Value Competition

Translating VC into an Op-Ed

What follows is an effort to embed value competition concepts in the accessible language of an op-ed.  The underlying value competition message is that left-right competition often goes along with the development of a well-grounded consensus among policy elites on certain matters amidst ideological dissensus on other matters; my examples are the movement in favor of HMOs in the 1990s and in favor of more consumer involvement in health care currently amidst past and present dissensus on universal coverage. 

The Unrecognized Successes of Clintoncare and the Implications for Obamacare

 

Sixteen years ago, in September 1993, Bill Clinton spoke to a joint session of Congress and presented a proposed law, developed by a task force chaired by Hillary Clinton, under which employers would required to provide their employees insurance coverage through health maintenance organizations.   No legislation was enacted, and the Democrats went on to lose their House and Senate majorities in the 1994 mid-term elections.

Although the Clintons’ health care proposal has become an emblematic example of a failed initiative, in two important ways the proposal was actually a resounding success.  First, the “Uncle Sam wants you to join an HMO” spirit of the Clinton proposal contributed to a substantial movement by insurance companies, private and public employers, health care providers, and consumers away from fee-for-service medicine.  Second, there was a very substantial reduction in the growth of health care costs in the 1990s—a real, immediate “bending of the curve”--that was associated with the broad, government-backed movement toward the HMO model of pre-paid medical services.

For the five year period from 1988-1992, official government estimates (at http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp) show total U.S. health care spending going up at an average rate of 10.5% per year.   By contrast, for the five year period from Bill Clinton’s speech in 1993 through 1997, the same estimates show the average growth in spending slowing sharply, to 5.8% per year.

The near halving of the growth rate in health care spending for much of the 1990s that went along with the Clinton-fostered move to HMOs continues to pay dividends in 2009.   Although the cost curve has gone back up again in this decade, increases have not been as dramtic as in the 1980s, and we are now spending hundreds of billions less per year on health care than would be the case if the rising spending curve had not been bent in the 1990s.

Understandably, those involved in the Obama administration’s current push for universal health insurance coverage are determined to avoid the legislative fate of the Clinton health care initiative.  But given that the results of the Clinton proposal were  positive in some significant ways, in the current battle over health care reform we should be asking ourselves whether the Obama plan, like the Clinton plan, has within it the seeds for some good outcomes regardless of what happens with specific legislative proposals.

The Obama health care proposal of 2009 is a less clear-cut one than the Clinton proposal of 1993.  But if the Clinton plan boiled down to “Uncle Sam wants you to join an HMO,” the Obama plan, with its individual rather than employer mandate, might be summarized as, “Uncle Sam wants you to be an informed health care consumer.”   That message, like the Clinton message, has the potential to contribute to some significant improvements in the health care system, with or without legislation.

If consumers paid a percentage of the bill at their doctors’ offices, instead of the current norm of co-payments that yield no information about the cost of underlying services, there would be a useful discipline on health care pricing.   If insurance companies and employers offered financial incentives to consumers who find quality providers who offer a service more economically, additional discipline would be exerted.  More broadly, if the government, insurance companies, employers, providers, and consumers together support a broad movement toward consumer-driven medicine, there is every reason to believe that the cost curve can be bent again, just as it was in the 1990s.

To be sure, a government-encouraged but privately-led move toward placing individual consumers more at the center of the health care system would not be a panacea for a vastly complex and costly system, any more than HMOs were in the 1990s.   But amidst all the sound and the fury over potential health care legislation, it’s worth remembering that social movements can change the actions and incentives of individuals and institutions for the better even in cases in which new laws are not passed.

On balance, the Clinton-inspired movement against fee-for-service medicine and toward HMOs in the 1990s was constructive, whether one regrets the defeat of the Clinton proposal or not.  Whatever happens with universal coverage in 2009, an Obama-inspired movement against consumer ignorance and toward consumer-driven medicine would be a similarly constructive outcome of the current health care struggle.

 

Post-Left-Right Politics

Assume that the left and the right in their moralistic "I'm right and you're wrong" forms are useful in certain settings (notably legislative politics and litigation) in which exit costs are high, surfaced conflict is acceptable, and substantial self-segregation of the opposing camps is practical, but are not useful in certain other settings (such as workplaces and social groups) in which self-segregation is undesirable, close collegial relations are important, and exit costs are low.   Further assume that these flexible economic and cultural organizations constitute the major frontier domains for politics in the future.  Is it possible for such organizations to gain some of the benefits of value competition--harder work, innovation, etc.--without the contextually unacceptable moralism of the left and the right?

