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2010 August 22 Sunday
Venezuela: Socialism Still Does Not Work

Socialism still has not become a viable way to organize an economy. But Hugo Chavez didn't get the memo. A Reuters reporter visited a commune funded by the Venezuelan government (funded of course by oil exports to capitalistic countries) and found that commune members lack revolutionary socialist fervor.

Neither ideological nor productive fervor were much visible at the Cacique Tiuna Commune, which boasts a plastics plant, a vegetable garden, a "socialist" carpentry shop and a plant nursery.

During a visit last week, the plastics plant was idled, the irrigated garden was awaiting "refinancing" to start and at the carpentry shop only a handful of laborers worked under the stern gaze of a mural depicting the historic Indian chief Tiuna after which the commune is named.

"The Comandante (Chavez) wants this to be a showcase community," said Yamilet Ramirez, the Commune's spokesperson. "The idea is that it should be self-supporting."

But the Cacique Tiuna commune seemed some way off its intended goal as a self-sustaining, self-governing community.

Click thru and read the whole thing if you want to make sure I didn't miss any revolutionary fervor of the working class. Or click thru and read it if you enjoy cautionary tales or are wondering just how messed up Venezuela is going to become (pretty messed up I would guess).

The people living in the commune are happy that Venezuelan President Hugo Chavez had funded the construction of their housing. But one of the residents admitted they felt apathy. Ole buddy Hugo wants his communes to become self-sustaining. Good luck with that Hugo. For your sake hope the price of oil skyrockets so that you can continue to play with oil-funded communism.

If Hugo can't get his oil production up then his party isn't going to last. The Venezuelans would be lucky if the oil ran out sooner and the socialists got the boot. But my guess is the socialists will get to remain in power long enough to do a lot more damage. The Spanish upper and middle class will seethe. The Amerinds will just keep accepting the hand-outs funded by oil money.

By Randall Parker    2010 August 22 06:30 PM Entry Permalink | Comments (17)
2010 May 08 Saturday
Cuba Rice Supplies Worsening

The worst days of Cuban hunger after the Soviet Union collapsed might be behind them. But in spite of 20 years to adjust to their own form of "Peak Oil" the communists in Cuba still can't grow enough food for their people.

"We are demanding discipline and order in purchases," state-run Radio Rebelde said during its Friday newscast. "Don't allow, under any circumstances, people to hoard rice so they can later sell it at a higher price."

The communist government subsidizes rice and sells it in government farmer's markets for 3.50 pesos per pound, about $0.17. But rice has become so scarce in recent weeks that "certain unscrupulous people are hoarding," reported the station, which broadcasts across Cuba and is among the most listened to nationwide.

Cuba is a living museum for communism. Cuba exists to remind us in real time that communism fails as an economic system. We should be grateful to the Cubans for playing the role of economic educators with their entire lives. Given that most people know squat about history the existence of a present day reminder serves a useful function.

Cuba's agricultural failures create business for US farmers.

Furthermore, food is not part of the U.S. embargo. For the past several years Cuba has been purchasing food and agricultural products from U.S. producers. The United States has become the largest exporter of food and agricultural products to Cuba.

So Hugo Chavez of Venezuela helps prop up the Castros and then they are able to buy from US farmers. Any country that provides financial aid or oil to Cuba is helping US farmers. Think about it.

After the Soviet Union collapsed and Cuba lost out on USSR oil shipments Cuba went thru its "Special Period" where the economy contracted and food became very scarce. The government's and populace's responses to that period included a return to organic farming and lots of gardening in empty plots even in cities. Basically, Cuba did what the relocalization and transition town movement hopes to do. I think it amounts to reversing the economies of scale and that we can deal with Peak Oil without giving up most of our economies of scale.

By Randall Parker    2010 May 08 12:27 PM Entry Permalink | Comments (5)
2010 January 18 Monday
Hugo Chavez Continues To Drive Down Venezuela

Hugo Chavez recently devalued (he rebranded this as "revalued") the Venezuelan currency. This rose prices of imports. He threatened to seize and nationalize any store that tried to raise prices in now more expensive imported goods. Well, stores tried to raise prices and Hugo has begun nationalizations in the retail sector starting with a small French retail chain.

Chavez announced on Sunday the imminent expropriation of Exito, owned by Casino Guichard Perrachon SA of Saint-Etienne, France and Almacenes Exito SA of Medellin, Colombia, for what he described as repeated instances of raising prices in defiance of government regulation.

