Insurance Lackeys Harry & Louise

The king has been brought to his knees. General Motors is officially bankrupt. Hindsight is 20/20.

So far this has been a year of hand-wringing among economic pontificators who have variously proclaimed that the wreckage around us proves capitalism’s fatal flaws or it’s remarkable resilience. What is not often discussed is the way capitalism — true, pure capitalism — is colored by conservative ideology. GM is a case in point.

When General Motors and the United Auto Workers (as well as the rest of the auto industry at the time) entered into a practical bargain in which the company paid for retirement and health care (including for retirees) almost sixty years ago no one predicted it would prove the undoing of both. But it essentially has.

What seemed like a perfectly reasonable deal in the salad days of American automobile dominance slowly but surely became an albatross. Over time GM became a health insurance company that also happened to build cars (which became pretty apparent to anyone with a ’75 Vega) — by last year GM supported 344,000 retirees with their contractually agreed upon health insurance. In contrast GM employed just 61,000 hourly workers.

None of this came as a surprise to the companies. They saw the storm coming for decades but generally tried to force the union to accept all the changes required to keep the business viable. There was always another way.

National health insurance was first part of a Presidential platform in 1912 but it wasn’t  until the depths of the Great Depression that Franklin Delano Roosevelt rolled out an actual plan — a plan that died a quick death in the face of uniform opposition from the medical community. And so it was for the next 50 years. Doctors were the ones who argued against “socialized medicine” even as the rest of the industrialized world instituted various programs to publicly fund health care.

But for car companies “socialized medicine” would actually be great for their businesses.

How do deal with the ticking timebomb of retiree health care? The answer was obvious from both an economic and a competitive standpoint: Push the costs of health care, at least, onto the government and taxpayers. That would have been the smart business and the truest capitalist move where survival of the fittest, winning at all costs, and the triumph of competition is given great lip service if nothing else.

It was patently clear from the mid-80s on (and certainly much earlier to the actuaries GM, Ford, and Chrysler employed) that their deal with the UAW was unsustainable. There businesses would be wrecked. And the captains of industry in Detroit were not alone. These staggering legacy costs had helped nearly ruin the steel industry a decade earlier. Rapidly escalating health costs were fast becoming a seminal political issue as well and would soon play a big part in the election of Bill Clinton.

So when Clinton began devising a health plan that would, however flawed, give the auto industry cover for shifting the burden of health coverage to Washington, you’d think these brilliant leaders would seize the moment and save their companies. And they did. Sort of.

The chairman of Ford Harold Poling led the charge at the start of Clinton’s first term coming out in favor of full-on national health insurance as detailed in Nicholas Laham’s book “Lost Cause.”

Poling warned Clinton that rising health care costs posed a grave financial and competitive threat to Ford. He noted that America’s three major international competitors in the automobile industry — Germany, Japan, and Canada — had substantially lower health care costs than the United States. Because they pay less for health care…the Japanese, German, and Canadian auto industries are able to sell their cars at a lower cost than their American counterparts, providing the three industrial nations with a substantial competitive advantage over the U.S. in the international market.

Poling concluded his presentation by urging…that health care reform was required, not just to guarantee all Americans health security, but to maintain American’s competitiveness in the global marketplace.

Hmm. That sounds awfully familiar. Sort of like exactly what’s happened.

So why didn’t America join the rest of the Western world in 1993-94? Because the auto execs were pretty much alone in corporate suites in their support of a national health insurance plan. The Big 3 chiefs said all the right things but seemed conditionally incapable of working the message with their corporate colleagues. Big business outside Detroit was universally opposed. Despite the massive numbers of workers in affiliated industries we’ve been hearing about lately there was virtually no support for the Clinton plan in the business world. And so the insurance industry funded Harry and Louise and the rest it history.

Now many more corporate executives are facing what the car biz faced 15 years ago and so now the logic of national health care seems more solid to them. Business support is much stronger this time around. But it’s too late to save GM and Chrysler and all those workers.

So here’s a proposal: Let’s have the health insurance industry fund the next $30 billion being poured into GM. Maybe they could get Harry and Louise to deliver the check in person. It’s the least they could do.