers on the impact that such option will have on the capitalist system. Well, the following example may shed some light on the subject and perhaps clarify a few points.
For a reason I cannot explain, I took interest in what is sometimes called the science of economics at an early age. I started formulating theories in my teens which I thought were big secrets that no one knew anything about. Then something happened that hit me in two contradictory ways at the same time. I discovered from reading books that my secrets were no secret at all because other people had discovered them before I was born. This had the effect of elating me and saddening at the same time. I was elated because the discovery told me I was on the right track, but I was saddened because I realized that I was not the first to entertain those ideas. No matter; I continued to think about the subject and to formulate new theories but now, I checked to see if someone had gone there before me. At times I hoped I would find that someone was there thus confirming that I was walking in the footsteps of some historical figure. At other times, however, I hoped to discover that no one had been there thus making me the holder of a great big secret. Like they say: Go figure! But remember, I was only a kid so don’t hold it against me whatever you figure.
All the while, I had an insatiable appetite to learn something new about everything, a habit I maintained throughout my life. Thus, even after I started working, I took formal courses in one subject or another or I learned from books on my own. My life was truly one of continuous learning but with all the passion I had for Economics, this was the one subject in which I never took a formal course. For a long time, I tried not to think about the reason why I stayed away from taking a course in Economics when it was so obvious I liked the subject very much. I then came up with the theory that I was afraid to meet a bad teacher who would make me hate the subject; and there may have been some truth to that. But there could also have been another reason; it could be that deep down, I thought I knew the subject so well I did not need a lesson. After all, I was taking lots of math courses, something that gave me tools to crunch the numbers and manipulate the equations, and I was taking lots of physics courses, something that gave me models of electronic circuitry by which to analogize the flow of money in what I came to visualize as economic circuits. Like they say, all you have to do to see the truth is to follow the money. And the money was flowing like electrons obeying the same sort of laws as Ohm’s Law, the Power Law and the laws of amplification.
Alas, this manifestation of self confidence was shaken one day when a woman taught me a lesson in economics I could not have learned in school, gathered from reading books or deduced by the power of reasoning because experience alone could do what she did. By now you must be guessing this is a long story that requires a flashback to the beginning, and you would be correct. So let me start from when I retired from teaching and launched a small newspaper in a town just outside the Canadian city of Toronto.
For most of its history this town had one newspaper dominating the market and tolerating no competition. Over the years, several people started a rival newspaper but were destroyed by the ruthless behavior of the family that owned the existing newspaper, and I was warned by those who enjoyed reading my column that I shall be forced out sooner or later. To understand this part, you must know that the town newspaper was affiliated with the biggest publishing corporation in the country, a relationship that gave it enormous clout. The family that owned the town newspaper used that clout to bend everyone to its will including the town council and the managers in charge of the local offices of the federal and provincial governments. But more importantly, the family had in its pocket the people who bought advertising space for the big companies whether they were local companies or out of town ones.
Because the money I earned came from selling advertising, I was at the mercy of that other newspaper. At times I managed to get big retailers such as the car dealerships to advertise with me but most of my income came from the small stores that did not bother to advertise anywhere before my coming to town. And the reason why they did not advertise was that they were never approached by a media salesperson. In fact, the owners of the dominant newspaper could not care less about the small stores until I launched my paper at which time they hired salespeople to counter what I was doing. These people traced my steps, going behind me and visiting the stores every time one of them placed an ad in my paper. And they made them deals “they could not refuse” in every mafia sense that this phrase connotes.
First, they offered the stores bigger ads for less money if they dropped me. When this did not work, they resorted to other activities, some of which were downright criminal such as making threats, engaging in blackmail, mounting conspiracies and so on. And all of this was known to the police and to the politicians at the municipal, provincial and federal levels but no one discussed it openly or did anything to put an end to it. In fact, these people who were the government and were responsible for the maintenance of law and order were afraid to even talk at length about the subject. They treated the matter as a reality we must all live with, and they tried to talk me into learning how to get along. They had a weird notion as to what journalism was about and I could not accept it.
Still, not everyone in town was frightened. One store that regularly advertised in my paper was situated in a strip mall and was owned by an attractive young woman. When things were quiet during certain hours of the day, the other store owners in the same mall would go to her store, stand there and have a chat. This was a good time for me to go see her as well because I could, in a single trip, sell her an ad and sell two or three more to the other store owners.
After running her ads, I would invoice her as I did everyone else and would receive her check almost immediately. The other advertisers in the mall would also pay me fairly quickly as opposed to most other clients who took at least a month to pay. One day I was greatly surprised when I received an envelop from her containing more than a check. In fact, the check itself was a surprise in that it was double the amount. And with it came my own invoice with a scribbled note at the bottom of it saying: “Please send another invoice with the right amount.”
My immediate reaction was to pick up the phone to call the woman but I froze before dialing. I thought for a moment what she was trying to say to me but my brain could not generate one sensible idea. I quickly dismissed the possibility that she may have a romantic interest in me because there are better ways to communicate such sentiment. Besides, she had more eligible candidates than me, including a husband that seemed better suited to her age. I put down the phone without dialing and went to see her instead.
When I got there she explained that she knew what was going on in this wretched town. She could see that some of the stores which used to advertise in my paper do so no more. She knew I lost them not because the ads failed to generate sales but because of the pressure that the other paper was putting on them. She got several visits herself from someone representing that other paper as did all the stores in the mall. To make a long story short, she wanted to keep me in business as long as possible because it pays her to do so. And she was going to put her money where her mouth was, hence the big check that she sent to me.
I thanked her for her confidence in my paper but she quickly snapped back that there was more to it than the sales I was generating for her. Surprised, I asked “like what?” She said that as long as she was advertising with me, the other paper will give her bigger and bigger ads at a lower and lower price. She was now getting half a page, four color ads for the price of a business card, two-color ads. Thus, she felt she owed me some of the money she was saving. And because she wanted this thing to go on for as long as possible, she was going to do her part to keep me in business. She could not promise that the other stores in the mall will do the same thing but at least, they will not cut me off despite the savage pressure that was heaped on them. She reflected for a moment then added they just don’t know how to take advantage of the situation like she does. With a smirk on her face, she leaned over the counter and pretended to whisper to me that no one will object if I raised my prices a little. She winked and nodded as if to say I must not tell anyone this was her idea.
The lesson I learned from this woman was that people will navigate between fear and greed using all the talent and the abilities they possess to take full advantage of a given situation. They will want their business to survive and will try to maximize their profit by playing one competitor against the other. If necessary, they will subsidize one competitor to keep the other honest, and will stop the subsidy when it ceases to deliver. And no book or classroom could have taught me this lesson which I regard as being in the best tradition of the capitalist system.
Applying this lesson to the question of including a public option in a healthcare plan, I expect to see the same sort of scenario play itself out. That is, the public option will stand as the competitor that will keep the insurance companies honest. But the moment the people will determine that holding the feet of the insurance companies to the fire is costing them more than it saves them, they will opt out of it and go with the insurance companies. This will be a decision for them to make and for the insurance companies to earn. And the conclusion I derive from this example is that to include a public option in a healthcare plan is to do things in the best tradition of the capitalist system. Any concern about this point should be seen as baseless.
Now, let me say a word about the attractive woman at the mall. She got pregnant and sold the store because she wanted to be free to raise a family. I am sure that she and her husband are now raising a wonderful family. As for my paper, I lasted in the business longer than anyone had anticipated, and folded when I reached the retirement age I had set for myself. The trek was brutal but was worth it.