The French firm holds 67 percent of Exito.

Last week, the leftist government closed 70 individual Exito and Cada stores for 24 hours, accusing them of increasing prices after a devaluation of the bolivar.

A BBC reporter finds decay in a visit to Venezuela.

The country's central bank has estimated that the economy shrank 2.9% in 2009.

And according to the International Monetary Fund, Venezuela is set to be the region's worst performer in 2010, with a projected contraction of 0.4% in a year when Latin America as a whole is expected to grow by 4%.

Without oil to export Venezuela's economy would collapse.

Oil, as ever, is still the mainstay of the Venezuelan economy.

In fact, it is responsible for more than 90% of the country's foreign currency inflows and 50% of government revenues.

Venezuela's declining oil production has continued downward beyond the time range of this graph. Notice the increase in consumption. Gasoline prices are subsidized and cheap in Venezuela. So soaring consumption is further cutting into oil available for export to earn foreign currency.

Venezuela Oil Production and Consumption, 1986-2006

The government oil company can't afford to develop enough production to arrest the decline. Hugo seized oil fields developed by ConocoPhillips and ExxonMobil among others. So most foreign oil companies aren't going to invest there. Hugo fired a lot of the technically skilled national oil company employees and then hired lots of supporters.

It is pretty easy to predict more decay. But Hugo has cracked down on inflation and brought it down to a mere 25.1%.

Annual inflation in Venezuela was 25.1 percent last year, down from 30.9 percent in 2008.

Rolling blackouts that last for hours at a time are doing their own damage to the economy.

A severe drought has forced Venezuela President Hugo Chavez to ration electricity in South America's top oil exporter, but underinvestment and shortsighted planning during an economic boom are as much to blame as the weather.

Meanwhile, Hugo is fighting his own battle against decay by taking on the Playstation game player.

Those games they call 'PlayStation' are poison. Some games teach you to kill. They once put my face on a game, 'you've got to find Chavez to kill him'.

He sees cigarettes, drugs and alcohol as the capitalist road to hell.

Games, said Chavez, "promote the need for cigarettes, drugs and alcohol," adding "That's capitalism, the road to hell."

Chavez has chosen the socialist road to hell.

Hugo thinks the US is going to occupy Haiti. Um, what would be the motive? I fail to see how the place could possibly pay for the cost of occupation. Though, to be fair, neither do Iraq or Afghanistan.

“I read that 3,000 soldiers are arriving, Marines armed as if they were going to war,” Chavez said. “They are occupying Haiti undercover.”

Marines armed as if they were going to war? I would hope so. Port au Prince was a dangerous place before the earthquake.

By Randall Parker    2010 January 18 08:55 PM Entry Permalink | Comments (3)
2009 February 15 Sunday
Food Shortages In Venezuela

Socialism only works when high oil prices can subsidize its many failings.

If you want beans, pasta or milk, you're out of luck at the El Barquero Supermarket in Caracas, Venezuela.

"Lentils, grains — you almost can't get them," purchaser Jose Rodriguez said by telephone. "We're always having shortages of one thing or another … and you can't import them because the government controls it all."

Price controls and currency controls lead to shortages. Is Venezuelan President Hugo Chavez surprised by this? Or does he see this as more evidence that Spanish-blooded middle and upper class capitalists are evil?

Inflation runs above 30%. Chávez has implemented price controls, but many producers have reacted by choosing not to sell their goods below what they consider fair cost — resulting in shortages of staple foods. The government has put strict controls on the buying and selling of dollars in an effort to prop up its currency, the Bolivar.

If the price of oil remains very low the rest of this year will the lower classes turn on Chavez? Oil prices will eventually recover. But the Venezuelan government is not investing enough in its nationalized oil industry and Venezuela is on a long decline in oil production anyway.

After nationalizing the holdings of ConocoPhilips (COP) and other oil companies Chávez is now trying to get Western oil companies to invest again now that he's in financial straits. Will any companies go for this?

Embracing the Western companies may be the only way to shore up Petróleos de Venezuela and the raft of social welfare programs, like health care and higher education for the poor, that have been made possible by oil proceeds and have helped bolster his popular support.

"If re-engaging with foreign oil companies is necessary to his political survival, then Chávez will do it," said Roger Tissot, an authority on Venezuela's oil industry at Gas Energy, a Brazilian consulting company focusing on Latin America. "He is a military man who understands losing a battle to win the war."

