Innovation and Capitalist Medicine

John Power reports on yet another appalling aspect of the world’s most expensive medical scheme:

Balking at the cost of in-house research, major drug companies have slashed R&D budgets in recent years to focus on the late-stage development and manufacturing of treatments pioneered externally – often by publicly funded entities such as government institutes and universities.

All 210 new drugs approved by the US Food and Drug Administration between 2010 and 2016 were developed with funding from the National Institutes of Health, which distributes about 80 per cent of its US$40 billion annual spend on medical research to more than 2,500 universities and research institutes worldwide.

“Big Pharma generally do not have research divisions anymore,­ they gave those away when they found their research was three times as expensive per drug developed than ones sourced from academia,” said Ian Frazer, a professor at the University of Queensland who co-invented the human papillomavirus vaccine. “Industry only gets involved in manufacturing and marketing a likely successful product.”

COVID Reaction: The Triumph of Ethics

Lots of folks have been wondering if the COVID-19 pandemic carries any legitimately hopeful meanings. Here at TCT, we think there’s at least one, and that it’s a doozy. Permit us to explain.

In his classic (though admittedly pretty hard-to-read) book, The Great Transformation, the Hungarian political economist Karl Polanyi argued that, despite official doctrine, no sane person really believes that human beings and natural objects are actually commodities, actually things that can be bought and sold, up to infinifty or down to zero, without regard to underlying physical and ethical realities.

Under certain conditions, Polanyi argued, certain groups of people can get away with pretending that land and labor really are merely salable things. But not always and not forever. When things get over- or under-heated, as they inevitably do, capitalist theory falls away, as people sense the truth of what Polanyi called, on page 76 of The Great Tranformation, “the commodity fiction”:

Now, one of Polanyi’s main subordinate hypotheses was that, despite the efforts of TPTB, society — meaning the democratic majority — would often be forced to defend itself against the commodity fiction by creating “welfare” policies based on the reality that land, labor, and money are not, in fact, infinitely salable quanta, but rather precious, ethically primary, qualitative realities of their own.

With this in mind, TCT would like to suggest that social distancing is, among many other things, a very major proof of the Polanyian “self-protection of society.”

As the most hardcore and/or naive capitalists among us are trying to point out, we could quite easily go back to letting the commodity fiction organize our everyday affairs. Doing so would undoubtedly be very good for capitalism.

But we are instead doing something else, aren’t we?

Why is that?

It is because we are choosing human life and human ethics over market valuations.

Just as Karl Polanyi predicted we would.

And, the news might be even better than this. We seem to be doing this astounding thing with little serious resistance. This may speak to the gradual improvement of our culture, in Polanyian and later culture-war terms.

We are voting with our feet, marching in the direction of the basic pragmatic point that, ultimately, in the real world, economic “markets,” as some have said, can be great servants, but are always, at the end of the day, terrible masters.

A big question now is whether we will somehow become aware of what we are, in fact, doing, and then use our new level of self-clarity to keeping stepping toward the other kinds of self-defenses we pretty obviously need to enact against our other impending realities, which promise to make COVID-19 look like, ahem, a tea party.

Donations as Marketing Ploys

TCT is composed in Portland, Oregon, USA. Here, our electricity is delivered by the Portland General Electric corporation, which trades as POR on the New York Stock Exchange.

There have naturally been several attempts over the years to make PGE a not-for-profit public organization. So far, they have always been rebuffed by moneyed forces.

Leap, now, to the present moment: As the overseers of the still for-profit PGE surely are having worried meetings about, in the present civilizational crisis, the socialization question naturally suggests itself again. Why should Portlanders allow Wall Street rentiers to skim off resources in this way?

Very soon, there will, of course, also be big questions about who among and how Portlanders are going to pay PGE and its absentee owners, now that capitalism has run off its rails and paychecks are dwindling at best. Again, why allow Wall Street rentiers a say in such a vital matter?

Imaginably, the financial status of POR itself might also soon reach a nasty point, raising public bailout issues. If this comes to pass, what should Portlanders demand in return?

Big questions, right?

So, what does the for-profit PGE do? It moves to pre-empt these screamingly obvious questions.

Its technique is surely happening all across the corporate-and-urban world:

Make a big-sounding donation, accompied by a press release to local news media. The aim, undoubtedly, is to implant this reaction in the audience:

Wowie! A million dollars! For homeless people and kids! So generous! So forward-thinking!

But wait. How many millions of dollars did Portland General Electric harvest on behalf of its shareholders last year alone? 1,509 millions.

So PGE is now “donating” less than one-tenth of one percent of its annual gross profits to its host city.

The minuteness of this number is enough to tell you that this is not, in fact, any kind of charity. This “donation” is neither more nor less than a marketing move, designed to pre-sell residents of the Portland metropolitan area on the notion that PGE is a good egg and shouldn’t be scrutinized.

The Actual Use of Corporate Capital

Any guesses what this graphic depicts?:

That is the percentage of free cash flow the firms included in the S&P 500 Index spent across the 2010s buying back their own shares, according to Bloomberg Business Week.

This is not an error or an optical illusion.

To say it again: From 2010 through 2019, U.S.-based big businesses, as a group, spent more than half their net profits buying back claims to their own future profits — i.e. helping their future shareholders extract even more wealth from forthcoming corporate endeavors. More than half.

Compare this fact to your Adam Smith model, pro-capitalist friends.

Coronal Thoughts

Those interested in reality and decent survival might ponder how our present pandemic underscores a few key points.

Three initial thoughts strike TCT as interesting:

First, the essential unity of human affairs. The arrival of the corona virus throws a rather bright light on the long-running fallacy of purely “private” enterprise, does it not? As has always been true, but is usually not so obvious as it is at this moment, doing business is always and everywhere a deeply social activity that relies on a host of quite distinct collective arrangements.

Second, risk. One of the cardinal excuses capitalists make for their incomes’ departure from any conceivably reasonable theory of compensation-for-services-rendered is the claim that their willingness to expose their investments to decline and destruction is itself such a service, and therefore justifies the existing flow of wealth. Tell us, then, O Barons of Business: Are you now willing to watch your enterprises go under — to forgo any and all public assistance? If your acceptance of risk really is the basis for your reward, why would you not simply take what fate is now dealing you? Pray, tell us your answer, which will certainly be very interesting…

The third question that seems especially apt right now is that of the exploitation of unpaid personal labor, which remains something, of course, mostly done by women. Given the ongoing fracture of purportedly “natural” routines and perceptions, the connections between what we do for employers and what we do to deliver ourselves to our employers ought to be right up in just about everybody’s grill, in these viral days. Perhaps it has been unwise and unhealthy to allow our overclass to treat our self-care activities as mere appendages to its own singular priority?