Tuesday, March 27, 2012

Backyard Steel and the Obamacare Mandate

In 1958, Chairman Mao unveiled his second Five Year Plan for the People's Republic of China. The first Five Year Plan--from 1953 though 1957--was actually quite successful, owing largely to serious capital investment in key industries like coal mining, purchases of heavy equipment from the Soviet Union, and specific help from Soviet specialists.

No doubt, Mao believed such successes could easily be repeated and--with over-brimming confidence--named the second plan the Great Leap Forward. He envisioned improvements across the board for the People's Republic, from agriculture to industry to commerce, while simultaneously moving closer to the communist ideal.

In 1961, the Great Leap Forward came to a premature end. All told, it is estimated that some 20 million people died because of the programs instituted by the Chinese government. Property destruction was immeasurable and entire villages were wiped out, even though the government invested even more capital then in the first Five Year Plan. One of the worst and most destructive programs instituted by Mao was the one to produce steel at a local level.

The idea behind the Backyard Steel program--as it is usually termed--was simple: get the rural peasantry involved in actual steel production for the purposes of making superior tools and equipment. To this end, furnaces were built in villages to produce the steel. To fuel the furnaces, trees were cut down--with no thought to replanting--and when there were no more trees, anything that would burn in the villages was used, including furniture, window frames, and doors. The furnaces were supposed to turn scrap metal--iron, theoretically--into steel, but once there was no more scrap metal to be found (which didn't take long), villagers were forced to use whatever they had as "scrap," in order to meet government quotas for steel production. Thus, into the furnaces went metal tools and implements, pots and pans, and anything else--no matter how useful--made of metal. Oftentimes, villagers who didn't know any better put actual high-quality steel into the furnaces, amazingly enough.

The "steel" that was produced was, of course, nearly unusable as the furnaces didn't generate enough heat and the peasants didn't really know how to make proper steel. And Mao realized this shortly after the program began, but refused to terminate it. Thus, the Chines peasantry destroyed their local environments, their tools, their homes, all of the things they needed to carry on with their lives, in the name of producing nothing. And they spent countless hours in this fruitless effort, neglecting all else. This brief video from PBS tells the story, using actual propaganda film from the People's Republic of China:

Backyard Steel serves as a cautionary tale--as if we really needed one--on the dangers of top-down economic planning. It represents an attempt to dictate the future by government fiat, the idea being that the future economy is easily anticipated and controlled, that individual actions can be directed for a large-scale goal with relative ease.

Which brings us to the mandate in Obamacare, now before the Supreme Court, the stipulation that all citizens must purchase health insurance. As has been well documented, the healthcare industry represents some 20% of the U.S. economy, so this is no small matter. The consequences for wide-ranging legislation in the field loom large, as a matter of course.

The idea behind the mandate is simple: it will enable the funding of healthcare for all, across the board. Those who refuse to obtain insurance will be forced to pay a penalty, which will help fund the measure. To look at it another way, the mandate forces private individuals--people and businesses--to use a portion of their productivity (measured in dollars) in the health insurance market. Not the the healthcare market, the health insurance market. And they must do this even though there may be no return on their productivity investment, even though they may get less back, compared to what they put it.

Like the Chinese peasant sacrificing his useful metal tools for the steel furnace, the individual is asked to pour money into the pockets of an insurance company, with no guarantee that anything usable will result from the action. Good money, useful money, paid to a third party, not for actual healthcare but for the promise of potential help down the road.

And the net transfer of wealth occurring over time will amount to trillions upon trillions of dollars. Much of it will go to administrative costs, much of it will become profits, much of it will be lost to waste. It's one thing to willingly engage in such a transfer, as a means of off-setting future risks; it's quite another thing to be forced into doing it.

The Greap Leap Forward turned out to be a Great Leap Backward, largely because Mao and his cohorts wrongly believed that they had a full understanding of the way all things work, believed that they had an absolute ability to control the future. China paid dearly for their ignorance in this regard. So will we. And the worst of it? The proponents of the mandate are fully aware of this reality but--like Mao--have no interest in admitting that they are wrong.

Cheers, all.

1 comment:

  1. "in the name of producing nothing"

    Perhaps the Chevrolet Volt should have been named Backyard Steel too.

    But our building codes offend in the same manner, by forcing the waste of resources. In our Boone County Government Center there is a glass vestibule with two double doors to the outside. Above each door is a battery powered illuminated exit sign, as required by code - when even Obama would be able to see the outside from there.

    I love to rant about exit signs, and when I get going, the exit lights required just OUTSIDE the building.

    I choose these examples because they are so easily visualized. They are not, er, lonely.

    [ see: Legionnaire's Disease - otherwise known as Tight Building Syndrome. Brought to you by the previous generation of green idealists. ]