no third solution

Posted By David Z on September 2, 2010

We are daily bombarded with variants of  the “Consumption is 7/10 of the economy” argument. Governments constantly monitor spending, and they encourage people to spend rather than save or invest, because consumption spending is a necessity for debt-based currency. They know that the only way the system can continue is if people continue spending, mindlessly.

But that doesn’t make a people rich (OK, it might make some people rich, but you are not one of them), it makes them slaves to their possessions.

The only thing that can make people rich is production.  An “economy” is not “spending”. An “economy” is a system of production and exchange in order to allocate scarce resources towards the alleviation of wants, needs and discomforts.

When he wrote the General Theory, did Keynes know what he was doing? Reading it, one gets the impression that maybe he did not, for example there are parts where he pretends to be a stalwart defender of free markets and other parts where he vilifies them. Certainly he could not have anticipated the destructive long-term effects of his system fully implemented. Or maybe he did, and he just didn’t care.

After all, in the long run we’re all dead.

Category: Economic Theory | 1 Comment »
Tags: consumption, economy, Keynes, production, Say's Law

Posted By David Z on September 1, 2010

The fact that the US spends more on health care is not particularly alarming. The NYT points out that, for the last 50 years the US has always spent more (as a % of GDP) on health care than the rest of the developed world. The problem is the velocity of change: health care expenditures are rising considerably faster in the US.

If you want to make something more affordable, you cannot continue to spend more money on it, nor can you continue policies which encourage bloat and bureaucracy. To be quite fair, there are dozens if not hundreds of factors that have contributed to the price increases.

• The $100B/year tax subsidy given to corporations is pretty pervasive. Anyone who doesn’t work for a large corporation is at a disadvantage, unable to write off their health care expenses as tax-free — and more unfairly handcuffs people to their jobs.
• The digital age has rapidly accelerated the development of new techniques and new technologies over the past few decades, but many of these procedures are extremely expensive (a problem that is exacerbated by the fact that many people view health care and insurance as a “Free Lunch”).
• The technological advances have allowed us to live longer than ever before — but there is a price to pay. An aging population will always require more attention as the frailty of old age sets in: everything from reading glasses to new drugs and procedures to elder care and hospice.

But something else happened in the 80s that contributes to this problem: The AMA, an evil cartel the sole purpose of which is to extract the highest possible monopoly rents for its member doctors, with the collusion of congress, began restricting the number of new and potential doctors, in spite of an obviously aging population.

The marketplace doesn’t determine how many doctors the nation has, as it does for engineers, pilots and other professions. The number of doctors is a political decision, heavily influenced by doctors themselves…

The United States stopped opening medical schools in the 1980s because of the predicted surplus of doctors.

— via USAToday

The moratorium on new medical schools was not overturned until 2002 when the damage was already well underway. Thirty-ish years later, despite spending more, the US has fewer doctors, fewer nurses, and fewer hospital beds per capita than the OECD average [source: pdf].

This problem is going to take years to fix. I pointed out the metaphysical problem last time: there is already a shortage problem, and it’s only going to get worse if someone pronounces that medical care (provided by whom? at what costs?) will be an American birthright. A shiny new label that says “Universal Single Payer Awesome Health Care America Fuck Yeah!” isn’t going to work, the entire “system” is broken, and rotten to the core.

Category: American Politics, Health Care, Rent Seeking | 3 Comments »
Tags: AMA, cartels, Health Care, licensing

Posted By David Z on August 30, 2010

Last week the NYT highlighted an ongoing labor struggle between Dr. Pepper Snapple and a local labor union, which Dissent Magazine characterizes as the latest installment in an ongoing “race to the bottom“, something like Marx’s iron law of wages. Per the Times,

The strike has become so important because of the prominence of the brands and because of its unusual nature: a highly profitable company is taking the rare and bold step of demanding large-scale concessions.

Dissent notes that the productivity gains of the last several decades have simply not “trickled down” in to the pockets of the American worker, instead they’ve been pocketed by the corporate elite. If this sounds somewhat familiar, it should.

Mike LeBerth, president of the local union echoes a familiar, but mistaken refrain:

“This whole economy is driven by consumer spending, so how are we supposed to keep the economy going when they take away money from the people who are doing the spending?”

