Deaths of Despair and the Future of Capitalism
On 12 November 2020, the Rafael del Pino Foundation organised the Master Lecture live on the Rafael del Pino Foundation's website. www.frdelpino.es entitled "The Future of Capitalism" given by Anne Case and Angus Deaton on the occasion of their latest work entitled "Deaths of Despair and the Future of Capitalism" published by Deusto.
Anne Case is Alexander Stewart 1886 Professor of Economics and Public Affairs, Emerita at Princeton University, where she directs the Research Program in Development Studies. Professor Case has written extensively on health throughout her life. Among other awards, she has received the Kenneth J. Arrow Prize in Health Economics from the International Health Economics Association for her work on the links between economics and health in childhood, and the Cozzarelli Prize from the National Academy of Sciences for her research on morbidity and mortality in middle age.
Angus Deaton is a senior fellow and Dwight D. Eisenhower professor emeritus of economics and international affairs at the Woodrow Wilson School of Public and International Affairs and the Department of Economics at Princeton University. In 2015 he was awarded the Nobel Prize in Economics for his contributions to the analysis of consumption, poverty and welfare.
On 12 November 2020, the Rafael del Pino Foundation organised a conference by Anne Case, Emeritus Professor of Economics and Public Affairs at Princeton University, and Angus Deaton, 2015 Nobel Laureate in Economics, on the occasion of the publication of his book "Deaths of Despair and the Future of Capitalism".
Even before the Covid-19 crisis, they explained, the lives of Americans without a college degree were being destroyed. This group accounts for two-thirds of the population aged 25-64. We want to see what the implications of this reality are in terms of despair and excess mortality, and what the long-term forces behind this situation are.
During the 20th century, the death rate for Americans of both sexes aged 45-54 years declined from 1,400 deaths per 100,000 people per year in 1900 to less than 400 in 2000, with the sole exception of the Spanish flu pandemic. The same pattern is repeated in other developed countries, including English-speaking countries such as Canada, the United Kingdom and Ireland, and extends into the early years of the 21st century. However, the mortality rate of white Americans from the 1990s onwards has been on a different trend. Their mortality rates are higher than they should be and are beginning to rise.
What has happened in the United States? Life expectancy has declined for three consecutive years between 2014 and 2017, something that has not happened in the United States for a century, since the end of World War I and the Spanish Flu. The root cause is to be found in what has happened to mortality among adults aged 25-64. This means that the benefits in terms of reduced mortality rates resulting from advances in disease control have been offset by other factors. In particular, the increase in drug use, alcoholism and suicide among the white population without a university degree. In fact, whether or not one has a university degree makes a difference in this regard.
This has been the case since the early 1990s for all age groups between 25 and 64. It has even started to appear in the 65-69 and 70-74 age groups since the beginning of the 21st century. As a result, 158,000 drug, suicide and alcohol-related deaths were recorded in 2018, compared to 65,000 in 1995.
When this situation is observed by year of birth, rather than by age group, it can be seen that while people born in the 1940s have lower mortality rates, those born in the 1950s already have higher rates, and they increase decade by decade, with the highest rates being those of people born in 1985. This trend, in contrast, is not replicated among the groups of people with university degrees, for whom low mortality rates have been a constant throughout the period under study.
According to established theory, the causes of suicide lie in a lack of social integration and social regulation. This is more likely to occur in times of great upheaval. What is noticeable in the United States is that the phenomenon is now occurring in every state in the US and that it affects both men and women, although more so the former than the latter. The difference is partly due to the rise in unemployment among men.
Underlying the mortality rates is an increase in pain and levels of isolation, as well as poor mental health conditions, among those without a university degree.
The main cause of despair is the long-term decline in working conditions for people without a university degree. It is a decline that manifests itself in both wages and employment rates. Wage and employment losses come from the loss of jobs and their replacement, for example, through outsourcing of transport, security and food service activities. These new jobs are worse because there is less commitment between workers and employers, because it is difficult to perceive these jobs as part of a good life and workers lose the sense of belonging to a 'big' company.
This process is not so much a loss of material well-being as a loss of meaning and status through work. At the same time, there is a decline in marriage rates, while the number of children out of wedlock increases and the sense of community is lost. In other words, the stability of households and communities is reduced. A situation that has many parallels with that of the loss of employment among the African-American community in the late 1960s and 1970s.
What has happened to the white working class? Their employment situation has been weakened by globalisation and automation. This, however, has also happened in other countries, but mortality rates have not skyrocketed there.
Why is the situation in the United States different?
One of the reasons is the opioid epidemic. Alcohol, drug and suicide deaths were already on the rise before the advent of Oxycontin, but the crisis became much more acute with its appearance. The opiate found fertile ground for abuse.
A second reason is that the United States has the most expensive health care system in the world, but Americans have the worst health of all rich countries. So life expectancy in the US is falling not because of what we spend on health, but because of what we spend on medical care.
The United States spent 17.8% of its GDP on health in 2018. Switzerland, the next highest spender, spent 12.4% and its life expectancy is five years higher than that of the Americans. The difference between the two countries, in terms of spending, is one trillion dollars per year, which implies more than 8,300 dollars per family. This overspending is equivalent to half of the entire military budget.
That money comes from wages, company profits and taxes. People may think of the health insurance provided by their employer as a gift, but that gift is deducted, in whole or in part, from what should be their paycheck. Part of the decline in low-paying employment has to do with rising health insurance premiums. In fact, many companies that have to pay their share (the 71%) of the $21,000 annual health insurance premium choose to outsource low-paying jobs. Outsourced jobs are not good jobs.
The health insurance premium does not vary much in relation to the worker's salary. So it is like a kind of flat tax per person, but there is no discussion on this issue: it is only done with respect to the minimum wage. To finance the health care system in this way is to destroy the labour market for low-skilled workers.
If state governments must pay their share of the health care system (Medicaid) in order to provide medical services for the poor, then they are left with less budget for schools, public universities and infrastructure. Medicaid, in fact, went from 20.5% of state spending in 2008 to 28.9% in 2019.
In the light of events, capitalism needs to be fixed, to be made fairer. Health care reform is at the heart of this process. Covid may be an opportunity to do this, but keep in mind that there are five health care lobbyists for every member of Congress. More broadly, the rise of lobbyism and the decline of unions has left low-wage workers almost unrepresented in Washington.
The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.
The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.