Today's Buggy Topic

. . . continues the analysis of the merits and problems of the US and French healthcare systems, only with the comparative thrust extended to include the Canadian system.  As before in the previous buggy article on the subject (August 26th, 2009)  the main aim of the current analysis is to debunk certain myths about the superior condition of these two state-run healthcare systems.

You'll find the continued buggy argument in the same thread at Economist View --- click here --- where the original two buggy posts appeared.  Today's adds two more.

Note Quickly

To puncture rife urban myths about those two foreign systems doesn't mean that the US healthcare system isn't troubled with certain real problems too --- let alone that we do everything better than they happen to and shouldn't be attentive to see if certain of their "best practices" can be imported here.  Prof bug deals with many of our healthcare problems in the Economist View thread, but the same analytical intent dominates: to counter the ex-cathedra beliefs of left-wing liberals and radicals that these state-run systems are superior to the US system in all relevant healthcare matters.

One Other Point Is Worth Mentioning

The largely unplanned and uncoordinated American healthcare system --- which is unique in the world in its heavy reliance on employer-based healthcare insurance, plus rapidly growing government-run programs of Medicare (and Medicaid )in the last few decades --- reflects our political heritage and institutional arrangements that are also . . . well, if not unique, highly unusual:

• A central governments that separates the branches of government, court-supervision of all legislation and regulations,
• A strong federal system spread out across a large continent with Alaska and Hawaii geographically far away,
• A revolutionary birth of our government based in no small part on suspicion of concentrated political power --- not least motivated by tax rebellions against the British colonial crown,
• Th absence of socialist ideological influences on the left, and --- on the right --- the absence as well of a pre-industrial, pre-democratic right-wing rooted in feudal traditions that supported strong government in European history for reasons of domestic stability and  power-politics that entailed almost continual warfare  with other countries for centuries,
• Massive and almost continual immigration from other countries for centuries now, which has lessened the sense of social solidarity as compared with the far more homogeneous populations of West Europe (with Canada something of a minor exception), but which --- please note --- has also been intense in West Europe and Canada for four or five decades and is nibbling away at the foundation of cultural cohesion there too,
• A powerful and largely unchallenged Protestant ethos of individual self-reliance, to which over time even non-Protestant immigrant communities adapted . . . reinforced by marriage across historical ethnic lines.
• And, finally, an unusually successful capitalism and a strong sense of individual economic self-reliance that has no full counterpart elsewhere in the rich countries . . . no, not even in Britain these days.

The Outcome?

Any reforms of our healthcare system, now or in the future, will very likely embody compromises that reflect these historical, cultural, and institutional influences.  Those compromises will not satisfy fully any one bloc of voters: left-wing Democrats, moderate Democrats and Republicans, libertarians, and Conservative Republicans.

Today's Buggy Topic

It's wide-ranging and found in a thread at Economist View, the laudable web-site run by Professor Mark Thoma, an economist at the University of Oregon. 

There are three long buggy posts in that thread.  One points out a myth about the US infant-mortality rate viewed across rich countries.  Two other posts deal at length, the face of enraged protests from some other posters, with growing troubles in the French healthcare system . . . extolled by some chronic posters at Economist View as the world's greatest.  Odd.  As you'll see, 74% of Frenchmen were found in a survey poll last October (2008) to believe that their healthcare system is problem-laden and getting worse.

Click here.  And be sure to note that at the bottom of the 1st page of comments --- where two of prof bug's posts are found --- you should click on the Next-Page button to find a third buggy post.  Enjoy the frazzled frets and bravado assaults that the chronic defenders of the French healthcare system have shot prof bug's way. 

Today's Buggy Topic

Dozens of studies have come out in the last two decades or so --- both in economics and sociology --- that find a similar result across countries: West European countries show more upward mobility in income over time than the US. 

Alas for them.  These studies, as it happens, confuse two things: an improvement in income of a worker over time --- say, 10 or 15 years --- with a re-ranking of the pecking order in an income hierarchy . . . say again, a movement over time for an individual worker upward from the bottom 5th quintile of income-distribution into the 4th quintile. 

The latter is what we mean by upward mobility in a strict sense.  And the movement of a worker upward into the 4th quintile requires that a worker at the beginning of the 10 to 15 years moves downward into the 5th quintile. 