One way post-left-right politics might work: Consider a six-way division on two dimensions, ideology and culture-economics, involving left cultural and economic organizations (in which the right is unacceptable), right cultural and economic organizations (in which the left is unacceptable), and centrist cultural and economic organizations (in which the left and the right are both unacceptable).  The key idea here is that the relevant dichotomies will have to be different for the different types of organizations; the competing/cooperating sides that will work to create a more mutually respectful, less moralistic politics for a left cultural organization are not the same as those that will work for a right cultural organization, and a centrist cultural organization demands yet another dichotomy.

My nominations for sides in the six types of organizations that could empathize with the other and feel the merits of the other, and in doing so work to foster mutually respectful internal competition in a way that the left and the right can't: 1) for left economic organizations (e.g., government or non-profit offices, schools, unions): Parents and Children (or Teachers and Children); 2) for right economic organizations (e.g., for-profit corporations): Managers and Investors (this division, unlike the other five, is already the basis of an effective cooperative-competitive politics for this type of organization); 3) for centrist economic organizations (e.g., reformist government, non-profit, or for-profit firms, schools, etc.): Yin and Yang; 4) for right cultural organizations (e.g., conservative churches, synagogues, mosques, etc.): Men and Women (or Boys and Girls); 5) for left cultural organizations (e.g., communes): Butches and Femmes; and 6) for centrist cultural organizations (e.g., social clubs, civic clubs): Yin and Yang.

Many ambiguities and debatable points lurk: For example, one might might doubt the viability of a "Women" or "Girls" side in a conservative religious group, and for some such groups the criticism might be correct.  Another question/criticism about the viability of the hypothetical sides: The "true-false" philosophical rationalism of Athens and the "good-evil" religious dualism of Jerusalem have through whatever processes gone along with democracy and rule of law-based civil liberties in the West.  By contrast, the "both sides true and false, both sides good and bad" philosophical dualism of Taoism and more broadly of China, appealing as it may be, has through whatever processes not gone along with democracy and rule of law-based civil liberties.   Given that, why should one feel that leaving the West's left and right behind in favor of the East's yin and yang can foster more democracy in certain kinds of organizations?   A response: The wheel of history brings different ideas to the top; my judgment/guess is that Taoist notions that perhaps did indeed promote quietism and emperor control in their original setting have a much better prospect than left and right of promoting cooperative competition and enhanced democracy within organizations in the contemporary United States.

Popular Cosmopolitanism and Business Nationalism in Indonesia

Sukarno, Indonesia's post-colonial leader from 1945 to 1966, was, along with Nehru in India and Nasser in Egypt, one of the pillars of the non-aligned movement, and shared with his counterparts a modernizing, internationalist, secular ethos on culture and a belief in state-led, populist approaches on economics.   By contrast, Suharto, the dominant figure in Indonesia from 1965 to 1998, led a regime that was pro-business on economics and, by comparison with Sukarno, nationalist and traditionalist in its cultural orientation. 

SCM and CSR: Take 3--Calculation and Culture

Some thoughts: 1) along with or instead of the holistic "calculation-culture" classification system used in my AoM paper last year, develop single word cues to make classifications; 2) examples of how social responsibility initiatives in SCM involve both a calculation and a cultural element--both W-M and Africa supply chain in pharm could fit in here. 

SCM and CSR: Take 2--Africa Supply Chain in Pharma

The efficiency and incentives challenges--relationship between the two.  Efforts by companies, NGOs, governmentsts, academics to increase efficiency and improve incentives.  "Calculation" and "culture" issues associated with efficiency and incentives.  Efforts to align incentives of people working in the supply chain with efficient outcomes.  Issues associated with non-profit distribution.

SCM and CSR: Take 1--Wal-Mart

Elements of a possible paper:

1.  The logic of SCM supports monitoring suppliers' social performance as well as other kinds of performance.   (Tie-in here to work on SCM, CSR, networked organizations--e.g., Rob Phillips 2009 SBE presentation)

2.  Different and sometimes competing definitions of social performance: For example, for suppliers of an American MNC in a lower-income country to pay above-market wages could be considered either  a socially responsible sharing of economic benefits with the least fortunate or a socially irresponsible capitulation to local and/or international pressure that will reduce the chances of broader economic development in the lower-income country.  (Tie-in here to Douglass North et al on "natural state" vs. "open access state") 

3.  Central and often controversial role of Wal-Mart in SCM in the past and the present--brief review.  Current W-M effort to provide metrics on supplier CSR, with a focus on sustainability/green performance--review--key part of paper.   Relationship between W-M drive for lowest costs and the measurement of green performance.  The market-wage issue revisited through an environmental lens: A low-paid employee in a low-income country uses resources (energy, etc.) at a lower level than a higher-paid employee in the low-income country and at a much lower level than an employee in the US.  Should this be factored into an evaluation of a supplier's green performance?  How W-M is handling or avoiding this issue and other issues associated with the measurement of sustainability/green performance.