His nationalizations have left him heavily dependent on oil revenue to keep his regime in power.

Nationalizations in other sectors, like agriculture and steel manufacturing, are fueling capital flight, leaving Venezuela reliant on oil for about 93 percent of its export revenue in 2008, up from 69 percent in 1998 when Chávez was first elected.

Chavez was trumpeting his agricultural policies not that long ago.

One of the objectives of the Chavez government has been to promote the production and consumption of corn in place of wheat consumption which is largely imported. Chavez pointed out that wheat is of European origin and was first brought to the Americas by the Spanish. Corn, on the other hand, originated from the Americas and is produced locally. Chavez pointed out that Venezuela is now self-sufficient in corn production thanks to the agricultural policies of his government that have doubled production in the last 8 years. Currently Venezuelan production supplies 98 percent of national consumption of yellow corn and 100 percent of white corn.

I'm reminded of Atlas Shrugged and an obsession with soy production.

By Randall Parker    2009 February 15 06:23 PM Entry Permalink | Comments (5)
2006 February 26 Sunday
Private Health Care Ban Collapsing In Canada

The Canadian Supreme Court finally recognized the barbarity of the Canadian government simultaneously outlawing private medical care while failing to deliver taxpayer funded care in a timely and high quality manner. As a result another socialist regime is falling apart.

The country's publicly financed health insurance system — frequently described as the third rail of its political system and a core value of its national identity — is gradually breaking down. Private clinics are opening around the country by an estimated one a week, and private insurance companies are about to find a gold mine.


Canada remains the only industrialized country that outlaws privately financed purchases of core medical services.Prime Minister Stephen Harper and other politicians remain reluctant to openly propose sweeping changes even though costs for the national and provincial governments are exploding and some cancer patients are waiting months for diagnostic tests and treatment.

But a Supreme Court ruling last June — it found that a Quebec provincial ban on private health insurance was unconstitutional when patients were suffering and even dying on waiting lists — appears to have become a turning point for the entire country.

"The prohibition on obtaining private health insurance is not constitutional where the public system fails to deliver reasonable services," the court ruled.

Yes, governments do not have a right to prevent people from spending their own money to prevent their own deaths. There is nothing virtuous about this barbaric ban.

Need to see a specialist? Come back 2 months later.

The median wait time between a referral by a family doctor and an appointment with a specialist has increased to 8.3 weeks last year from 3.7 weeks in 1993, according to a recent study by The Fraser Institute, a conservative research group. Meanwhile the median wait between appointment with a specialist and treatment has increased to 9.4 weeks from 5.6 weeks over the same period.

Private MRI clinics are opening in Canada. Soon many Canadians will be able to get MRI scans as quickly as their dogs and cats can. Now, that's progress. What's next? The collapse of Castro's regime? Or will the North Korean regime go down?

By Randall Parker    2006 February 26 10:06 PM Entry Permalink | Comments (5)
2005 April 08 Friday
Too Much Credit Given To John Paul II For Collapse Of Communism

Marc Fisher, who served as the Washington Post Berlin bureau chief from 1989 to 1993 says Pope John Paul II's role in bringing down communism is being greatly exaggerated and the Eastern Europeans really wanted higher living standards and more freedom to travel and live as they chose.

So I always asked: Why are you doing this? And the answers came in a torrent, as if decades of silence had been unplugged. Especially in East Germany, where almost everyone could watch West German TV (though they had to keep the volume way down because it was strictly verboten to watch, and if the neighbor heard, there could be trouble), people talked about their jealousy for the material goods that Westerners enjoyed—the clothes, the shoes, the cars, the food. They talked about their dreams of traveling outside the Soviet Bloc and about the hopes—mainly for a particular career or area of study—they'd had when they were young. And they talked about the freedom to say what they wanted or to teach their children about realities other than what the socialist state had ordained.

Even when I sat in churches for hours on end, talking to ministers, priests, and the generally nonreligious people who came there because of the more open atmosphere, the talk was of political freedom and consumer goods, not of faith.