By contrast, an improvement in an  individual worker's income over those 10 to 15 years that does not re-arrange positions in the income hierarchy reflects overall "institutional" and "tax and distributive transfer policies" as well as overall economic growth and more experience on the job.  We can call this kind of income change "structural mobility."

What Happens When Strictly Viewed Income Mobility --- Upward and Downward --- Is Measured?

That's the gist of a lengthy post that prof bug left in a thread today at Economist View.   The post draws on an impressive study by a Belgian economist who separated lots of income data on these two measures: mobility that entails re-arranging the income hierarchy as opposed to straightforward income improvements due to institutional and policy matters, plus economic growth. In particular, the Belgian economist compared the US income data between 1985 and 1997 with data for Belgium and West Germany in the same period. 

His finding? 

Income mobility of the strict re-ordering of positions in the income hierarchy was 60% higher in the US than in Germany and 65% higher than in Belgium.  Quite a difference with the findings that rest on a confusion of the two kinds of income changes, no?f

Today's Buggy Topic

It's found in a thread at Economist View, where prof bug frequently posts long analytical commentaries.   The subject-matter was prompted when prof bug looked over swiftly the posts of others, where two or three left-wing posters used the term fascism as a scare-word, intended to bad-mouth and vilify moderate liberal and moderate conservative politicians whose policies they don't like.  Such usage is the equivalent on the left of the right-wing mud-slinging at someone with boo-words like communism or even socialism . . . at any rate, in the American context now or in the past.

There are specific meanings, specific historical contexts, and specific historial variants of the political phenomena that these ideological concepts embody and historically reflect,  but their use as a polemical smear-tactic has hardly anything to do with actual fascism, communism, or socialism on these scores.

Click here for the buggy effort to bring some conceptual and historical clarity to the nature of fascism and its history.

Today's Buggy Topic

The subject-title here mirrors the lengthy buggy commentary with full fidelity . . . the bugged-out stuff inspired by a linked post at Economist View, the admirable web-site, that featured an article in the Washington Post by Professor Gregory Clark.  A gifted economic historian at UC Davis, Clark published a book in 2007 --- its title, A Farewell to Alms --- that unfolded a tightly argued, radically innovative account of the industrial revolution and its causes in England in the late 18th century.

How the Book Relates to the Article

Clark's Washington Post article did not explicitly refer to his book, but you can't understand his argument there without knowing well his historical account of the industrial revolution, and especially its key explanatory causal model:  in a word, only by mid-18th century were there enough "modern men" in England with a thorough-going middle-class mentality ---  educated, thrifty, and hard-working people with cumulative family capital and an entrepreneurial spirit: most of them addicts of self-improvement, and keen and ready to increase their income, wealth, and social status by business, financial, or technological innovation in industry and agriculture --- who could exploit the various institutional advantages and incentive-system that had existed in England for centuries.

This focus on the rise of a modern-man mentality as the key variable behind the industrial revolution isn't itself radically new.  A century ago, the great German sociologist, Max Weber, set out such a cultural explanation in his renown work, The Protestant Ethos.

Clark's argument, though, is even more radical than Weber's . . . the latter's cultural thesis downplayed for decades anyway in almost all economic history.   Clark's explanation is both cultural and biological . . . the interaction based on social biology or, its up-to-date variant, evolutionary psychology.  And his evidence --- which shows how, in a Malthusian world, the rich and well-to-do classes in England began in the 15th century to leave far more surviving sons and daughters than the less affluent classes --- is strikingly new and persuasive.  

Click here  for the buggy post.  Be sure to read the Clark article at the top of the thread, and then --- if you want --- click on the "previous page" button after you've looked at prof bug's comments if you want to see what the other 100 posters had to say about it. 

Today's Buggy Topic

Until the mid-1970s, low-skilled labor in the USA had a long record --- stretching back throughout most of the 19th century --- of unusually high-wages, at any rate if measured against the equivalent wage-levels abroad in Europe or East Asia.  As late as 1939, on  the eve of WWII, the American wage-level was about 2.0- 2.4 times higher than in Britain or elsewhere in West Europe.  By the end of the 1970s, that lead had narrowed in parts of Northwest Europe --- Scandinavia, Germany, Belgium, Holland, France, and yes, also also in slow-growth Britain, mainly owing to what's called convergence catch-up growth. 

Convergence Catch-up Growth Means What?

