The Pandemic Has Exposed the Free Market’s Fundamental Flaws. We Need a Democratically Planned Economy.
As COVID-19 cases skyrocket again, hospitals remain understaffed and PPE and ventilators are still in short supply. We can’t leave people’s basic needs up to the whims of profit-seeking actors — we need democratic planning.
One April morning at 4 AM, the chief physician at Baystate Health in Massachusetts left his house and traveled to a warehouse outside the state to receive a shipment of masks and gowns from China. Two FBI agents interceded. They approached him and threatened to confiscate the shipment on behalf of the federal government, only relenting when the doctor called his congressman. Still fearing that the goods would be intercepted by another state, the physician divided the shipment into two trucks, with the hope that at least some of the goods would reach Massachusetts.
Meanwhile, halfway across the country, state officials in Illinois wrote a shot-in-the-dark email to a thousand small businesses (most of which had nothing to do with health care) requesting help gathering personal protective equipment (PPE). The email was answered by someone who operated a moving business, who happened to “know a guy” in China, and who was able to cobble together enough contracts, one assembly line at a time across many factories, to produce 1.5 million masks.
In the end, the state comptroller drove a check for $3 million a couple hundred miles away to meet the guy who knew a guy at a McDonald’s parking lot. They had to act fast: the state of Louisiana had already offered $2 million more for the masks. And Illinois had previously lost a contract for three hundred ventilators overnight when New York State went directly to the supplier and purchased the ventilators at double the price.
A global pandemic mismanaged by a psychopath in the White House set the stage for this disastrous state of affairs. As the crisis hit its spring peak, instead of centralizing the procurement and distribution of medical gear and devices, President Trump gave state governors this helpful advice: “for respirators, ventilators, all of the equipment — try getting it yourselves.”
But while many mainstream analysts have rightly criticized the administration’s criminal response, few have questioned the profit-seeking that caused mask prices to sextuple and gave the highest bidder rights to secure the lifesaving deals. The harsh reality is that the market has functioned exactly as it is set up to do.
Corporate Globalization Coming Home to Roost
Eight months into the pandemic, frontline workers are still not getting the protective equipment they need. According to a report by National Nurses United, 87 percent of nurses have had to reuse PPE at some point, and 27 percent reported that staffing at their hospital declined in recent months.
One nurse wrote to Salon: “I’m so disappointed in our lack of preparation as a country for a pandemic . . . N95s [masks] quickly became sparse and we were forced to reuse them for days, basically until [they] broke, when they are intended per the manufacturer to be single/ one time use. We had to put them in a brown paper bag in between uses.”
Many commentators have chalked this up to a regrettable failure in global supply chains in amassing PPE and ventilators. In fact, we are seeing decades of corporate globalization coming home to roost. As corporations offshored manufacturing — chasing cheap labor across the globe — downsizing, lean inventories, and just-in-time production arrived at home.
In an article titled, “Why Are There Still Not Enough Paper Towels?” the Wall Street Journal answered its own question:
The scarcity is rooted in a decades-long quest by businesses at all levels, handling many different products, to eke out more profit by operating with almost no slack. Make only what you can sell quickly. Order only enough materials to keep production lines going. Have only enough railcars for a day’s worth of output. Stock only enough items on a shelf to last till the next batch arrives. The concept, known as lean manufacturing or just-in-time inventory, was born in the hyperefficient Japanese automotive industry in the 1970s and became a religion for many American CEOs. It spread first to Detroit, then to other U.S. manufacturers and finally to other industries, from distribution to retailing.
While US manufacturing represented 28 percent of domestic output of GDP at the end of the 1950s, that figure is just 11 percent today. A full 85 percent of mask production capacity is in China, and ventilators are produced from parts sourced from across the globe.
Experts in the field have long warned that investor rewards for lean production are inimical to public health needs. A paper published in Health Security raised the alarm in 2017:
Like most goods in the United States, the PPE market supply is based on demand. The US PPE supply chain has minimal ability to rapidly surge production, resulting in challenges to meeting large unexpected increases in demand that might occur during a public health emergency. Additionally, a significant proportion of the supply chain is produced offshore and might not be available to the US market during an emergency because of export restrictions or nationalization of manufacturing facilities.
During previous crises, such as the 2009 H1N1 influenza pandemic, supply chains buckled under far lesser pressure than what we face now.
For hospitals, lean manufacturing means lean staffing. Labor, Russell Gold and Melanie Evans report in the Wall Street Journal, “is typically the largest expense at any hospital, and nurses make up 42.7% of hospital payrolls, according to federal labor department data.”
Just as production of PPE and medical equipment has suffered from lean supplies, so too have hospital’s staffing levels. While states engaged in bidding wars for masks and ventilators, hospitals did the same for nurses on short-term contracts, often recruiting workers from other hospitals.
The Wall Street Journal article goes on to explain: “Hospitals by design were supposed to be lean and efficient, pushed that way by the market and government policies. But that left the U.S. dangerously unprepared.” Driven by shareholders to boost revenue, hospitals cut labor costs and shifted resources away from emergency room intakes toward lucrative surgical procedures. The result: fewer hospitals, and less intensive care capacity. Since 1975, the number of hospitals has dropped 12 percent, despite an increase in the population of about 50 percent.