Business Cosmopolitanism

Business cosmopolitanism involves choices by a nation-building elite to ally with business on economics and with modernizing, internationalist forces on culture.  In recent times, it could be termed the Westernizing option for nation-building, in which the newly formed political regime embraces Western capitalism and Western cultural freedom, and makes peace with if not embraces the military dominance of the United States and its Western allies.  Among the large middle-income and lower-income nations with political competition, very few have featured nation-building elites that have made across-the-board Westernizing choices.  The only clear example is Russia in the late 1980s and 1990s, with Boris Yeltsin as the pivotal Westernizing leader who privatized huge swathes of Russian industry, freed the press, and backed off from military confrontation with the West. 

Incentives to Overcome Market Failure

In the standard asymmetric information story, the cure for market failure lies in some type of regulation, such as lemon laws that allow consumers to return defective used cars.  In the story of Green and Burner preferences, nothing straightforward is wrong with Faux Green cars in the way that is the case with a used car that is a lemon.  Accordingly, curing the market failure is trickier.  But here as in many other cases, incentives can work.  The implication of the story told in the previous post is that given different incentives through having Burner competition, the Green car employees will incur expenditures to assure the market that their car is True rather than Faux in a way that does not make sense for them when there is no Burner competition.  Alternatively, there could be a regulatory response, with a government agency that duplicates the expertise of the employees.  Doing it that way, though likely more costly than incentivizing the employees, would be the way to go in the absence of consumer heterogeneity that allows employee incentivization.

Lipset and Rokkan Updated: Culture

Per Lipset and Rokkan, the basic choices for European nation-building elites on culture involved allying with secular forces (as in France or Italy), with Catholicism (as in Austria or Belgium), with a national Protestant church (as in Britain or Scandinavia), or with both a national Protestant church and Catholicism (as in Germany and the Netherlands, with their large Catholic minorities).  As in the economic sphere, these choices, along with the parallel, reactive choices of peripheral groups resisting the dominance of the nation builders, became the basis of long-lasting European party systems. 

Compared to the Lipset-Rokkan economic framework, which can be best updated by adding a category, their cultural framework needs to be pared down in order to fit the nation-building experience of populous lower income and middle-income countries around the world that have substantial elecoral competition.   Instead of four choices keyed to the nuances of 19th century European Christianity, it makes more sense to view the basic cultural choice facing recent nation-builders in Asia and Eastern Europe as a basically dichotomous one.  Contemporary nation-builders can ally themselves with secular and/or cosmopolitan and/or Westernizing cultural forces, or alternatively with religious and/or nationalist and/or traditionalist forces.  India in the 1940s, South Africa in the 1990s, and the Gorbachev-Yeltsin Russia of glasnost and rapid cultural liberalization in the late 1980s and 1990s exemplify the secular/cosmopolitan/Westernizing option being taken by nation-building elites.   On the other side of the ledger, Khomeini's Iran from 1979 on and Suharto's Indonesia from the 1960s to the 1990s exemplify nation-building elites that by comparison with their comparatively cosmopolitan discarded predecessors (the Shah, Sukarno) took a more nationalist/traditionalist/religious line on culture.  Park-Hwan South Korea in the 1970s and 1980s is a trickier case given its strong alliance with the US and the ambiguities of Korean nationalism, but is also reasonably classified as illustrating the nationalist-traditionalist-religious cultural choice by a nation-building elite.

Lipset and Rokkan Updated: Economics

In the economic sphere, Lipset and Rokkan contended that nation-building elites in 19th century Europe were faced with a choice between allying with urban business elites or with rural landowning elites, and that these choices exercised long term influence over national political systems.   More recently, those two choices have remained options for nation-building elites, but the rise of the universal franchise has gone along with another economic choice becoming available: a popular alliance between the nation-building elite and the less affluent majority of the population.  Among large middle-income or lower-income nations with competitive electoral politics, the best examples of that alliance involve the Congress Party in India, the Khomeini-led Islamic Revolution in Iran, and the African National Congress in South Africa.   In these three cases, the new nation-building elites in comparison to their predecessors (the British, the Shah, South African whites) took a populist, egalitarian approach to economics.  The connection between the nation-builders and egalitarian doctrine on economics was especially clear in India, where the Congress Party of Nehru identified itself with socialism, land reform, and state planning.  In Khomeini's Iran and Mandela's South Africa, nation-building took place later in the twentieth century, at a time in which nationalization and central planning had lost much of the appeal it had had during Indian nation-building.  At least partly for that reason, the Khomeinist revolutionaries and the ANC did not espouse a clear left of center economic agenda, but both groups of nation-builders relied in part on a populist appeal that they, unlike their predecessors, would stand up for the majority of the nation's people rather than a small, economically privileged elite.