It means that countries with good legal, political, and business institutions --- plus, a labor-force able to work effectively with up-to-date technologies (mostly innovated and diffused first in the US since the late 19th century; and still the case today) --- will, once they are launched on a sustainable growth-path, grow faster in productivity and per capita income than the lead country on the technological frontier. 

There are several reasons why.  They have more investment opportunities; have lower-priced labor; can attract the technologies from the lead country by multinational implants or licensing (or piracy as in much of China today);. and can then diffuse the technologies across various sectors of their economy . . . and all at relatively low costs, compared to the R&D that American firms invested, the US the leader on the technology frontier for about a century since the 1890s.  In the late 1990s, for instance, the information and communication technologies US firms had innovated had cost about $500 billion.  European or Asian firms could purchase these ICT breakthroughs for something like $25 billion.

Meanwhile, the lead country's economy has, usually, a larger capital stock; and if its firms don't continually innovate, sooner or later diminishing returns on capital investments will set in and the growth-rates in productivity and per capita income will fall off.   In the end, on this view, those countries that have proper institutions and skill-levels diffused among their populations will end up with similar levels of productivity and per capita income.

Enter the Big Structural Changes in the US Economy Since the Mid-1970s

The two biggest changes have been radical technological innovation and globalization . . . the two inter-connected: the big breakthroughs in information and communication technologies, including the Internet, have facilitated the rapid movements of capital and multinational enterprises around the globe; then, eventually, as the pace of globalizing influences picked up --- including the bursting economic growth of East Asia and especially China --- the competitive pressures on US corporate business intensified and speeded up the need to move swiftly up a technological ladder.

The outcome here?

Among other things, there has been a marked relocation of standardized manufacturing out of the US (and to an extent out of West Europe) to China and elsewhere, with multinational firms operating multi-level production and using disciplined low-wage Chinese labor for much of their low-end and mid-level production.  That has entailed the loss of about 4 to 5 million unionized jobs.  At the same time, advanced manufacturing production has enjoyed a tremendous burst of growth in productivity --- so much so that today in chemicals, airplanes, pharmaceuticals, automobiles, big machinery, and the like the level of labor productivity is 3 to 4 times higher than in the late 1970s.  In the upshot, millions of more high-cost labor have been laid off.

In effect, the US has shifted to an overwhelmingly service-industry economy, with manufacturing output only about 15% of American GDP and manufacturing employment down to around 10% of the overall labor force. 

Another good measure of the change?  About 75% of the US Fortune 500 giant firms in the late 1990s didn't exist 25 years earlier. 

Enter the Problem of Growing Wage Inequality

The skill-levels needed in various service-industries vary markedly.   Americans with university degrees have done generally quite well . . . though those in the highest income levels have also enjoyed huge windfalls in their stock-market investments (with ups and downs, and no doubt downs in the latter part of this decade).  By contrast, Americans with only high-school education or less have done poorly.  Their wages have either stagnated for almost three decades (except for the late 1990s dot.com ballooning economy and unemployment around 4.0%) or actually fallen.

This trend, moreover, has been aggravated by other changes in the US economy since the late 1970s:

• A large growth of the low-skilled labor force owing to immigration, legal and illegal.
• A reinforcement of this growth of low-skilled workers as women flooded the job-market starting in that decade.  With, to boot, high-skilled women marrying high-skilled men and thus increase wage-inequality that way.
• The big lag in educational lev els of Hispanic and African-Americans compared to European-Americans and Asian-Americans (especially those from East Asia and India).

What To Do?

There are no easy solutions , far from it --- no silver bullet to end this complex of mutually reinforcing causal influences.  Still, as you'll see if you click here, prof bug sets out a more systematic analysis of these trends and comes up with some policy-suggestions that --- superficial as they might seem --- at least underscore the changes needed to improve the wage-prospects of low- and mid-skilled Americans.

f

Today's Buggy Topic

When Congress returns from its vacation, the debate on reforming our existing health-care system will be at the center of its concerns . . . the reform looming as the biggest change in American social policies since the "Great Society" programs of Lyndon Johnson in the mid-1960s.  It helps to know which healthcare systems in Europe seem to offer some guidelines for our reforms in this country.

Two kinds of different healthcare systems exist in Europe:

(I) Strictly Private Insurance, Carefully Regulated by Governments 

In West Europe, three healthcare systems --- the Dutch, German, and Swiss --- rely exclusively on private-insurers, with the government role restricted to requiring universal coverage of basic services for all citizens and permanent residents . . . plus close regulation of the  fees of those healthcare services (physician, hospitals, nurses, drugs, and so on.)  

