Socialism and Capitalism Can Work Together

A major objection to the Obama's administrations public option in the health care reform debate is that a public option is socialized medicine and will take the US down the road to a socialist society similar to the former Soviet Union.

Socialism by definition is the ownership and administration of a business activity. Socialism is not necessarily something to be feared and the US currently has a significant part of its economy operating under socialism. Most of our roads, our military, most of our schools, the weather service, etc. are socialized in that they are owned and operated by the government. Capitalism even requires that some services be provided as socialized services. The economist F. A. Hayek who is a champion of capitalism and is frequently quoted by conservative commentators such as Larry Kudlow said that in cases where restrictions and regulations apply to all, capitalism does not argue against central control such as in the areas of food safety or working hours and that capitalism is not incompatible with the provision of social services. In general, Hayek says that legitimate areas of state control are where the payment of a price is ineffective such as most roads or where the cost of harmful effects of competition can not be confined to the owner that state regulation is required. Hayek specifically makes the case that the state is responsible for developing regulations that limit the negative impact of pollution and deforestation.

The public option being discussed by the Obama administration would not be a business owned or operated by the government and therefor would not be socialist. Britain has socialized medicine in that the hospitals are owned by the government and the doctors are employees of the government. The public option being advocated by the Obama administration would not be socialized medicine in that the doctors, hospitals, pharmacies, etc. would remain private businesses. The public option would pay medical bills for its policyholders with money collected in the form of premiums from its policyholders. The public option would be governed by an independent board of directors working under the same state and federal regulations that private insurers work under and would therefor be similar to the US Post Office (USPS). Like the USPS, the public option would compete for business with privately owned competitors. The only real differences are that like the USPS, a public option would not be operated for profit, would not need to pay some of the money collected in premiums to shareholders, would not use premiums to pay sky high salaries or to fund mergers and acquisitions. Keep in mind that some of the existing private insurers such as Blue Cross are not-for-profit firms owned by their policyholders. Also, it appears that some people who object to the public option do not make a distinction between the terms public option and single payer. Every private health insurer is a single payer mini-system. In the case of my Blue Cross insurance, all of my medical bills (after the considerable calendar year deductible) are paid by Blue Cross.

Although there may be many good arguments against the proposed public option, a claim that the public option is taking us down the road to communism is not a valid argument.