Two important events happened over the past three days. One, Bernie Sanders convincingly won Nevada and is now the Democratic front-runner. (MarketWatch blames the recent plunge of UnitedHealth Group Inc.'s stock on this bit of news.) The other event was the Chinese government's admission that it has no real control of the Coronavirus crisis. The communist party is being tested like never before. Also, the virus has spread to Italy and Iran. The bad news is that the Iranian state may not be equipped to deal with the crisis because it has been starved and starved and starved again by Trump's economic sanctions. The US's exit from Obama's agreement means that Iran is now the big unknown for the Middle East. We will also have to see how Germany's Europe-wide and decade-long austerity program has impaired the Italian government's ability to respond to a major health crisis. With that in mind, think now of what will happen when the virus hits Greece.
On Monday morning the Dow Jones opened by losing more than 1,000 points. Some are saying this has nothing to do with the virus but instead, Bernie Sanders—the market is now waking up to the fact that the person running the White House in under a year may not be friendly to Wall Street. Others say it is the virus, which has hit the factory of the world—China—and the slowdown of this economy will have a big economic impact on the world market. And if the virus spreads to the US, then it is pretty much game over. So, which is it? The socialist or the deadly disease?
JUST IN: The Dow Jones Industrial Average plummeted more than 900 points on Monday as the number of coronavirus infections around the world have surged. https://t.co/zhbuVYhHEY
— ABC News Politics (@ABCPolitics) February 24, 2020
Or the other:
Or both? If this is where your thinking presently stands on the matter (Sanders or virus), then you will miss the interpretative power of connecting Sanders crashing UnitedHealth Group Inc.'s stock and the market's obvious panic about the escalating globalization of the virus. When this connection is made, then we are faced with something that mainstream economics cannot provide an explanation for: Why are markets so concerned about public health?
If one was to look at the US health system over the past 10 years, you find every effort to improve public health attacked by very powerful forces within the market. Obamacare, universal healthcare, single-payer schemes—all would improve public health outcomes, and yet, we have a whole party devoted to a program that leaves millions uninsured and those who are insured, exposed to medical expenses that can completely wipe out their wealth. None of this sounds like it is the best approach to properly managing the health of a large population. But if the Dow Jones is crashing because governments are failing to contain the coronavirus, this means the markets connect their well-being with the well-being of the population. Now, how can we make sense of this?
Firstly, the economic thinking that has dominated government policy over the past 30 years, called neo-neoclassical by Joan Robinson (but can also be called, less awkwardly, neoliberalism), has nothing to offer in the way of an answer to the present state of things. For it, everything is working just fine, and what's needed is to follow the logic of the market on its terms to the very end, which basically comes down to the public waiting for a solution to the crisis to pop out of the free play of forces within the market. The class of economists known as neo-Keynesians (the mainstream left—for example, Paul Krugman), would read the crisis—which has exposed a split between what markets want (no universal healthcare of anything like increased government control of the health system), and what markets are (dependent on a healthy population)—as a market flaw.
But neo-Keynesians do not examine the exact nature of this failure. What exactly has caused it? Here, you have to turn to a form of economic thinking that is not even taken seriously by academic economists, Marxism. What this school will point out is that the entire body of capitalism is racked with contradictions, and this is just one of them: markets want healthcare to be privatized, and yet, the best outcomes for the market would be the socialization of public health. Marxists began classifying these contradictions back in the 19th century, believing their unchecked accumulation would eventually implode the whole system. (This is known as scientific socialism.) But the death of capitalism by contradictions did not happen as predicted, mostly thanks to the influence of the British economist John Maynard Keynes. He recognized that the contradictions (such as high unemployment despite a demand for goods, and the capacity to produce these goods unused) needed state solutions. He won that round, and after World War II, capitalist states began socializing large sections of their economies.
But this was only a partial solution. For example, overcoming one contradiction by, say, universalizing health services, did not bring an end to other contradictions. For example, Canada has universal healthcare, but another area of its economy is stuck in the contradiction of homelessness amidst empty luxury apartments and condominiums.
The development CEOs would have you think that Vancouver's real estate problem is lack of houses... 🤔
You could give 10 houses to each homeless person in Vancouver and still have thousands of empty houses to spare.#vanpoli pic.twitter.com/5lPaeMzlEL
— Gil Henriques 🌹🍉 (he/him/his) (@_Gil_Henriques) March 1, 2018
And so Sanders' rise is hurting the market value of a health insurance corporation. The fear is that he will precisely eliminate one of the many contradictions of the market. We also have Trump worried about how the virus crisis will harm his reelection bid (for him it's a real threat), yet he has done everything in his power to deprive ordinary Americans of even the most basic forms of healthcare certainty. Even in Seattle, we have a health service corporation, Swedish, that's doing all it can to protect its profits from the wage demands of its employees. At this moment, American voters need to see that the last thing they need is a public health crisis in an economic, political, cultural environment dominated by a few insatiable profit-seekers.
A last note: The market rewarded UnitedHealth Group Inc. when Sanders defeated Warren in New Hampshire—Warren was perceived as the real threat—but punished the company when Sanders's huge victory in Nevada made it clear that he was very popular and very electable. How this miscalculation of Sanders's candidacy occurred can be attributed to an economic policy that is content-less in two ways: one, managing financial markets by interest rates; and, two, by focusing on employment numbers. The latter only looks at jobs but not at what jobs are paying or how people are making ends meet.