Dozens of different insurance companies compete to offer basic plans in those countries with different costs.  The companies are not supposed to earn profits on those plans; they can, of course, pay their employees at all levels whatever they individually want.  Above and beyond these basic insurance plans, the companies offer all sorts of supplementary plans full of different options for better rooms in hospitals, certain health services not covered by the basic plans like alternative medicines, and so on.  Lots of choice; lots of high-quality services; and generally all three countries manage to cover their citizens' healthcare needs at about 25-30% lower expenditures yearly as an overall percentage of GDP than the US does.   (We are currently spending over 16% of GDP on our healthcare services.)

(II.) The Alternative Systems in Europe: A Bigger State Role

 In Britain, Sweden, Denmark, Austria, and France, the healthcare systems are funded mainly out of taxes --- as, say, Medicare, Medicaid, and Veterans' Hospitals are in this country.  In all of them, private insurance companies offer supplementary plans and added healthcare options in the private market.  In France, for instance, about 90% of the population opts for additional coverage this way.  

The range of individual choice among physicians varies too in this countries.  Traditionally, for instance,  the individual Frenchman could go to any doctor of his or her choice, including a specialist; pay the doctor the required fee (for which the citizen is then quickly compensated, minus a co-payment of usually 30% . . . though with limits on financial liability for lower-income and mid-income persons or families); and go as often as they wanted.  Recently, though, as a cost-cutting measure, the French system is moving toward a HMO-like access-model.  That limits choice of specialists, as is the case for HMO services in this country too.  (Other private insurance plans in the US, of course, allow the patient to choose seeing any doctor who will accept the insurance coverage.)

Still, direct and indirect taxes fund most of the healthcare systems' costs in these systems.

Remember Here When It Comes to Reform:

 The current US healthcare system --- largely private insurance, funded mainly by contributions of both employers and employees; some individual acquired insurance policies; and government programs like Medicare, Medicaid, Veterans' Hospitals, Federal and State Employee-coverage, and coverage for active military members --- has a number of strengths.

• In the World Organization rankings in 2000 of 191 countries' healthcare systems, the US was ranked overall 37th --- mainly because of problems of fairness in access and overall cost --- but ranked first in overall patient views of responsiveness.  The latter was one of the 8 measures used to rank countries.  It covered about seven or eight criteria, all based on survey data: how patients felt they were treated with dignity by healthcare professionals; timely access to doctors, including referrals to specialists; views of the pleasantness of offices, hospitals, food in them, and so on.

• And the WHO noted that the US system was the most innovative technologically, including in drugs, and US citizens were subsidizing the costs of drugs and new medical technologies for other systems.

A further study, linked to by prof bug, was a panel-discussion between European and American healthcare specialists on the question of medical innovations and whether Americans were subsidizing the healthcare systems of others.  A Dutch specialist, both a physician and a scientist who runs an important consulting services for healthcare throughout the EU, agreed without reservation that the US healthcare system was far and away the most innovative, and not just in drugs and technologies but in HMO networking and so on.  He did dispute whether such innovations were subsidizing EU systems, noting that such innovations were generally profitable for American companies.)

• And Americans --- while agreeing in the range of about 60% or more that our healthcare system needs an overhaul --- were found to be generally overwhelmingly satisfied with their health-care insurance plans if they had them.  And even the 14% or so of Americans not insured were, in large majority, satisfied with the healthcare they did receive, though many mentioned the problems of costs

So what are our main problems?  Two stand out:

• As a country, we spend a little over 16% of GDP on healthcare. That's far more than other healthcare systems spend. Some of that, of course, is reflected in the R&D for new technologies and drugs. Still, insurance plans have risen in costs to employees and employers and others at a rate about double to triple that of annual general inflation, and for well over 15 years now. Something needs to be done here.

• Access is a problem for the non-insured . . . even if the figure of 46 million is misleading, and on several scores: not least, only about half to 3/4 of that figure was found in a CBO study to mirror accurately those Americans and residents who were uninsured for any one whole year. There are also lots of uninsured with incomes 2 to 4 times higher than the poverty-levels for families or individuals.

For Prof Bug's Views

Click here.  Note that there are three or four bugged out posts in the thread. 

Today's Buggy Topic

 The subject-title captures it faithfully, and prof bug's long, evidence-laden commentary can be found here.