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The Real Free-Market Approach to Health Care, Part 1


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In his book A Critique of Interventionism , Ludwig von Mises wrote, “Authors of economics books, essays, articles, and political platforms demand interventionist measures before they are taken, but once they have been imposed no one likes them. Then everyone-usually even the authorities responsible for them-call them insufficient and unsatisfactory. Generally the demand then arises for the replacement of unsatisfactory interventions by other, more suitable measures. And once the new demands have been met, the same scenario begins all over again.”

No words could more accurately describe the nature of America’s so-called health-care crisis. After decades of governmental intervention into the health-care arena, the failures are apparent for all to see. But rather than root out the cause of the problem, Americans are demanding that government do something about it.

What are the governmental interventions that have caused America’s health-care crisis? Licensing, Medicare, Medicaid, economic regulation, and income taxation. What is the solution to America’s health-care crisis? The repeal (not the reform) of licensing, Medicare, Medicaid, economic regulation, and income taxation.

What is the response of the average American to such a prescription? “That’s too radical. That’s too extreme. The system needs to be reformed, not abolished. Give us something we can work with.”

And the same is true with many free-market advocates: “You need to modify your views. No one is going to take you seriously. Congress will never invite you to testify. Newspapers won’t accept your editorials. You need to be more practical.”

The denial of reality

Most Americans, including many free-market advocates, simply will not-perhaps cannot-face the truth: that the welfare state (socialism) and the managed economy (interventionism) have never worked and can never work. No matter what is done-no matter who is put in charge-no matter what plan is used-the result will always be the same: failure. The sooner we come to grips with this truth, the sooner we can begin traveling the road to a healthy and prosperous society.

Why do Americans have such a difficult time accepting the reality of their condition? Part of the answer lies in the indoctrination they receive from the time they are in the first grade and that continues even after they graduate from college. The indoctrination is so complete that no matter how carefully you explain the reality of their circumstances, Americans simply refuse to accept it.

Let me give you an example. Ask any American if the United States is a land of free enterprise. He will proudly say, “Of course it is.” Ask him if it has always been so. He will puff out his chest and proclaim, “You bet it has. And free enterprise has prevailed over socialism!”

But then explain to him that during the first 150 years of American history, the American people said “no” to the following: income taxation, welfare, economic regulation, licensing, Medicare, Medicaid, and Social Security. Then remind him that he, along with his fellow Americans, say “yes” to the following: income taxation, welfare, economic regulation, licensing, Medicare, Medicaid, and Social Security. Then ask him, “How can different principles be the same? How can white be black? How can A be B? How can opposites both be free enterprise?”

He will stare at you with befuddlement. For he cannot defend the way he has been taught to view the world since he was six years old. As he tries to reconcile reality with the way in which he has been taught to see the world, ask him, “Do you favor the Cuban way of life-a way of life which has income taxation, welfare, economic regulation, licensing, and free medical care for everyone.” He will not answer, because he cannot answer.

But the problem goes much deeper. Americans do not want to face reality . For the reality is too terrifying for them to consider. It means that everything about America’s “free-enterprise system” that they have learned in school-that they have taught their children-that they have read in books, newspapers, and magazines-is false. To accept reality would constitute an admission that Americans have, for decades, been living a life of the lie. It is much less terrifying for them to continuing living a life of deception.

This is one reason that people resent so deeply the true advocates of economic freedom-we expose their lie. We make them confront the reality and pierce through the deception that clouds their minds. We provide the tough medicine that enables people to see the world for what it is. We “cause” the pain associated with their recovery process.

Why is it so important that we do this? Because we cannot begin solving societal woes until people eliminate the psychological barriers to recognizing the real nature of the problem. If people believe, for example, that America’s health-care crisis is due to a failure of the free market, then their natural inclination is to accept what their public officials say is the cure-governmental intervention. But if they pierce through to the reality of what is happening by recognizing that governmental intervention is the cause of the health-care crisis, they are much more apt to accept real free-market principles as the solution.

