Names, faces, and places of the new economy.
Subject: Medical care (Economic aspects)
Medical care (United States)
Author: Cantoni, Craig J.
Pub Date: 03/22/2012
Publication: Name: Journal of American Physicians and Surgeons Publisher: Association of American Physicians and Surgeons, Inc. Audience: Academic Format: Magazine/Journal Subject: Health care industry Copyright: COPYRIGHT 2012 Association of American Physicians and Surgeons, Inc. ISSN: 1543-4826
Issue: Date: Spring, 2012 Source Volume: 17 Source Issue: 1
Topic: Event Code: 200 Management dynamics Canadian Subject Form: Medical care (Private); Medical care (Private) Computer Subject: Company business management
Product: Product Code: 8000001 Medical & Health Services; 9105210 Health Care Services NAICS Code: 62 Health Care and Social Assistance; 92312 Administration of Public Health Programs
Organization: Organization: American Medical Association
Geographic: Geographic Scope: United States Geographic Code: 1USA United States
Accession Number: 293812998
Full Text: A website of the IDRT consulting company displays the photograph of its president, an attractive woman who holds a Ph.D., stating that she" has extensive knowledge and experience in the applications of technology for educational product development particularly with federal mandates for Section 508 accommodations compliance."

She is one of millions of workers in the private sector who make a living in the New Economy from ever-growing government regulations and mandates.

Consuming 12 percent of national income, regulatory compliance is one of the three "industries" that make up the New Economy. The other two industries are government, which now consumes about 40 percent of national income at the local, state, and federal levels, compared with about 22 percent in 1947, and financial services.

The financial service sector grew from 10.9 percent of gross domestic product (GDP) in 1950 to 21 percent in 2006. Much of the growth was based on phony money--on leverage on top of leverage, and not on real assets produced from real work. This industry's share of GDP has dipped somewhat because of the recession, but given its clout with both political parties, the dip will be temporary.

By contrast, manufacturing, which is part of the Old Economy, has dropped to 12 percent of GDP.

A similar shift to government and finance happened during The decline of the Spanish, Austrian, and British empires.

In a rare instance of personal prescience, I saw the New Economy coming to the U.S. in 1992, when I published a management book on bureau cracy (1) and walked away from a lucrative corporate career because of having to spend too much time on government-required paperwork instead of work that helped my employer and fellow employees grow and prosper.

The New Economy is characterized by make-work instead of real work, by the shuffling of money and paper instead of the production of valuable goods and services, by living off old wealth instead of the creation of new wealth, and by the replacement of the free market by a deadly combination of crony capitalism, corporatism, mercantilism, and socialism.

It's at this point in my commentaries that readers begin asking what can be done about these trends. I'll answer the question later, after saying a little more about the New Economy.

The epicenter of the New Economy is of course Washington, D.C., which, unsurprisingly, has remained largely immune to the recession and housing bust. The New Economy also can be seen in "revitalized" downtowns across the country, where warehouses, factories, wharfs, freight yards, and working-class taverns have been replaced by Potemkin villages of lofts, light rail, subsidized sports stadiums, coffee shops, fusion restaurants, and other places that cater to workers in the New Economy--workers who are insulated from the economic harm caused by their environmentalism and statism. Then, in a case of mass cognitive dissonance, these same economic elites say they are concerned about the declining wages of working stiffs.

Tellingly, the current President of the United States is from the New Economy, most members of Congress are from the New Economy, and the likely Republican presidential nominee will be from the New Economy.

Even companies that appear to be in the Old Economy are actually in the New Economy. J. Berra Engineering is an example. The company publishes a "Crisis Management Plan" for school districts and claims that 12 percent of the nation's 15,000 districts are clients. Here is an excerpt from its website,

Imagine little Megan being asked in grade school what she wants to be when she grows up. "I want to be Directive 5 expert," she answers.

As promised, I'll switch now to what can be done to transform the New Economy back to a real economy and encourage little Megan to grow up to do real work.

You already know what has to be done to roll government back. Since most government spending is on entitlements, welfare, and subsidies, voters simply have to vote to stop getting free stuff for themselves from the government. Easy, right?

Shrinking financial services is a more complicated matter, because it would require an end to crony capitalism, corporatism, and mercantilism. It also would require transformation of the cartel of the Federal Reserve Bank and its big banks into a truly competitive system based on private capital, personal risk instead of socialized risk, and sound money (or even private currencies) tied to precious metals. Since neither President Obama, nor the leading Republican candidates, nor 98 percent of Congress are talking about these solutions or even understand them, the first step, then, will be to form a new political party. Easy, right?

Stopping the growth of the regulatory state will be much more difficult than the previous two easy fixes.