Mistaken, because economies aren’t driven by consumption, they’re driven by production. The standard GDP-economy puts the cart before the proverbial horse. Per J.B. Say, Production must precede consumption; prosperity increases where production is permitted.

In fairness, I have to admit I’d be hard-pressed to find a better example of corporate greed, than a company which showed a $555M profit on $5.5B revenue in FY2009. What LeBerth describes, is not the problem. The real problem, or problems, are much greater.

The case of Dr. Pepper Snapple illustrates nicely that the “race to the bottom” is but a symptom* of monopoly rents.

In this instance, a substantial portion (approaching 100%) of their profits are attributable to intellectual property, a considerable barrier to market-entry enforced by the government under penalty of law. Make no mistake: this is not a “right” in any sense of the word, it is a privilege granted by government, to corporations X, Y and Z, protecting them from A, B and C and anyone else who might otherwise be tempted to start their own competing business. The effects of such privilege are obvious: where a lucrative market exists, profits are concentrated among those who benefit thereby.

Insofar as this case embodies a “race to the bottom”, it is the monopoly privilege of intellectual property which drives a wedge between workers of various classes: those inside the protected industry may enjoy leverage over those outside. To a probably substantial degree, the wages taken by the union are a derivative economic rent, extracted from the rest of the economy (i.e., the non-union employees in other industries in the local market), but coming first and foremost from the privilege granted the corporation. And it is precisely this privilege which enables a corporation like Dr. Pepper Snapple to exercise such a degree of economic power over its own workers, as to demand considerable concessions even when posting record profits.

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* For brevity’s sake I will limit discussion to this one problem, although I do not doubt that you could point out several more, each of which would merit examination of its own.

Category: Economic Theory, Economics Lessons, Employment & Labor, Rent Seeking | 2 Comments »
Tags: Dissent magazine, Dr. Pepper, intellectual property, labor disputes, profit, race to the bottom

Posted By David Z on August 28, 2010

Take a gander across suburbia. As far as the eye can see: 60′ lots row by row mile by mile. Every single one of us has our own lawnmower, weed whip, edger, two fucking cars and 5 televisions, microwave dinners and central air-conditioning.  For christ’s sake people are wearing $200 Ed Retardy denim (Levi & Strauss probably rolling in their graves) and drinking $5 coffee-flavored milkshakes.

But folks are crying about lack of access to “universal” health care?

This is absurd for all those reasons listed above and then some, and also because it’s not that big of a “problem” that it can be handled other ways*. Everybody wants it, but nobody wants to give up their McWhatever or designer clothes or HDTV or unlimited talk text & web smartphones.

Governments at all levels (which have actively contributed to the health care crisis) have already demonstrated their inability to manage socialized health care programs with specific, limited scope. What makes anyone think that they’ll be able to do any better by expanding the programs and broadening their scopes? More government interference is unlikely to fix it.

But it’s bigger than that:

Exactly where is the capacity, in the current ’system’ (for lack of better words), to cope with the increased demand for medical care and services which we know with absolute certainty will occur if national health care becomes a reality?

Allegedly there are millions of people who are clamoring for care, wallowing in their own urine, setting their own broken bones, eating Alpo because they can’t afford food, and self-medicating with a handle of Five O’ Clock because they can’t afford their meds. But all the doctors and nurses and practitioners are already working 40 or 50 or 60 hours a week. You aren’t going to get more doctors without a considerable (10+ years) lag unless you open the borders (which incidentally is fine by me), but the last time I checked, that wasn’t on the menu.

Where is it all gonna come from? The capacity is years, if not decades off. And that’s if we were to start now by dismantling all the subsidized oligopolies that are contributing to the current problem, and changing, reforming, or eliminating every sentence of every law or code which disadvantages individuals in favor of corporations. Otherwise, it’s just talk.

It is simply not possibly to will a perfect system in to existence merely by labeling it “universal.”

It’s a lie. Just like everything else they sell you. They get rich, and you get fucked.

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*Let me assure you that this is not an endorsement or defense of the current “system” of health & wellness care in the U.S.   There are plenty of things wrong with it, and plenty of things that could fix it overnight, the most apparent of which would be to immediately grant the same tax-favorable treatment to individuals as is had by corporations.  But these are never discussed in the mainstream.

Category: American Politics, Economics Lessons, Health Care | 3 Comments »
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