Taylor Marsh – TaylorMarsh.com – News, Opinion and Weblog on Progressive Politics

One of the most interesting myths of Capitalism is that private enterprise is responsible for the stunning technological progress we’ve experienced over the last century. It is the creativity of the private sector, so the myth goes, that has vastly improved the human condition throughout the short history of the market economy. On the other hand, the public sector is, according to the same myth, bureaucratic and, essentially, uncreative.

It is this myth that opponents of the public option for health insurance rely on to keep the government from offering an alternative to private health insurance. Their arguments are rich in contradictions and ironies and betray a condescending attitude toward old people and poor people. Presumably public insurance is good enough for the old and the poor, even though it’s not good enough for the rest of us.

And, as a matter of fact, many economists have argued that science, not business, has fueled economic growth and constantly improved our standard of living. There is no doubt that the private sector, especially small business, has been innovative. But it’s also true that government has been innovative, and the contributions government projects have made to the progress of American is undeniable. Science and technology can flourish under government as well as under private enterprise, for progress is what science is all about, no matter who pays for it. As long as government isn’t downright anti-science — a condition we suffered through recently under an administration that was as committed to limiting the role of government in the economy as any — there is no reason to believe that science and technology can’t be managed as well by government employees as by private sector managers. NASA project managers, for example, are some of the best in the world.

All of that is interesting, but not nearly as interesting as granting the anti-public option voices their premise and seeing where it leads. All right. Suppose the private sector really is more creative than the public sector. Is more creativity in the health insurance industry what we need right now?

I first became interested in the role creativity plays in the insurance industry in a slightly different context, i.e., in considering the role credit default swaps played in almost destroying the American financial system. No one can deny that credit default swaps are a creative way to manage risk. The problem is the people who invented them were interested in making money, not in promoting the public good. There lies the rub. In the private sector, there is no necessary connection between making a profit and making Americans better off. I’m sure the private sector doesn’t mind if the public benefits from their schemes, but promoting the public good isn’t their main motive, profit is.

Looking back at the history of the private health insurance industry, it seems to me they have often managed risk by creatively excluding people from coverage and denying benefits. They have reduced the industry’s exposure to risk by increasing the public’s exposure to the extent that medical expenses, even for the so-called insured, is one of the leading causes of personal bankruptcy in America. Do we need more of that kind of creativity? Even a little? Do we need to find ways to make the health insurance industry even more profitable? Or do we need to find ways the health insurance industry can contribute to the public good by making life better and more secure for all Americans?

Of course, promoting the public good is not the business of private enterprise. It’s the business of government.