Fisher's argument strikes me as correct. The Pope had some influence in Poland. But most of the people in late communist era Eastern Europe were not Christians of any sort, let alone Catholics. Russia and the Ukraine were formerly Orthodox but few believers remained. What caused communism's collapse? The material differences between the communist East and relatively more capitalistic West became too large and glaring. The communist economies were stagnating and even in decline. The greater exposure to Westerners that came as a result of Nixon and Kissinger's negotiations with Moscow heightened the awareness of Eastern Europeans and Russians that they were falling hopelessly behind.

In the Soviet Union it was the KGB itself that helped initiate reforms that eventually spun out of control. Why? The KGB had many people who had spent time in the West and they knew how far behind they were falling. Reagan's Star Wars initiative, while widely criticised in the United States as unachievable, worried the Soviet leaders who feared US technological advantages might be usable to develop weapons that would neutralize much of Russia's nuclear arsenal. Capitalism's triumph over communism motivated the reformers to try to find ways to keep up. The communist reformers set in motion changes that they failed to control. Widespread desires for a better life and a loss of faith in communism led to the collapse of the USSR and the freeing of Eastern Europe. Gorbachev's inept leadership undermined efforts to control the reforms. The Pope played a relatively small role by comparsion.

By Randall Parker    2005 April 08 02:01 PM Entry Permalink | Comments (17)
2004 December 08 Wednesday
Need A CT Scan In Canada? For Your Sake I Hope You Are A Dog

A Canadian friend just called to say his dog was going in for a computerized tomography (CT) scan. From the day that the specialist decided the dog should get a CT scan to the day he takes the dog in for the scan is only 6 days. Also, the time from visiting a regular vet to seeing a veterinary specialist who ordered the CT scan was a week and a half. This is in Ontario province. The dog will be scanned after hours on a machine that during the day scans humans. My friend knows I follow stories about waiting times in socialized medicine and suggested the obvious comparison. Well, some quick Google digging turned up a Fraser Institute report from 2003 which shows that Canadian dogs have it better than Canadian humans when a specialist visit and a CT scan are needed.

The total waiting time for patients between referral from a general practitioner and treatment, averaged across all 12 specialties and 10 provinces surveyed, increased this year; rising to 17.7 weeks in 2003 (from 16.5 weeks in 2001-02).

“Canadians are waiting almost 18 weeks for essential medical care. And these lineups have almost doubled over the past ten years. The standard solution -- throwing more money at the problem -- is just not working. The federal and provincial governments are still failing to act in the face of international evidence that increasing patient options for private care reduces waiting times,” said John R. Graham, the Institute’s director of health and pharmaceutical policy research.


The waiting time between referral by a GP and consultation with a specialist rose to 8.3 weeks, an increase of 14 percent over last year (7.3 weeks).

The shortest waits for specialist consultations were found in British Columbia (6.7 weeks), Manitoba (6.9 weeks), and Saskatchewan (7 weeks). The longest waits for specialist consultations occurred in Newfoundland (12.6 weeks), New Brunswick (11.8 weeks), and Alberta (10 weeks).


The growing waits to see a specialist and to receive treatment were not the only delays facing patients in 2003. Patients also experienced significant waiting times for computed tomography (CT), magnetic resonance imaging (MRI), and ultrasound scans.

The median wait across Canada for a CT scan was 5.5 weeks. The shortest wait for computed tomography was in New Brunswick, Nova Scotia, and Newfoundland (4 weeks), while the longest wait occurred in Prince Edward Island (8 weeks).

So if my friend had needed a referral for himself to a specialist and for a CT scan he'd probably have to wait at least 3 months. As it stands now his dog is getting through the same process in less than 3 weeks.

If my friend got desperate he could always leave Canada. A drive south to New York would take Canadians to a real medical market that allows competition and customer payment for services rendered. This ability to pay for services makes provision of such services much faster, just like what a dog in Canada can get. Unfortunately, it is hard for Canadians to buy medical insurance to use in the event of a major illness. Therefore the trip south is more often an option for illnesses which are less expensive to treat and for wealthy people.

On the bright side, it is good to know that Canadians place a such high priority on quick medical treatment for their dogs.

By Randall Parker    2004 December 08 03:21 PM Entry Permalink | Comments (51)
2004 February 24 Tuesday
Food Shortage Worsens In Cuba

Food scarcity is not yet as bad as it was in the early 1990s. But the amount of food available per person in Cuba is declining.

It is nevertheless clear that monthly subsidized ration allowances have grown slimmer over the years, providing Cubans with what most experts agree is less than two weeks worth of food for every month. Eggs, for example, are restricted to 6 to 8 per person per month.