In New York City, the systematic dismantling of the public hospitals system shattered the city’s ability to manage the crisis. A city that lost over a dozen hospitals in as many years has now lost more than one out of every four hundred of its residents to COVID-19.
Today, the majority of the city’s hospital beds are in the well-endowed private hospitals, mostly located in Manhattan and catering to a richer, whiter clientele. These hospitals enjoy comfortable revenues from their patients’ fees — most are covered by Medicare or private insurance. Meanwhile, the public hospitals, which rely on shrinking Medicaid payments and serve patients who are largely uninsured, have been left to languish.
Manhattan boasts five hospital beds for every one thousand residents, while in Queens (one of the hardest-hit counties in the nation), there are only 1.8 beds per one thousand residents, in Brooklyn 2.2, and in the Bronx, 2.4. Not surprisingly, these numbers correlate strongly with race and class demographics. The majority of Manhattan residents are white, and the majority of Queens, Bronx, and Brooklyn residents are nonwhite. The median income in the Bronx is $38,000, compared to $82,000 in Manhattan.
What this has meant in practice, the New York Times reported this summer, is that patients at some public community hospitals were three times more likely to die from COVID-19 than those in the wealthiest parts of the city. At the public hospitals, patients were left unattended in understaffed wards. Some died simply because no one was around to help them get to the bathroom, and they eventually removed their own oxygen masks. Staff had to rely on old, ineffective ventilators and had no access to dialysis machines or experimental drugs. The facilities didn’t have enough staff to turn patients on their stomachs, a basic strategy to help patients breathe. Doctors and nurses were worked to a total breaking point.
Meanwhile, at Manhattan’s upper-crust hospitals across the river, self-turning beds, heart-lung bypass machines, and specialized drugs led to very different outcomes. And when the president himself was diagnosed with COVID-19, no expense was spared for his state-of-the-art treatment. Most estimates of the cost have run from hundreds of thousands of dollars to over a million.
We Need a Planned Economy
We live in a society where every decision — whether by individual corporate heads or by governments dependent on corporate revenue — is circumscribed by the short-term drive for profits. This seems so natural that it barely registers during “normal” times. But during a pandemic, its barbarity is made plain.
As John Hick, medical director at Hennepin Healthcare explained to the Wall Street Journal, “You’re looking at a private-sector entity that suddenly has to take on the world’s largest public-sector response. They’re not prepared for it because there’s no incentive to do that.”
Lisa, a nurse in Alameda, California, who recently struck over staffing and patient safety, told Salon:
We just can’t give the care you need because of this corporate drive to save money. We’re at existential odds with one another on a daily basis. And we need to burn the system down and we need Medicare for All. End of story. End of story. Our medical-industrial complex is broken and ineffective and absurd.
And homicidal. As death tolls mounted in the spring and refrigerated trucks sat outside hospitals collecting bodies, the market proved what it really does best: foster competition and profiteering, no matter the human cost.
Mainstream economics encourages unshakeable confidence in what Adam Smith famously dubbed the “invisible hand” of the market to efficiently provide the things that society needs. Yet Adar Poonawalla, chief executive of the world’s largest vaccine manufacturer, recently estimated that it will take at least until the end of 2024 to produce enough vaccines to inoculate the world’s population. There simply aren’t enough resources being devoted to ramp up production more quickly.
In the short and medium term, we need to struggle forcefully for an economic and health agenda that includes Medicare for All, massive funding for public hospitals, a jobs program centered on community health, restrictions on patent laws for vaccine production and distribution, and the use of the Defense Production Act to marshal the resources of US manufacturers and boost medical equipment production.
In the long term, we need to conceive of a society organized along different lines altogether. One in which the development of cures and vaccines is properly resourced despite the greater profits attached to continuous medication for chronic diseases. Where instead of competition between developers, scientists begging for money, and bidding wars among countries, we tackle an international crisis with international collaboration. Where the state, rather than private capital, is the superintendent of our health care systems. Where production and distribution of lifesaving goods are democratically planned rather than left to the vagaries of the market.
Conceiving of such a society necessarily entails challenging the market imperative, particularly in those areas of society — like health care — that provide vital services. The pharmaceutical industry should be socialized, and private hospitals should come under public ownership.
More broadly, we need a democratically run economy to steer production and technological development toward improving the quality of life for the vast majority of humanity. If we are to replace short-term profits for the few with human needs for the many as the driver of decision-making, then we need a democratic state to carry out such an agenda. The state, rather than the market, would shepherd innovations in health care and other technology. Resources for research into more efficient and sustainable production methods would be systematized. Allocation of resources in society would be organized by a nationalized financial sector.
As Leigh Phillips and Michal Rozworski have argued:
[I]f something is profitable, no matter how harmful, it will continue to be produced in the absence of nonmarket intervention, i.e., planning. Likewise, if something is unprofitable, no matter how beneficial, it will not be produced, again in the absence of planning.
The details of exactly how a planned economy would come about are debatable, and creating a society where state institutions are responsive to the needs of the vast majority rather than to a corporate elite will require a tremendous, long-haul struggle. But it’s clear that the market must be taken out of the equation in life-or-death matters and that a broader vision for what replaces the market is desperately needed. The discussion, as Phillips and Rozworksi put it, should be “what sort of planning instead of whether planning.” There is a future for humanity in democratic control, where the market has only dealt out death.