Wednesday, May 07, 2014

Margaret Wente's "Takedown" of Thomas Piketty

Marget Wente’s purported “takedown” of Thomas Piketty’s Capital in the Twentieth Century ( "Who Cares About Inequality? Wonks") Globe and Mail, May 3, p. F2), while anti-intellectual in tone, reminds me of  the philosophical arguments made against idealist theories of equality decades ago.  Friedrich Hayek railed against what he called the “mirage” of social justice, since  "the results of the individual's efforts are necessarily unpredictable, and the question as to whether the resulting distribution of incomes is just has no meaning" (The Constitution of Liberty, ch.6). Likewise, Robert Nozick pointed out that any attempt to build a just society around a preferred distribution would be intolerable, because   “liberty upsets patterns”. 
 Like Wente, both Hayek and Nozick  thought that inequality was a problem only in some people’s heads. Get rid of the egalitarians and their misplaced notions, and you get rid of the problem. But their arguments don’t address a more recent line of thinking about inequality, which gives it a different ontological status from simply being an expression of envy or of subjective notions about "justice".  Fred Hirsch's Social Limits to Growth (1977) analyzed society's declining ability to simply buy social peace and legitimacy through growth  in terms of the growing importance of inherently scarce positional goods.  Richard Wilkinson and Pickett’s The Spirit Level (2009) was written by two social epidemiologists who found stronger correlations between the degree of inequality and various social ills than existed between those ills and any other social determinant. Their conclusion: "societies with more equal distribution of incomes have better health, fewer social problems such as violence, drug abuse, teenage births, mental illness, obesity, and others, and are more cohesive than ones in which the gap between the rich and poor is greater."  
Robert Frank (The Darwin Economy: Liberty, Competition, and the Common Good , 2011) has found that it is indeed getting harder and harder to join the middle class. His views are supported by the researches and arguments of prominent economists like Tony Atkinson, Joseph Stiglitz, Robert Reich and Paul Krugman.  Now, Thomas Piketty has tied a lot of this together and looked at several national economies over centuries and has demonstrated convincingly that there is an inherent tendency within capitalism for the return from wealth to grow faster than the return from work. This "rich-get-richer" dynamic is the norm in capitalism. America in the 18th and 19th centuries (which because of the abundance of land and higher productivity had much lower capital/income ratios)  and in the early-mid 20th century (because of Depression and war) was an aberration; it is now reaching capital/income ratios more like those that have been found historically in Europe. Piketty expects global capital/income ratios to reach about 6.5 in this century --barring another cataclysm.  That is why he argues for a global wealth tax as the best long-run solution, even if that is not practicable in the short term.
Even in societies where basic living standards and a full panoply of civil and political rights have  been achieved, much depends upon the assumptions of upward mobility  and equal opportunity. This is why Piketty threatens to turn conservative views upside down, because he shows once again that the problem may not be the virus of class consciousness or socialist attitudes coming from Europe, but the actual economic dynamic underpinning them. If that is true, then the baneful consequences of inequality will be felt here as well, whether we like to think about them or not.

Friday, May 02, 2014

The Federal Government and Healthcare Reform

The future of health care may be the most important issue that Canada faces heading into the 2015 federal election year.  The 2003 First Ministers’ Accord on Health Care Renewal injected $36 billion in federal money into health spending and the 2004 10-Year Plan to Strengthen Health Care added a further $41 billion over that decade in order to, in then-Prime Minister Paul Martin’s words, have a “fix for a generation” that would “buy change”. On March 31 that Accord expired.
Unfortunately, all this  federal spending mostly did was to buy the avoidance of  change for about half a generation. Hardly a “fix”.   And by avoiding hard choices, progressives in the Liberal Party and the NDP have opened the door for Stephen Harper – a man who was once the President of the National Citizens Coalition (an organization founded by an insurance salesman who hated Tommy Douglas for getting in the way of profits)—to do things his way.  The really scary part is that Harper doesn’t have to commit political suicide to undermine medicare. As prime minister, all he has to do is cap funding (with reductions conveniently scheduled to commence after the next election), not enforce the Canada Health Act very vigorously, and let nature take its course.  
But if  throwing more money at the provinces won’t work, what should we do instead?  We need only go to the source: when he first implemented medicare, Tommy Douglas was against the fee-for-services approach as something that blunted the cost effectiveness and equity of the single-payer system. Half a century of experience with our healthcare system (not to mention the analysis of the world’s most reputable health economists and policy analysts) shows that Tommy was right.  We need a federal government that will use its spending power to accelerate  the creation of a strong primary care foundation that is more patient-centred, more focused on prevention and chronic care,  and less focused upon high-cost providers simply billing the government for their services. We need to stop using acute-care hospitals as long-term care facilities.    And we need a national drug strategy so that we can  use the power of the single-payer to lower drug prices.
That drug strategy could have been accomplished by now.  Every business person understands that the larger your bulk order, the greater your chance of lowering the price. Economists estimated in one study that for four major drugs the savings in Canada of a single national drug plan could be as high as 50 percent.  Premiers Lorne Calvert of Saskatchewan,  Ralph Klein of Alberta, and Gordon Campbell of British Columbia all  called for a national pharmacare program. But prime minister Martin was too busy, and  he dithered. As a consequence, the deal was killed in 2006 when we elected the Harper Conservative government.