I wrote the following critique in February 2012 which I planned to publish on either a collaborative libertarian website or my own blog. Unfortunately, the document was “swept” into a random folder on an old computer, and neither ever occured… until now.
As a “Christian” living within the “Christian Church”, it’s apparent to me that there has been a growing divide, similar to how the Old and New Mennonite Churches split decades ago. That is, the Old seems to be set on fundamentalist ideas of rigid doctrine, working for salvation, and “getting saved”; while the New seems to be more focused on showing God’s love through social and community settings, ie, providing for the poor through state-sanctioned welfare programs. This is not unlike the aged-old divide in the American political spectrum of Right versus Left. Indeed, many in the Old camp claim to be Republicans just as many in the New camp claim to be Democrats. A quick read of Murray Rothbard’s 1965 essay entitled “Left and Right: The Prospects for Liberty” would seem to shed a new perspective on this political dichotomy.
In this light, let’s turn our attention to an application of this New mentality. I’ve recently finished Shane Claiborne’s 2006 book “The Irresistible Revolution”. Those not familiar with Claiborne should refer to his Philadelphia-based organization The Simple Way, which, according to their website, “is a web of subversive friends, conspiring to spread the vision of ‘Loving God, Loving People, and Following Jesus’ in our neighborhoods and in our world.” In addition to this, Simple Way has led many protests, activist campaigns, and community organizing in impoverished sections of urban Philly. As an example, they organized a successful campaign against gun shop owners in the city who were knowingly and illegally (according to federal mandates) selling handguns to drug dealers intent on using the weapons for violent purposes (a goal that I both admire and applaud because of their desire to do so through voluntary means and outside the confines of state power).
In his book, Claiborne breaks up his theology and application of it in his life into easy to digest chapters focused on singular aspects such as church transformation, Christian attitude adjustment, Christian outlook, theological misunderstanding, economics, etc. It is the chapter on economics (Economics of Rebirth, page 155) that I’d like to take a deeper look at; specifically the subsection “Whispers of Another Economy” on page 178.
Coming off the previous section, this subchapter starts by making a call for “radical interdependence”. Claiborne stresses throughout the entire chapter that Christians need to be willing to sacrifice (a form of fasting) their own personal desires in order to clothe, feed, and generally support the impoverished souls of the world, or at least the ones they encounter on a daily basis. In Whispers of Another Economy, Claiborne delves right into how he sees this “radical interdependence” play out, and, indeed, how he partakes of it himself:
“In our community, one quiestion we continually revisit is health insurance. Many of us feel uneasy living without it, especially as we have kids entering our communal life. And yet it is dificult to use that privilege when many of our neighbors go without health care. It conflicts my spirit to take assistance from the government when I believe it is the primary responsibility of the new community to care for one another. A few years ago, I came across a collective of thousands of Christians who pool their money each month in order to cover one another’s medical bills. This feels much more in harmony with the spirit of the early church, the sense of being a big family with a parent with a big wallet. So I am now a part of that community, and each month I get a letter telling me who’s in the hospital, where my money is going, and how to pray for my sisters and brothers. Over and over, I have seen the divine multiplication meeting people’s needs. And a few years back, I had an accident and racked up a $10,000 medical bill. I brought that need before the community and it was met in full.”
Now, I must say that I am in favor of efforts by individuals to voluntarily “fast” from what they might consider “over-consumption” or “greed” or “unnecessary wealth” and instead re-allocate their abundance to those that may be in more need of them. Although some in the Austrian camp have stressed recently the importance of charging prices, one must not forget that value is subjective. And because of this there may be times that those in possession of goods or services find it more valuable or meaningful to themselves to see the satisfaction of meeting another’s needs instead of deriving a price from the exchange. Mises talks about this to some extent in Theory and History.
Regardless, that is not my contention. My contention is with the false idea that the way Claiborne and the others in his community-led health insurance venture are conducting business is really any different than some supposedly inferior corporate or “official” health insurance company. This displays not only a clear lack of knowledge of how insurance operates, but also a blind, ignorant perspective on business and capitalism as a whole.
But this is not an uncommon ideology to hold for the New Christian Church. It’s apparent that this group sides very much with the leftist doctrines of redistribution of wealth, but most stop short of calling for state intervention into the matter.
