Economic freedom's impact on health care, coffee, and garbage collection

Current debate over the best path for reforming our healthcare system stems from a fundamental clash of ideologies. Are people and society best served by greater government involvement in a market? Or does greater economic freedom facilitate the best outcomes?

Those on the side of free market solutions often point to historic examples where nationalization of a service (e.g. mail delivery and passenger rail) or an industry (e.g. Tennessee Valley Authority) hurt rather than helped consumers and communities. Even the Olympics offers proof that central planning is a bad idea. Yet, positive examples can be as affirming if not more than negative ones. So here are three examples of the beneficial effects of privatization from which healthcare reformers should take their cue.

Capitalist Coffee: Underneath the U.S. Capitol building, there is a small coffee shop called ‘Cups.' For many years, it was run by the Senate and delivered less-than-favorable results. Few customers went there, the coffee was bad, and the shop continually lost money. In 2001, government leased the shop to a husband-wife team, who quickly turned it into a profitable venture. The government couldn't run a coffee shop, but individuals can.

Competitive City Hall: Since its incorporation in 2005, the town of Sandy Springs, Georgia has relied on private firms rather than City Hall for just about every service. From garbage collection to courthouse clerking, the city encourages outside companies to compete for its business. The result? Its budget is in the black, and its citizens sing the praises of its services.

Private Parks: In the ‘70s, Central Park was in decline. So during the following decade, philanthropists and activists formed the Central Park Conservancy, which has donated $430 million to restore, manage, and enhance the area which accounts for six percent of Manhattan's total acreage. The private group is responsible for the maintenance and operation of the park and employs 90 percent of its staff and provides 85 percent of its annual expense budget. The privatization of Central Park has been wildly successful and has returned the park to its former splendor. This strategy has worked even though free city parks are often viewed as a type of public good.

In each of these examples individuals accomplished what bureaucracy could not. It was not until the private sector was given a chance that government officials discovered it could provide a better product and do so more efficiently. The same myopic view too often pervades health policy. Profits are presumptively viewed as "evil" or inappropriate in too many quarters-never mind that the profit-oriented pharmaceutical industry has for decades made the U.S. a global leader in innovative medicine. "Excessive" CEO salaries are viewed with suspicion or outrage.

I am often amused by the periodic rants published in my local paper over the salary of the president of Blue Cross Blue Shield of North Carolina-a salary which turns out to amount to less than $1 a year per subscriber. With the average subscriber paying thousands of dollars a year for health coverage, why all the ‘sturm und drang' over one component of expense that is meaningless in terms of either the burden of paying for health insurance or the amount available to pay providers? Likewise, pundits and politicians vilified private health insurance company profits throughout much of the 2009 debate over health reform-even though mainstream media reported that insurers' profits ranked far below those of other sectors of the U.S. health economy and well below those of most other industries in America.

Contrast these facts with those of the food industry.

The average American can survive far longer without medical care than without nourishment. No one can dispute the latter is an absolute "necessity" of life. Yet, we leave virtually our entire food distribution system in the hands of private producers-the vast majority of which are for-profit. The Senate, however, has yet to stage a highly publicized committee hearing over the salary of Food Lion's president or the quarterly profits of Kellogg. Consumer advocate groups are not lobbying for a "public option" grocery store under the banner of increasing options and reducing costs for shoppers. Yet, a cabal of lawmakers and activists claim this same kind of increased bureaucracy would be a good idea in health care.

Fierce debate over major policy issues such as health reform cannot and will not be resolved so long as ideological blinders prevent passionate advocates from clearly sifting fact from fiction. For those willing to open their eyes, private markets are capable of playing a much wider role than some commonly suppose. Sensible policy would recognize this.

 

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About the Author

 

Christopher J.
Conover

  • Christopher J. Conover is a Research Scholar in the Center for Health Policy & Inequalities Research at Duke University, an adjunct scholar at AEI, and a Mercatus-affiliated senior scholar. He has taught in the Terry Sanford Institute of Public Policy, the Duke School of Medicine and the Fuqua School of Business at Duke. His research interests are in the area of health regulation and state health policy, with a focus on issues related to health care for the medically indigent (including the uninsured), and estimating the magnitude of the social burden of illness. He is the recent author of The American Health Economy Illustrated and is a Forbes contributor at The Health Policy Skeptic.


    Follow Chris Conover on Twitter.

  • Phone: (919)428.4676
    Email: chris.conover@duke.edu

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