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Capitalism in Crisis: The Horrors of Capitalism in an Epidemic Part I

Posted on April 15th, 2020 in Coronavirus, Neoliberalism by James Deal
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The Coronavirus epidemic has made the issues inherent to the Capitalist system apparent in the daily lives of most Americans, forcing many to confront the horrifying nature of the Capitalist machine for the first time. Yet, Coronavirus has merely served as a stress test for our economic, social, and political infrastructures, revealing the gross inequalities and inefficiencies of these institutions in dealing with times of crisis. In many ways, Capitalism is to blame for our failure to prepare for and respond to the inevitable spread of a highly contagious and deadly pathogen such as the Coronavirus.

With the spread of SARs across Asia in the early 2000s, the US and others bore witness to just how dangerous such an epidemic could be. Indeed, a 2017 memo authored by the Pentagon to President Trump warned:

"The most likely and significant threat (enemy) is a novel respiratory disease, particularly a novel influenza disease. A disease of operational significance (natural, accidental, or deliberate) will have rapid rates of transmission that will result in debilitating illness… An outbreak in a single community can quickly evolve into a multinational health crisis that causes millions to suffer, as well as spark major disruption to every facet of society."

The same report also anticipated the critical need for hospital beds and certain medical supplies in the response to such an outbreak, noting, "Competition for, and scarcity of resources will include…non-pharmaceutical MCM [medical countermeasures] (e.g., ventilators, devices, personal protective equipment such as face masks and gloves), medical equipment, and logistical support." Yet, in spite of this warning, the US remained utterly unprepared to fight the spread of an epidemic of this size.

Another instance of the US recognizing the dangers posed by a potential epidemic can be found in the state of California, which recognized the necessity for advanced preparation in order to effectively respond to any potential major public health crisis. In 2006:

"the state invested $400 million to shore up the state's capacity to respond to a major pandemic… They built three mobile crisis hospitals that could be deployed around the state and amassed a stockpile of emergency medical equipment such as the now critically undersupplied N95 masks, ventilators, and 21,000 hospital beds."

So why was the US so utterly unprepared to respond to the Coronavirus epidemic despite predictions of both the likelihood and potential severity of such an outbreak? The answer is actually quite simple: Capitalism.

For California, in the wake of the financial crisis the Democrats passed an austerity budget in 2011 that cut the $5.8 million in funding to maintain the mobile hospitals. The stockpiles of medical supplies "were either given away to hospitals or simply disposed of." Ultimately, the budget for the year totalled $120.1 billion, but the state still deemed it necessary to cut the $5.8 million in spending to maintain their preparations for a potential epidemic. 

At the federal level, funding for federal agencies such as the Center for Disease Control (CDC) and the Health and Human Services Department (HHS) have long been cut as part of budgeting battles over the last three administrations:

"In nominal dollars, the funding for the CDC's Public Health Emergency Preparedness grants went from $939 million in 2003 to $675 million in 2020… Private health providers get money through a hospital preparedness program within the Health and Human Services Department. It helps local coalitions… plan and get ready for a sudden health threat. That money went from $515 million to $275 million in the same 17-year period. Corrected for inflation, combined spending went from over $2 billion in 2003 to a bit under $1 billion in 2020."

Pandemic FundingCourtesy: PolitiFact

The US Strategic National Stockpile (SNS), which acquires medical equipment and pharmaceuticals deemed critical in the event of a public health crisis, has also been reduced by the aforementioned budget cuts as it was managed by the CDC until October of 2018 when the HHS took over its operations. As of now, the SNS is reportedly almost depleted of ventilators, N95 masks, and other crucial medical supplies in safely treating the Coronavirus.

Despite the 'need' to slash the budget for the CDC and HHS, the federal government has managed to continue providing corporate bailouts and tax cuts for the wealthiest in society, prioritizing the welfare of Corporate America over that of the average citizen. This is true across three administrations; so, while Trump has grossly mishandled much of the preparations to respond to a pandemic, the blame must in part be assigned to Obama, Bush, and other elected officials over the years in failing to adequately fund these precautionary measures.

The shortage of ventilators can also be traced back to a fundamental failure of both Capitalism and our elected officials. In 2007, a federal contract was drafted to manufacture and purchase a large quantity of portable ventilators that could be deployed in the case of a public health emergency. In 2010 a small company, Newport, won the federal contract to manufacture these devices, and the HHS testified in 2012 that Newport was on pace to earn market approval within the next year and begin manufacturing the ventilators shortly after. Within a month of the HHS's testimony, Newport was bought out by a larger company, Covidien, that produced a more expensive ventilator. Covidien requested more funding from Congress before asking to be released from the federal contract because they would be 'unable' to earn a sufficient profit from the sale. The purchase of Newport by Covidien was "meant to torpedo a cheaper product that would have produced more ventilators for less money but cut into profits."

VentilatorCourtesy: ProPublica

In 2019, a new contract was signed with the manufacturer, Philips, which "gave Philips almost a year before it had to produce a single Trilogy Evo Universal [ventilator], and two more years to fulfill the order of 10,000 ventilators." In the meantime, Philips has taken the ventilator, a product developed using government funds, and been selling it at a significant mark up overseas. In fact, Philips is under contract to produce and sell the ventilators to the US government at a rate of $3,280 per machine, but has been selling the ventilators for $12,495 in the meantime before hiking its price to $17,154 in early March to capitalize on the increased demand due to the Coronavirus. In spite of this, the US government has received no ventilators from Philips and the company has no plans to produce for the government this year. According to ProPublica:

"Steve Klink, the company's Amsterdam-based spokesman, said Philips was within its rights under the HHS contract to prioritize the commercial versions of the Trilogy Evo. An HHS spokeswoman — who insisted she could not be identified by name, despite speaking for the agency — did not disagree."

This is gross profiteering at the expense of the public's welfare. There is a critical shortage of ventilators across the US in response to the Coronavirus epidemic and, yet, the company is allowed to fail to fulfill the government's order (of a product developed using the taxpayer's money) in order to maximize returns to their shareholders. Thousands are dying due to the lack of ventilators, yet Capitalism enables and encourages the company to continue this sickening practice in order to turn a quick profit. These exploitative practices are inherent to Capitalism and cannot be allowed to continue. The Coronavirus epidemic has forced many to confront the horrifying nature of the Capitalist system for the first time. For any meaningful change to occur, we cannot allow for the continued existence of Capitalism when it, by definition, prioritizes the accumulation of capital over the welfare of the people.