The FiMMIT Complex – Why Finance, Medicine, Military, and Information Technology Industries are Influence Leaders
In a farewell address in 1961, outgoing President Eisenhower warned Americans against the dangers of a growing Military-Industrial Complex (MI Complex) and its influence, “sought or unsought”, in the affairs of our government. It was a nice speech, an example of the candor we sometimes get from outgoing or recently retired leaders. They have a lot less to lose by truth-telling, which is why their memoirs are sometimes so revealing. Here’s the address.
In a nod to Eisenhower, we could call the new world we live in a Financial-Medical-Military-IT Complex (FiMMIT Complex). Some folks have called it the Medical-Industrial Complex, but that doesn’t quite sum up where we are today.
The FiMMIT acronym puts the two largest drivers of our current and forseeable future economy, Finance and Medicine, up front where they belong, and in the correct order of power over government. It also pays homage to the continued specialness of Defense, and finally, acknowledges the increasing importance of Information Technology (both software and nanotechnology-driven hardware) to industrial productivity and our future.
The FiMMIT tetrad of Finance, Health Care, Defense and Information Technology industries can each be expected to have special influence, now and in the future. In addition to historical lobbies, like Agriculture, that means the FiMMIT industries will naturally attract unfair political influence, cronyism, and excessive wasteful spending in relation to their employment in both government and in society. Thus those who work with and deal with these sectors would do well to realize ways in which their specialness influences foresight practice.
Over the 20th century both our Finance and Health Care industries have grown tremendously, and each is now greater than education and nonprofits in annual revenues, or dollars spent. Finance has been special since the 15th Century, as owners of capital have used the instruments of finance, like banks, debt and equity, to create wealth. Health Care and Information Technology are the most newly influential.
Eisenhower should have included Finance in his MI Complex speech, but Health Care’s and IT’s growth to prominence have occurred in the decades since. In the US, in non-war years, we now spend at least two to three times as much on Health Care as we spend on Defense, and Health Care’s relative size will continue to grow, as wars become less hard to justify and as the value of life and the ability of health care to extend it and improve its quality continue to grow. Unfortunately, the structure of Health Care industry is presently biased for costs to continue to increase into the unreasonable zone. The way hospitals and clinics are run, the patient never sees the charges until afterward. They are offered no options for cheaper care, and they have no incentives to decline care. We pay ever-larger sums through insurance, and federal benefits to the health care industry that we don’t even think about. As one small example, babies born today even just a week or two premature are recommended to spend a few days in the NICUs, and hundred thousand dollar bills ensue. If there were a personal cost to overusing health care, such as the loss of benefits later in life, many consumers would become mindful of the costs, and would decline unnecessary tests, take advantage of medical tourism, and pay more attention to preventive behaviors and healthy habits as adults. But no such personal responsibility-building components exist in today’s health care system, due to political decisions made by health care industry leaders. As a result, a massive wealth transfer from the American populace to health care network owners continues to occur, and it will be a while yet before we can fix that problem.
The Politifact 2016 graphic at left estimates America presently spends almost twice as much on Health as Defense, but this graphic understates the sector’s importance. As with Finance, which doesn’t appear on this chart at all, much of the Health Care industry’s revenues, including consumer discretionary spending, don’t appear on such charts.
Defense has always been special, as security is the fundamental service and legitimation of the state. America has just exited from a sixteen year undeclared war in Iraq and Afghanistan, at a cost to the taxpayer of $4 to $6 trillion dollars, according to this 2016 Harvard study. In a world of smart agents a few generations from now I think we’ll look back on this era of unprecedented war profiteering as a necessary evil of our present form of government, one with insufficient public say over the kinds of wars we fight, or how long we fight them. In the meantime, we do what we can. See our counterfactual on the Ludlow Amendment for one of the ways we may rein in defense spending in coming years.
Information Technology (IT) will continue to grow the fastest, but from the smallest base, so it will be a while yet before it rivals the other three special sectors in spending, though IT may become more important than the other sectors before this, as the smarter machines get, the more IT becomes the top driver of technical productivity. IT may eventually have even more influence than the other special sectors, as we move to a world of intelligent machines. We shall see.
Regarding Finance, it is an unpleasant but clarifying reality to realize how deeply the priorities of both the US government, and even our military have been directed, since the 1970’s, to the end of supporting the US dollar, Treasury bills, securities markets, and other financial industry infrastructure. This has benefited the American people to a minor degree, but the financial leaders to a far greater degree, while creating vast new levels of debt. The financial industry has always had special influence in government. But as the US plutocracy has grown in the last half-century many private financial actors have become increasingly gargantuan, corrupt, and uneffectively regulated.
In the Savings & Loan Crisis of 1989-1994 the US government bailed out the financial industry at a total cost of 500 billion dollars in 1992 estimates by Time reporters, with at at least 130 billion taken directly from taxpayers, a breathtaking example of regressive taxation at the time. But these numbers were small compared to the Great Recession of 2007-2013, in which Wall Street excesses, subprime mortgages, and consumer greed played central roles. In our most recent recession, the TARP program directly spent $700 billion in US taxpayers money to bail out banks. But this was just a small portion of the true cost. In 2010, Bloomberg estimated the US had lent, spent, or guaranteed $13 trillion to counter the recession. The total global cost of the Great Recession was estimated by Federal Reserve Economists in 2014 at six to 14 trillion dollars, and the US impact was as much as $150,000 in lost lifetime wages for each US citizen.
