Let’s say there’s a movie critic with his own business reviewing films. His business is publicly traded, so he relies on shareholders. He is also reliant on studios to provide him sneak previews, so that he can hold forth before the general public sees the movie.
Let’s say that he honestly assesses a few duds and some studios threaten to cut him off. The critic would lose market share and shareholders would begin to grumble. What now? Well, when the next stinker arrives, he proclaims: “Dazzling! Amazing! Rob Schneider has outdone himself this time! Oscar will come calling!”
And now everybody is happy, except the poor saps holding the torn tickets.
This is essentially what happened during the Wall Street meltdown when financial ratings houses stamped “AAA” on mortgage-infested junk. The fix would seem simple. End the conflict of interest. Instead Congress has bought the Wall Street claim that it’s just too complicated and has kept the conflict intact. Oh, there are some legislative tweaks here and there, but the Big Three – Moody’s, Standard & Poors and Fitch – will remain reliant on the large financial institutions for business. They’ve already demonstrated what that pressure can produce.
This is like the accounting scandals surrounding companies such as Enron and WorldCom. Public accounting firms audited the books, but didn’t unearth the corruption. These firms also had consulting departments that relied on the firms they were auditing for business. This gave rise to the Public Company Accounting Oversight Board, an independent agency that reviews audits of public companies.
Something similar could be formed to make sure ratings agencies aren’t tipping the scales to bring in more business. Jonathan Macey, a deputy dean at Yale Law School, was on a task force that advised Congress about the issue. He told the New York Times:
“There are a lot of complicated issues that nobody knows how to deal with, like water shortages in different parts of the world. But this isn’t one of them. We could solve this one pretty easily with a modicum of political will. It’s just mortifying.”
Yep, like a bad horror movie.
Field of opportunity. I’m not sure what this says about journalism, but my favorite reporter and analyst on health care reform is a surgeon. Dr. Atul Gawande wrote the ground-breaking New Yorker article about the wide disparities in health care costs by comparing two Texas cities, McAllen and El Paso. That started a national conversation about what’s behind the high cost of medicine in the United States.
He’s back with another potential game-changer in the Dec. 14 edition of the same magazine with an examination of the state of agriculture in the 1900s and the high cost of food, which consumed about 40 percent of an average family’s budget. He traces a single pilot project in Texas to smarter practices that ultimately produced a more efficient food supply. Excerpt:
“America’s agricultural crisis gave rise to deep national frustration. The inefficiency of farms meant low crop yields, high prices, limited choice, and uneven quality. The agricultural system was fragmented and disorganized, and ignored evidence showing how things could be done better. Shallow plowing, no crop rotation, inadequate seedbeds, and other habits sustained by lore and tradition resulted in poor production and soil exhaustion. And lack of coordination led to local shortages of many crops and overproduction of others.”
That’s an apt description of our disjointed health care system. The cooperative extension program at the U.S. Department of Agriculture helped produce outcome-based farming and the results didn’t lie. The USDA became a clearinghouse of vital information and technical assistance. Productivity soared; prices fell. Today, food accounts for 8 percent of the typical household budget.
Gawande’s hope is that the pilot programs in the health care bills can achieve similar gains. It would require trial and error, political patience, a reliance on rational data and, yes, trust in government.
Local journalism is essential.
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