Would our fellow Americans be better off if we simply let them continue living their lives of deception? No. A life of a slave is not made better simply because the slave thinks he’s free. Moreover, a life of the lie ultimately manifests itself through severe psychological disorders, which, in turn, often result in an addiction to mind-altering drugs.

Therefore, for us to validate the deception would be morally wrong, for it would only worsen the person’s condition and make it more difficult for him to recover.

The “Free-Market” alternatives

And that is the gravamen of some of the so-called “free-market” solutions to America’s health-care crisis-they mislead people into believing that a reform of the welfare-state, managed-economy way of life (as opposed to its elimination) is a “free-market” approach to the problem.

For example, consider two “free-market” alternatives to the health-care plan proposed by President Clinton-the plans proposed by two conservative think tanks-the Heritage Foundation and the National Center for Policy Analysis.

The Heritage “free-market” plan would mandate, by force of law, that people purchase health-care coverage. In other words, under the principles of “freedom” promoted by Heritage, people would be “free to be forced” to buy health-care coverage.

The NCPA plan is less oppressive. It calls for “medical IRAs,” an income-tax device by which people would be encouraged, by virtue of a tax deduction, to donate money into a savings account that could only be used to cover medical expenses.

What is wrong with these two “free-market” plans? They accept the legitimacy and inevitability of the welfare-state, managed-economy way of life. Even worse, they assume that their plan-the “free-market alternative”-will save the welfare-state, interventionist system and make it work more efficiently. But worst of all, by making people believe that these plans constitute a “free-market alternative,” they validate the life of delusion and unreality that afflict the American people.

Mandated health care and income-tax deductions do not constitute freedom. They may be less intrusive and less oppressive alternatives to President Clinton’s health-care plan, but they are not free-market alternatives.

Mandates and freedom are opposites. If a person is free, then that means he is not mandated to buy anything. If a person is mandated to buy something, then he is not free. Mandates are not a free-market alternative, because mandates violate free-market principles.

Moreover, to be free entails living your life the way you choose (so long as it’s peaceful), to accumulate unlimited amounts of wealth, and to decide for yourself how to spend your own money. If government controls the amount of income a person keeps, then that is the essence of slavery, not freedom. And to the extent that government is able to use such devices as income-tax deductions to manipulate people into buying things that they might not otherwise purchase, to that extent a person cannot be considered free. Consider the words of Friedrich A. Hayek in his book The Constitution of Liberty :

“The question of how many courses of action are open to a person is, of course, very important. But it is a different question from that of how far in acting he can follow his own plans and intentions, to what extent the pattern of his conduct is of his own design, directed toward ends for which he has been persistently striving rather than toward necessities created by others in order to make him do what they want. Whether he is free or not does not depend on the range of choice but on whether he can expect to shape his course of action in accordance with his present intentions, or whether somebody else has power so to manipulate the conditions as to make him act according to that person’s will rather than his own . [Emphasis added.]”

In other words, an individual is considered free only when he can decide for himself how to utilize his own resources. He is not considered free when the state either orders him to spend-or manipulates him into spending-his resources in some state-approved fashion.

Would people be better off under the Heritage or NCPA plans, as compared to the President’s plan? Of course, in the same manner that the slave on the plantation is better off the more choices he is “free” to make on the plantation. But the “freedom” of the slave to make choices does not change the real nature of his condition; it simply makes his slavery less onerous.

The welfare-state, managed-economy way of life is doomed to fail, as central planning and economic control have failed all over the world. Neither the Heritage plan nor the NCPA plan will change this; at best, they can delay the inevitable or make living conditions less onerous in the meantime. But the major drawback to their adoption is this: a few years from now, when the health-care system is in even bigger crisis (which it will be), public officials will make their inevitable proclamation: “We have tried free enterprise, and it has failed; now we must use governmental intervention to fix the problem.”

There is one and only one solution to America’s health-care woes: a total separation of the economy and the state. This involves, first, a recognition that the welfare-state, managed-economy way of life is a cancer that infects our body politic. And, second, a cure that calls, not for Band-Aids but, instead, for radical surgery by which such interventions as income taxation, welfare, licensing, Medicare, Medicaid, and Social Security are eliminated.

Part 1 | Part 2 | Part 3

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    Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.