Want an America That Works? Innovate, Don't Regulate

By Jonah Goldberg

Wednesday, February 26, 2014

Down with stakeholders.

The American Academy of Pediatrics has come out against affordable health care for kids. Retail medical clinics -- at drugstores, Walmarts, etc. -- are cropping up across the nation, thanks in part to the expected longer waiting times and out-of-pocket expenses stemming from Obamacare. And the pediatricians don't like it. "While retail clinics may be more convenient and less costly, the AAP said they are detrimental to the concept of a 'medical home,' where patients have a personal physician who knows them well and coordinates all their care," reported the Wall Street Journal. You say "medical home," I say locked-in customers. Tomayto-tomahto.

The pediatricians have a point, albeit a weak one. You can't say the same about teachers unions, whose top priorities are to take care of their members, even when such care comes at the expense of students. In New York City, the passion from teachers unions is all aimed at pay raises, killing charter schools and keeping rules that make it harder to get rid of incompetents, criminals and even, occasionally, sexual predators.

In Michigan, until reforms from Republican leaders kicked in, the Service Employees International Union, with the help of state Democrats, claimed parents of disabled kids were "union members" just so the union could skim "dues" from Medicaid payments to parents who served as their kids' health-care providers.

I cite these examples because they involve children, the constituency everyone claims should come first. But this dynamic is endemic to society. The sugar lobby bilks taxpayers to subsidize an industry that shouldn't exist in the United States. The life insurance industry lobbies to keep inheritance taxes because, after all, people buy their products to avoid such taxes. The health insurance industry remains bought-in, literally and figuratively, to Obamacare because the prospect of becoming the equivalent of guaranteed-profitable utilities is worth the headaches of government incompetence.

When I say that this dynamic is endemic to society, I do not mean endemic under President Obama, or under America or under capitalism. It is a natural human tendency. The augurs of ancient Rome fought any attempt to break their monopoly on divine prophecy by studying the flights and entrails of birds. The Luddites declared war on the machines, long before anyone had heard of Skynet, because the Luddites were market incumbents being ousted by new, and better, technology. Taxi drivers are trying to use the law to fend off companies like Uber. Every occupational group that pushes for the licensing or regulating of its industry does it, at least in part, to keep competition out.

The standard left-wing complaint is to blame only big business and capitalism. But if you don't think that exact sort of thing happens under socialist and communist systems, you don't know anything about those systems.

Despite a century of anti-corporate rhetoric about the power of corporations, they actually come and go with amazing rapidity (Only 13 percent of firms on the Fortune 500 list in 1955 were there in 2011).

But government is forever. The state has the unique ability to protect existing "stakeholders" from the threats posed by innovation and competition, whether those stakeholders are businesses or unions, fat cats or philanthropies. That's where the votes are and where the checks comes from.

But progress -- material, medical, economic -- comes from innovation. Economist Deirdre McCloskey notes that until the 19th century, innovation was a negative word because innovators upset the established order and the powers that be.

In her wonderful book "Bourgeois Dignity: Why Economics Can't Explain the Modern World," McCloskey describes how for all of human history, humans lived on about $3 a day, using today's dollars. For 200,000 years, the line was essentially flat until around 1800, when a culture that valued innovation spread from England to Europe and the New World. Since then, wealth has skyrocketed, all thanks to a culture willing to let innovators pull up the stakes of the existing stakeholders.

In Silicon Valley, where government's touch is light, we can see the rapidity of innovation at work. In health care, education and other areas where the government's hand is heavy, we see stakeholders holding on for dear life.