First, as can be seen in the example of Directive 5, even if the federal bureaucracy were cut to zero, the president could still entangle the economy in red tape on his own. Second, bureaucrats are like hermaphrodites that can reproduce alone and in the dark. As such, they will breed new bureaucrats unless you keep them under 24-hour watch. Third, the majority of your fellow Americans love the regulatory state, because they are worrywarts who think that all risk can and should betaken out of life, and because they are busybodies who want to tell others how to live.

For example, worrywarts and busybodies such as the nation's First Lady think that if they tell obese Americans that broccoli is healthier than Cheetos, overweight people will switch to broccoli. Accordingly, the worrywarts and busybodies support food labeling regulations, including regulations governing restaurant menus. These regulations have spawned an industry of labeling experts, including Food Label News, a subscription newsletter. Below is a sample from the publisher's website of the kinds of questions and answers that can be found in the newsletter.

Below is a description of a product offered by the American Medical Association, which, by the way, "supports governmental policies to require chain restaurants to provide customers with nutritional information," (2) and the Medical Group Management Association. Wouldn't it be more beneficial to their members for these associations to fight regulations instead of offering products to facilitate regulations?

Is it impossible to transition out of the New Economy? If it happens, it will not be painless, smooth, or voluntary. Too many have too much invested in it--including the AMA.


(1) Cantoni C. Corporate Dandelions: How the Weed of Bureaucracy is Choking American Companies--and What You Can Do to Uproot It. Amacom Books;1993.

(2) AMA. Case summaries by topic: food labeling. Available at: casesummaries-topic/ Jan 30, 2012.

(3) AMA. New AMA-MGMA online directory helps physicians select practice management system software. Press release, Apr 28, 2011. Available at: .page.Accessed Jan 30,2012.

Statist's View of "Fair" Bureaucracy

"It is not seemly for a subject to apply the yardstick of his wretched intellect to the acts of the Chief of the State and to arrogate to himself, in haughty insolence, a public judgment about their fairness!'

Prime Minister Von Rochow's response to a Prussian Citizen's Petition--May 15, 1838


"Today the fashionable philosophy of statolatry has obfuscated the issue. The political conflicts are no longer seen as struggles between groups of men. They are considered a war between two principles. The good and the bad. The good is embodied in the great god State, the materialization of the eternal idea of morality, and the bad is the 'rugged individualism' of selfish men. In this antagonism the State is always right and the individual always wrong. The State is the representative of the commonweal, of justice, civilization, and superior wisdom. The individual is a poor wretch, a vicious fool."

Bureaucracy by Ludwig Von Mises, 1944

Craig J. Cantoni is an author, columnist, management consultant, and a former corporate executive responsible for employee benefit plans. Contact:
The current 5th Edition of the Crisis Management Plan
   for Schools[R] includes the response procedures that are
   compliant with the NIMS-National Incident Management
   System and the ICS-Incident Command System as
   initiated by Homeland Security Presidential Directive 5.

   On Feb 28, 2003, the president of the United States
   issued Homeland Security Presidential Directive 5 (HSPD5)
   called the "Management of Domestic Incidents," which
   directs the Secretary of Homeland Security to develop
   and administer a National Incident Management System
   (NIMS).The NIMS system includes the ICS system.

Question: What should a serving size be for a retail
   baking flavor? There are so many uses from cookies to
   smoothies, which would have significantly different
   serving sizes and nutrition information.

   Answer: The Code of Federal Regulations (CFR) does
   not include a specific reference amount customarily
   consumed (RACC) for baking flavors. FDA's Food Labeling
   Guide in section L62 includes suggested RACCs for a
   number of product categories not included in the CFR.
   Products marketed as flavor substances for baking would
   most closely resemble flavoring oils with a suggested
   RACCof1 tsp.

   In this scenario, it would be helpful to consumers to
   include a second column within the Nutrition Facts that
   shows nutrition information for other intended uses
   (such as smoothies).

Selecting the correct software to use in a medical
   practice is critical for physicians, particularly now that all
   technology-based practices must be compliant with the
   government's updated standard for electronic claims
   transactions. The new standard, known as HIPAA Version
   5010, will be required by January 1, 2012. The American
   Medical Association (AMA) and the Medical Group
   Management Association (MGMA) have made the
   software selection process easier by developing an online
   directory of software vendors that helps physicians
   determine whether the vendors' practice management
   systems are compliant with the 5010 standard. A
   companion piece to the recently released Selecting a
   Practice Management System toolkit, the Practice
   Management System Software Directory provides
   detailed vendor profiles, enabling physicians to easily
   choose the software that best fits their needs. (3)
Gale Copyright: Copyright 2012 Gale, Cengage Learning. All rights reserved.