This is what Claiborne and his cohorts in their community insurance plan don’t understand about the health insurance system in America: for the most part, it operates on the exact same principles as their cooperative system. Insurance, as a whole, is a form of risk management that helps to hedge against some sort of loss to one’s property. Participants in the system choose to pool their money together in a form of voluntarily socialized plan that allocates funds to those that need them the most at any given time. Both the health insurance industry and Claiborne’s community initiative are systematically identical.
So, what are the differences? Is one better than the other? Simply: yes.
Firstly, a corporation (large or small; local, regional, or national) operates on a much broader scale and thus has a much larger pool of constituents to draw funds from. Where as Claiborne’s system only touches those in his immediate locale, a corporate insurance company may be able to reach an entire city, state, region, or even a country. Simply put, the larger the pool to draw from, the more people are served and the better off the users of the system are because it mitigates the risk across a broader clientele.
Secondly, an insurance company makes money in two different ways: underwriting premiums, and investments. By underwriting the premiums of the applicant, the insurance company can appropriately apply custom prices per person in the system based on the risk they are bringing into it. The greater the risk being brought in (ie, smoking, heavy drinking, dangerous hobbies, etc), the greater the chances are that a claim needs to be filed. By analyzing what the proper premium a client should be charged based on these factors, the system can better mitigate any claim by that person in the future. In addition to underwriting, instead of just pooling funds from individuals to be used at a later date, an insurance company will take those funds and use them to buy into various investments such as the stock market, mortgages, etc. Claiborne’s model is absent of any sort of calculated premium or alternative income stream to supplement the voluntary funding of the participants. Thus, his model runs the risk of insufficiently covering the people that are buying into his system. There is theoretically a large chance of a substantial claim (more than Claiborne’s $10,000 example) either totally devastating their small scale operation by completely draining their pool of funds, or by exposing the person making the claim to not being covered by their system.
Thirdly, Claiborne’s main critique of the insurance industry is that it’s somehow “evil” for turning a profit off of their customer’s and that by not charging for the services they’re providing, his system is somehow superior. Again, Mises talked extensively about this great fallacy of economics in many of his books: Economic Calculation in the Socialist Commonwealth, The Anti-Capitalistic Mentality, and most of all Profit and Loss. In this last book, Mises utterly destroys the theories of the opponents of the profit/loss system of capitalism. Profit is merely the money brought in that’s above and beyond the costs of production. A loss occurs when the costs of production outweigh the money derived from selling the product. A business that turns a profit is essentially being rewarded for meeting the demands of the consumer appropriately. Each player in the economic transaction makes a subjective value judgment based on unmeasurable, personal factors. For a transaction to be completed, both players involved must value the object or service they’re receiving more than that which they are giving. In this light, we see that participants of the health insurance system that are willing to pay more than it costs the company to provide the service they’re receiving are telling the company that it is meeting their needs. In Claiborne’s model, this does not happen because people merely contribute what they randomly feel like contributing when they feel like contributing it. The same subjective value judgments happen, but the lack of underwriting for the premiums charged (or even the lack of consistent premiums at all) open the system to another theoretical risk for collapse and insolvency.
In the end, the community-operated system Claiborne is putting forth and being apart of is at best a naïve attempt to live outside of the existing insurance system by providing insufficient coverage for those involved; at worst, it’s a con of all partaking of it by convincing them of the “merits” of their system while subjecting them all to huge risks to their lives, both their financial stability and their medical well-being. The fact that a major crisis (or crises) could arise that the system is wholly unprepared and incapable of handling (ie, chemotherapy/surgery for cancer treatments; hundreds of thousands of dollars for a car accident victim that needs multiple in-depth, cutting edge surgeries; a rare, debilitating or lethal disease that needs state of the art treatments to overcome; etc) through its severe lack of structure able to calculate risk and reward factors, lack of diversification of incomes and funding, and extremely small pool from which to draw resources; all these reasons are enough to condemn this well-intentioned model.
To suggest that Christ would be more in favor of adopting an untried, insolvent, and potentially more detrimental system than the one that has existed and (despite state intervention into it) succeeded for the better part of modern civilization merely because he does not wish that those offering the services to millions of people be rewarded monetarily for doing just that is preposterous. The simple fact is that a corporate health insurance model is more adept at serving and providing for the most people. That’s not to say it’s a perfect system. Less government intervention, outside-the-box thinking, and innovative ways of connecting the insured participants with a larger community would do wonders for improving any sort of “Christ-like” model that the Church is looking to propagate. Claiborne is merely ignorantly and self-righteously tooting his own horn for coming up with a model that is wholly not meeting the needs he says it is.