Return of the State, Bankruptcy of Gig Economy and Questioning Milton Friedman Heritage.

Return of the State, Bankruptcy of Gig Economy and Questioning Milton Friedman Heritage.

A new analysis from U.S. federal government actuaries say that Americans spent $3.65 trillion on health care in 2018, according to a report from Axios. The amount is larger than the GDPs of such countries as Brazil, the U.K., Mexico, Spain, and Canada.

Suddenly, the poor little private industry, the hope and proud of the people, has difficulties in dealing with pandemics and asks for the support from the Government. The coronavirus stimulus package Congress rushed out in March to help the nation’s hospitals and health care networks hands the industry billions of dollars in windfall subsidies and other spending that has little to do with defeating the COVID-19 pandemic.

The $2 trillion legislation, which President Donald Trump signed, includes more than $100 billion in emergency funds to compensate hospitals and other health care providers for lost revenue and other costs associated with COVID-19. The measure also calls for spending up to $16 billion to replenish the nation’s depleted stockpile of medical gear, such as ventilators, medicines and personal protective equipment.

But health care businesses will get billions of dollars in additional funding not directly related to the pandemic, in some cases because Congress agreed to reverse scheduled cuts in the rates paid by Medicaid and Medicare, which the federal government had tried for years to impose.

The gig economy leaders do not ask for subsidies. They simply do not care. And why should they? The whole concept of independent contracting is based on simple formula: “No matter what, no job — n pay”. The things like employment benefits or emergency support has never been promised. What has been promised to the happy independent contractors was freedom to choose their own work schedules and fun to drive. The beauty of the proposal was so properly presented, that gig-economy masters managed even to organize some of them to oppose the state legislation like AB5 of California which obliged the masters to treat their “contractors” as employees. States of New York and California had evaluated the multiple systemic risks of the model right when they introduced the according laws. But the gig companies are currently contesting the Laws in the courts. (Which looks like quite a dissonance taking into account that all the gig companies gladly accepted the honorable heroic laurels of the “employers” — even enthusiastic “employers of the future” — several years ago when their now independent contractors were included into national labor statistics, thus pulling the figures of employment steadily up).

Suddenly, the freedom does not seem so happy to the independent contractors. Why?

Because people do not ride much these days. So, not much of a job. So, not much of a pay. So, factually unemployment.

On April 07, 2020 California policymakers approved all unemployed Californians to receive the extra $600 per week as unemployment benefits, part of the federal CARE Act economic package.

Naturally, except for “independent contractors”, or rather to say misclassified workers, like Lyft and Uber drivers. The way the policy is written creates a barrier for drivers — saying only if they have been certified for at least a $1 or more unemployment benefit are they eligible.

Lyft and Uber have defied the California law that requires them to report payroll data to the state, which has held up drivers’ benefits being determined. So while thousands of drivers have been certified to receive unemployment, their benefit is as of yet undetermined until our incomes can be verified. Their current benefit is defined as “$0”.

Because Lyft and Uber are continuing to disobey the state laws like Californian AB5 that qualifies their drivers for regular unemployment, while all the other people certified to receive unemployment benefits will get a $600 weekly increase in their unemployment benefits, gig drivers and other misclassified workers will receive none.

Milton Friedman talking about the need to move to a classically liberal society, that free markets would help nations and individuals in the long-run and fix the efficiency problems was a good talk to win the Cold War. In practice, the talk had not been not put into life ever until the war was won, for there was no way to win it this way. However, at the end of 1990-ies the absence of other theme on agenda gave leeway to experiment with the unleashing of the invisible hand of the market, a mythical concept borrowed from heavily misinterpreted Adam Smith’s “An Inquiry into the Nature and Causes of the Wealth of Nations” which was abusively read in desolation from his more fundamental “The Theory of Moral Sentiments”.

We had 2008 meltdown as a result. Suddenly, the Government had to save the day, by which were meant those enlightened who caused the problem in the first place. Suddenly, the big financial businesses were seeing the strong Government as integral and desirable part of the market.

Suddenly, now the individuals, small and medium businesses, and large industries like healthcare do again see the Government as a friend and savior. The friend in need, is a friend indeed.

What shall we expect as a major consequence of the pandemics:

  • the rise of the reputation of a state and a Government;
  • the renaissance of the domestic re-industrialization, out of the necessity;
  • total discrediting of gig economy;
  • social distancing of the national states, except for regional agglomerations.

Is it good? Generally, on the background of the tremendous massive of the accumulated mistakes and deficiencies, it is rather good chance to make the things right. After all, over the last couple of decades or so, iconic “1984” and “Animal Farm” started to seem less like about the Government, but more about the large corporations. Less about the nation-state, more about the certain state of mind independent of the political order.

Friedman’s libertarian stance is that government should stay out of matters that do not need and should only involve itself when absolutely necessary for the survival of its people and the country. He recounts how the best of a country’s abilities come from its free markets while its failures come from government intervention. It is worthwhile to mention in this regard, that Friedman was initially unable to find academic employment during the years of the Great Depression which was caused by the Government’s hand-off laissez faire policy, so in 1935 he followed his friend W. Allen Wallis to Washington, D.C., where Franklin D. Roosevelt’s New Deal was “a lifesaver” for him, as for many young economists. Surely, in Milton Friedman’s world view that was a matter absolutely necessary for the survival of the people and of the country, quite in line with rugged individualism Mr. Friedman preached. By Michael Klimusha, April 13, 2020.



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