One interesting example of Finance’s unique influence is the petrodollar, the oil-backed currency trading agreements we created in the 1970s. For a good early account of how we used these agreements to fund the growth of US debt in our relations with Saudi Arabia beginning in the 1970’s, read David Spiro’s The Hidden Hand of US Hegemony, 1999, and Daniel Yergin’s Pulitzer Prize-winning The Prize, 2008. For more recent accounts, including an excellent introduction to preemptive war as a way of maintaining US financial dominance, read Ron Suskind’s excellent The Price of Loyalty, 2004, on the inner workings of US government finance, as told by former Bush Administration Secretary of the Treasury Paul O’Niell. For a more speculative and populist account, you may enjoy Jerry Robinson’s four-part post, The Petrodollar Wars at FTMDaily.com, 2012. Fortunately, the misuse of our fine military to prop up financial industry hegemony is a game that seems very likely to end in coming generations, the more developed and war-intolerant the world becomes. Another example is the use of debt as a mechanism of control, often in disempowering and unethical ways. Naomi Klein’s The Shock Doctrine (2008) is a great summary of the rise of finance and debt in enforcing the Washington Consensus of fiscal austerity in the developing world since the 1960s.
These policies have allowed the US enormous financial leverage, printing more money and growing more debt than it should, and they have also greatly favored financial industry owners, who are increasingly making our citizens into indebted servants via mounting consumer, mortgage, student loan, and other debts. As citizens debt/equity ratios continue to climb, more and more of their future productive value is transferred to the holders of capital. Fortunately, no financier can deeply capture the future productive value of science and technology itself, which will continue to accelerate for not only human but also universal reasons. Some, like Jerry Robinson, think all this argues we are headed for a great crash ahead. But given that machine productivity and autonomy are themselves growing exponentially, I see that as a low-probability outcome at present. Certainly we’ll see corrections and debt forgivenesses along the way, but as long as technical productivity keeps accelerating, they are likely to be less and less disruptive over the years.
Health Care rose to special prominence in the latter half of the 20th century. As the world keeps developing economically, and the value of life keeps going up, and as our medical therapies become increasingly useful, this trend will only accelerate. Rich societies will shift ever more of their spending priorities to health and healthy longevity. In the US, increasingly more of our GDP flows to our mostly privately-owned health care industry, and we now spend two-and-a-half times more per person than the OECD average, as the 2009 OECD chart at right shows.
The relative size of these industries in America versus other industrialized countries, and their high degree of wealth concentration largely explains why our health care is the most expensive and least productive per dollar in the US, versus all other advanced democracies. These systemic factors also explain, for those interested in political foresight, why universal health care, now in over thirty leading countries since 1948, has been so difficult to implement in the US, though we have made steps toward it with Medicare, Medicaid, CHIP, and the ACA. Real choice and competition in health care remain scarce. But if we are to make health care truly responsive to the consumer, states and counties will eventually need real choice and variety between the types of these programs to implement. Consumers with appropriate levels of personal assets would also benefit greatly from the freedom to sign away certain rights to sue if they wish to receive lower cost care, with less unnecessary testing, in our litigious US society. Health consumers also need better legal access to medical tourism, which offers the same benefits and outcome (more affordability, less litigation capacity).
Restricting the influence of powerful oligopolies (health insurers and providers) on policy, as difficult as it is today, may in the long run be the most important factor of all. The 2010 ACA hoped to increase competition via insurance exchanges, but so far, the exchanges have reduced the number of insurers offering coverage in the vast majority of states, with most US counties being monopolies or duopolies. Serious antitrust reform would be needed to bring real competition to this market, but such reform is politically unlikely in industries where great wealth is concentrated in the hands of very few players. It is a basic economic reality that all oligopolies naturally seek to reduce or eliminate competition at the top, and to transfer maximum profits from citizen consumers to those who own, run and insure the network. Whether the middle class suffers during this growth via a deteriorating social contract, greater technological unemployment, and increasing indebtedness because of that growth, as it has in the US since the 1960s, or it stays strong, as we’ve seen in Germany and the Nordic Democracies, is an open question for the US, and indeed for any developing economy. That path seems ours to choose.
Finance and Health Care both largely control US political activity in their industries. Two fascinating books on the unique political and economic power of finance and health care are Taibbi’s Griftopia (2011), for Finance, and Angell’s The Truth About the Drug Companies (2005), for Health Care. For example, Angell notes that in 2002, the top ten drug companies made more profit (albeit in an unusually profitable year) than the other 490 businesses on the Fortune 500 combined. Pharmaceutical giants are oligopolies, and are free to spend far more on marketing, to manufacture consumer demand, than they do on R&D to find objectively better drugs.
As I’ve mentioned, Gar Alperovitz’s What Then Must We Do (2013), outlines one practical strategy available when oligopoly reform is not possible: the collective funding and establishment of more employee-owned and community-owned competitors (public health insurance programs, social enterprises, employee-owned businesses, credit unions, etc.). None of this is to denigrate the value of financial services, health insurance, health care, and pharmaceuticals to human welfare, or the great need for better foresight work in these sectors. But for new students of foresight it would be remiss not to mention the unusually strong political influence of these sectors in American society, now and for the foreseeable future, and some consequences of that influence.
All foresight work that happens in these special sectors in the US, as well as governance of those sectors, must be influenced by this state of affairs. It’s sobering, but it’s also to be expected to some degree, given their importance to society. Let’s drop down to the organizational level now, and take a look at various departments where you can do great foresight work.