To supplement their subsidized rations, many Cubans must shop at up to nine different types of state-run and independent markets that charge higher dollar prices - in a country where the average monthly salary is about $10 - although many Cubans receive dollars from relatives abroad.

The article notes that an increasing portion of Cuban food imports come from the United States as the US has loosened agricultural trade restrictions with Cuba. But Cuba doesn't have enough to sell to the rest of the world (the vast bulk of which does not maintain US-style sanctions on Cuba) to provide the revenue to buy enough food for its populace. Somehow Castro missed out on learning about the great historical discovery that socialism doesn't work. Why haven't some visiting Canadian or European Union leaders let him in on the secret?

What is happening in Cuba is still only bush league hunger. To get up into the really big hunger leagues Cuba is going to have to compete with North Korea. Hunger in North Korea is so bad and so sustained that North Koreans are, on average, 8 inches shorter than South Koreans.

Update: The current level of crop sales to Cuba are a fairly recent turn of events.

The heightened tensions come amid a surge in American food sales to Cuba, which totaled $256.9 million in 2003, an 80 percent increase over the previous year, according to the New York-based U.S.-Cuba Trade and Economic Council.

The rise in sales has been quite dramatic in just 3 years.

Cuba in three years climbed from last to No. 35 on the United States' list of food export markets despite continued tightening of American sanctions against the island, according to a leading Cuba-U.S. business group.

The legal change that made crop exports to Cuba possible happened in 2000.

Under the Trade Sanction Reform and Export Enhancement Act, which was established in 2000, the United States can send some food and medical supplies to Cuba.

Part of the cash that Cuba uses to buy US food is coming from Cuban-Americans who take money to family members in Cuba.

On a recent visit to Miami, Treasury Secretary John Snow suggested that the administration might toughen current rules that allow Americans to send up to $300 per quarter to relatives in Cuba. These rules also allow Cuban-American travelers to take up to $3,000 to Cuba each quarter to be divided among 10 households.

Past US interventions in Cuba bear some resemblance to what the US is trying to do now in Iraq.

General Leonard Wood and the Rough Riders commanded by Theodore Roosevelt, liberated Cuba from Spain. Wood, as governor of Cuba, accomplished something similar to what President Bush is trying to do in Iraq. Wood did many good things for Cuba: He built roads, bridges and schools, established the Correctional Courts and improved sanitation. He also created the Rural Guards Corps to police the countryside.

Of course Cuba ended up going communist. The US did not ultimately succeed in transforming Cuba permanently for the better. Now it faces hunger and continues under communist rule.

US rulers of Cuba from 1899 thru 1903 made many good reforms and improvements.

Brook's administration restored some services while controlling customs, postal services, sanitation; and health agencies. In December 1899 General Leonard Wood initiated the second period of United states administration in Cuba. Wood was a very energetic man who led the most impressive United states-administered reconstruction programs in Cuba. As a former United States surgeon general, Wood undertook a campaign for the eradication of malaria and yellow fever in Cuba. Dr. Walter Reed, an army surgeon, worked on epidemiology and tropical parasitical diseases projects using research results obtained previously by Dr. Carlos Juan Finlay of Cuba. A census taken in 1900 gave a bleak picture of the island's population of 1.5 million (200,000 less than in 1895), in both economic and educational terms. Schools were built, students were enrolled, special training was provided for teachers, and the University of Havana was restructured. Several public works programs were also established for the improvement of railroads, roads, and bridges.

Cuba's past history has a number similarities with Haiti's past and present. Just as the US occupied Haiti for a number of years so it did with Cuba as well. Plus, just as with Haiti the US left and the government called for the US to return when rebellions sprung up.

In the "August Revolution" disgruntled Liberals rebel against Estrada Palma. The Cuban government is unable to defeat the insurgents and requests U.S. military intervention.

The United States military occupies Cuba and governs the island through a provisional government.

There are places in the world that can get better under US rule but which will deterioriate once the US military and US administrators pack it up and leave.

By Randall Parker    2004 February 24 11:53 AM Entry Permalink | Comments (0)
2003 October 19 Sunday
Canada Suffering Medical Brain Drain To United States

Tyler Cowen has linked to an interesting piece in the New York Times on the sorry state of Canadian medicine.

"It's not about the money," said Dr. Sriharan, a 38-year-old immigrant from Sri Lanka. "We can't do our job properly with operating room time so extremely limited here."

