Government 1B: Lesson 35
It is no secret that WWI & WWII changed the lives of millions and generations to follow. Not only were countless lives lost, but every sphere of life was dramatically affected and permanently changed. The rights of the individual and the family was diminished and continues to diminish to this day, while the State grows and infringes upon the rights of the church, family, and individual. Time change, passports, federal income tax, and the espionage and sedition acts are just a few results of WWI & WWII, as well as the invention of healthcare insurance. It marks the beginning of the rise of costs of medical care.
During WWII, businesses were not allowed to raise wages to attract employees. With the government pulling 22% of the labour force into the armed forces, businesses had to find a way to attract the remaining men and women to come and work without raising wages. The solution became employer-supplied medical insurance, which was not considered a wage increase and was also not subject to taxation. A brilliant solution.
By the end of the war, people had grown accustomed to all their medical expenses being taken care of and labour unions made employer-financed medical insurance part of their contract demands. With all the people returning from war and finding new jobs, non-union employers became compelled to also provide medical insurance to attract employees and avoid unionization. By 1960 the government covered 21% of medical expenditures with consumers bearing 55%. Those numbers rose to 43% covered medical expenditures with consumers bearing only 17% by 2000. With people less concerned about the price of medical procedures they stopped “shopping” for healthcare and prices began to rise. Doctors and hospitals could now raise their prices without fear of losing patients. Fast forward to the Obama plan introduced in the U.S. This plan allows uninsured individuals and small businesses to buy insurance, all routine health expenses are covered, there are no lifetime limits, and it covers children of the insured until the age of 26. In other words, there’s no need to worry about anything, the government has got you covered.
If governments were to look at what was unseen (the evermore increasing medical expenses) instead of what is seen ( free healthcare for all), there wouldn’t be a need to constantly find artificial ways to lower the costs of healthcare and fix the economy. It’s the broken window fallacy all over again.
Let’s look at one more example of what is seen and what is not seen relating to WWII.
“World War II was a time of great prosperity in the United States.” This is a common statement that economists throw around and is largely believed to be true. The idea that war stimulates the economy should be understood to be false by everyone, else why not go to war all the time? The Great Depression was a time of extreme unemployment, and economists credit WWII with pulling the U.S. out of the depression and decreasing unemployment rates. Yes, that’s true on the surface. But where did the unemployed go? The government pulled 22% of the prewar labour force into the armed forces and 40% of the labour force was not producing consumer goods but were employed in the military industry. That is not stimulating the economy, that is stimulating the military and weapons economy. 60% of the population now has to produce consumer goods for themselves and has to pay for what the 40% does not produce. Fewer consumer goods and less money do not equal prosperity. While the statistics from 1941 – 43 appear to show an economic boom with an annual growth rate of 20% it is utterly useless to use these national income figures during WWII when those are skewed wartime numbers. National income figures only make sense when real prices are being used. Just as the prices of government-insured healthcare are arbitrary, prices for consumer goods were capped or artificially bought by the government, and any national numbers were also arbitrary. They had no foundation in consumer choice because the U.S. during the war was not a free economy.
In conclusion, the effects of WWI & WWII still affect us today and forever changed the way the economy is managed. Looking back on the war with rose-coloured glasses does not help and it is foolish to use wartime statistics and figures as a model for today’s economy.