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The Fire Brigades of Crassus

August 29, 2009

Marcus Licinius Crassus is a prominent figure in the history of the Roman Republic. Contemporary of Sulla, Cicero, and a little-known character by the name of Julius Caesar, Crassus was the wealthiest man in the Roman world. So wealthy that his vast riches alone earned him a spot on the First Triumvirate alongside Caesar and Pompey, who would later engulf the Republic in civil war over the matter of a salad recipe (I kid…).

Crassus began to amass his fortune in the aftermath of another civil war, when enemies of the state were proscribed, and their property seized and sold at auction. From here he branched out and discovered all sorts of nefarious ways to accumulate wealth.

One such method involved tracking down the owner of a property going up in flames. Arriving on the scene, Crassus would offer said owner a trifling amount for the presumably destroyed property. Once the owner agreed, Crassus would then bring forward his private fire brigade, put out the blaze, and take ownership of the slightly damaged property.

Talk about a dick move.

This predatory practice continued until Augustus rose to power and established a public firefighting force. Fire was a very real threat in the ancient world. It could very easily gut a city. Against that peril, the investment in public firefighting seemed well worthwhile, as it still does to this day.

I bring up Crassus and his fire brigades as a way of maybe shifting the conversation about public versus private enterprises.

Our country is historically suspicious of government-run anything. There is a belief that government programs are inefficient, and that, by virtue of capitalism, matters should be left to the markets and private industry.

In most cases, I agree. When it comes to selling computers and clothing, car insurance and houses, supply, demand and competition tend to make things better for the consumer. If someone gets lazy and starts building crap products, you or I can always go elsewhere. Likewise if someone starts charging too much for too little. This is because the profit a company takes is directly tied to the quality and/or price of their product or service.

But there are sectors where providing a service can have a negative impact on profit, or where profits can be enhanced by unscrupulous means. Crassus’ fire brigades are a prime example, and one reason why private firefighting companies are a very bad idea. I would say the same for law enforcement, the military, and search and rescue operations.

If you thought this would eventually come around to health care, congratulations, have a cookie.

Profit-driven healthcare is, in my opinion, a dangerous thing. It can work to a point, and with proper regulation. For example, the employer mandate stipulates that health care insurers must cover an employees receiving benefits through their employers regardless of pre-existing conditions. They can’t drop them the moment things get hairy.

If you happen to work for a small company, or strike out on your own, that protection is gone. An insurer can refuse to cover a pre-existing condition, or charge a premium so high you can’t afford it, or employ rescission to drop you when you need care the most.

As someone who knows several people who have struck out on their own, and who may do so one day himself, this terrifies me. It is an anchor around the neck of every entrepreneur in this country, an anchor that keeps people working for “the man” and that stifles innovation.

Furthermore, given the perilous state of the economy, this is an issue that concerns each and every one of us. You may get pretty decent benefits through your job today, but what if your employer decides they are no longer worth the expense? Or what if you get laid off, and haven’t found another job by the time your COBRA benefits expire (or can’t afford the COBRA premiums)?

If you want some real-world examples of this kind of stuff, I highly recommend perusing the excellent “View From Your Sickbed” accounts Andrew Sullivan has been collecting and posting. It’s easy to spout platitudes about the uninsured from 40,000 feet, it’s another matter when you see how this system could very easily turn on you, your family, or your friends.

I’m typically not a fan of government intrusion, but in some cases Adam Smith’s invisible hand is not enough to keep private industry honest, and in those instances I DO feel it is the government’s role – as an entity that can act without hyperactive profit motive – to step in and set rules. Or, if need be, enter the fray directly.

And I feel that is the case with health care, which, though we may not often think of it as such, is a very real factor in American competitiveness and, it could be argued, is a matter of national security.

2 Comments leave one →
  1. October 5, 2009 3:55 pm

    Matt, you said “I DO feel it is the government’s role – as an entity that can act without hyperactive profit motive – to step in and set rules. Or, if need be, enter the fray directly.”

    Setting the rules is one thing…. (not a big fan of the governemnt doing that in many instances..but whatever..another discussion.)….

    But entering the fray directly? A government run “option” is anything but “an option”. It would become a virtual requirement. If the governemnt has a vested interest int he outcome AND the ability to set the rules what is the likely result? IF the head coach of the Dallas Cowboys was also the head referee, who do you think wins the football games each week? Do the Redskins have a chance?

    You say the government wouldn’t have a profit motive? I call bullshit. The USA government is flat broke. They are broke for a reason…. bad decisions have lead to more spending than tax income. If all of a sudden they have the ability to compete with insurance companies PLUS have the legislative power to slant the rules in their favor to wint he business of the citizens and restore some money to the coffers wy wouldn’t they do it? Sure they could take that money and waste it wreckelssly again, but the only losers in the deal are the insurance companies they all of a sudden find themselves competing against.

    Given how citizens act in self-interest and are money-crazed, OF COURSE they will “select” this “government option”. The government will become the Wall-Mart of healthcare except with ZERO competition… selling crappy products for a cheap price and with virtually no oversight. Scoff if you will, but this sure sounds socialized to me…and all logic suggests this is the way ti would play out. I am THRILLED the public option is seemingly off of the table

  2. Matt permalink*
    October 11, 2009 8:52 pm

    Sorry, but I’m not buying the head coach/ref analogy.

    The private health insurance situation is more akin to our broadband situation, where you have two, maybe three providers in a given region, and ZERO chance of emerging competition because the existing carriers are so entrenched, and because the barriers to entry are so high.

    Here in Austin, we recently went through a situation where Time Warner Cable was gearing up to imposed tiered pricing – in other words, you go over a certain allotment and you get dinged, bad. They claimed network costs, but if you look at their earnings statements, they’re making a higher profit per user now than they ever have. The move was nothing more and nothing less than a ploy to protect their cable – and particularly video on demand – services by making it cost-prohibitive to buy movies and TV shows from iTunes or stream them via Netflix and Hulu.

    The move was met with fierce backlash. A lot of people dumped Time Warner and moved to AT&T – but AT&T was planning on doing the EXACT SAME THING.

    Time Warner finally backed down. Want to know why? Because the government threatened to get involved. If they’d stuck to their guns, and AT&T had done the same, they could have basically used their combined monopoly position to shut down the nascent digital video industry.

    Now…regarding the public option. I won’t argue the government has zero financial motive. It does. But it’s more nuanced than GOVERNMENT TAKE OVER ALL OF HEALTH CARE. It’s in the government’s interest, and in the public’s interest, for that matter, to rein in rising health care costs, which have basically stagnated wage growth in this country (masked for some time by the credit boom…but not anymore).

    If the government can rein in medical costs, it’ll ease the burden of Medicare, Medicaid, and the VA, which will in turn help with the rising deficit.

    At the same time, it’s in the government’s interest to preserve the health insurance industry. Using the public option as a Trojan Horse to dismantle private insurance would wipe out something like 500,000 jobs in the insurance industry alone (not to mention the collateral damage to retailers and service providers which would lead to additional job loss). Not to mention wipe out a very powerful industry lobby which already has tons of legislators in its pocket. Legislators who would obstruct and fight tooth and nail against anything like that happening.

    The structure of health insurance in this country, which comes mainly through employers, doesn’t foster much in the way of competition. It’s very similar to broadband, where you have a captive audience that basically gets to choose between two bad options. The government, in this case, is the ONLY entity that can introduce competition into the marketplace.

    I’ve been reading lately that there’s growing support for an opt-out public option, which states could vote to back out of if so inclined. Honestly, I think this is the way to go. Some states would go with the public option, and some without, and we could see just how effective it would really be.

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