Forced to compete for operating room time with other surgeons, he said that he and his colleague could complete only one or two operations on some days, meaning that patients whose cases were not emergencies could go months or even years before completing necessary treatment.

Of course people are going to say that a decision of this sort to move to the US to practice medicine is not about their own income even though prospects of much higher incomes would play a major role in most people's decision-making. However, poor facilities and all sorts of resource limitations have got to seem like the insult added to injury for someone who spent many years training only to be faced with limits on how well they can apply what they know.

Can the last neurosurgeon who leaves please turn off the lights in the last neurosurgery clinic? If it gets bad enough the Canadian government will be forced to raise salaries for high priced specialties and to make some more money available to allow them to carry out their work.

There was a net migration of 49 neurosurgeons from Canada from 1996 to 2002, according to the Canadian Institute for Health Information, a large loss given that there are only 241 neurosurgeons in the country.

While the NY Times story is mostly anecdotal there are more statistically based arguments that suggest that you are a lot better off getting sick with a serious illness in the United States than in Canada.

Update: Sally Pipes, president of the Pacific Research Institute, has a 4 part series at Tech Central Station about Canadian health care. Canada is lacking in modern diagnostic equipment.

According to the Organization of Economic Cooperation and Development, Canada has about half the number of MRI units and CAT scanners as the average for other industrial nations, ranking it in the lower third of the 30 nations for such vital diagnostic tools. It gets lumped in among the former nations of the communist block. Canada is even farther behind in other technology. In 2001, Canada had only two functioning PET (positron emission tomography) scanners for its 31 million people, or one for every 15 million residents versus 250 such machines in the United States, or one for every 1.1 million residents. Such scanners are particularly vital to women suffering from breast cancer as they are 80 percent accurate (and even better than MRIs) in determining whether the disease will recur.

Pipes' second article in the series describes how hospitals try to cut back on the amount of various procedures they perform.

Canada's primary care physicians don't face a lot of hassle from the government in dealing with their patients. But they also aren't given many of the tools American doctors have to heal their patients or save lives. Price controls through global budgets, wherein hospitals are given a lump sum of money each year, make patients liabilities to be avoided. "[I]n Canada, the patient is a source of expense. So it's to the hospitals benefit to reduce costs [by] doing the least amount of operations as possible," Dr. Alfons Pomp, a Canadian laparoscopic surgeon told one writer.

Coupled with government purchasing controls, the arrangement virtually guarantees the unavailability of high-tech diagnostic equipment, modern medical procedures and new and better pharmaceuticals, all because they are considered too expensive.

Canada's system discourages the use of drugs to lower costs.

Also imported would most likely be the waits for new drugs. The median time for drug approvals in Canada is nearly half a year longer than in the United States. Under formulary rules, a new drug place in a category cannot increase the cost of drug treatment for a disease -- even if it reduces the other medical costs associated with the treatment. More effective drugs thus can be kept off the market or made more costly to buy for Canadians for years.

By contrast, in America's freer market health care companies and physicians embrace drug use in order to lower total costs and improve health.

Science writer Ronald Bailey in Reason magazine reported how Humana Hospitals cut the death rate for congestive heart patients from 25 percent to 10 percent through a year-long disease management program. The program increased the use of pharmaceuticals, raising costs for its pharmacy by 60 percent. But hospital costs dropped 78 percent, saving Humana $10 million net. Drug therapy thus was both life saving and cost saving.

In a kind of unintended reverse experiment, proving the same thing, the New Hampshire Medicaid program in 2000 limited the number of prescriptions it would pay in order to save some money. They did for drug costs -- but not for nursing homes. The rate of admission to them doubled.

Indeed, according to research by Columbia University professor Frank Lichtenberg, every $1 of increased spending on new pharmaceuticals reduces other health care expenditures by an average of $7.17.

The Canadian health care single payer system and price controls are things we should avoid like a plague in the United States.

By Randall Parker    2003 October 19 07:43 PM Entry Permalink | Comments (0)
2003 October 06 Monday
Medicare Drug Benefit Could Lead To Less Drug Research

David Gratzer of the Manhattan Institute argues that if the US federal government starts paying prescription drug costs then price controls and restrictions on which drugs can be used are highly likely outcomes.

At present, Washington plays a modest role in the purchase of prescription drugs. Apart from funding in-hospital prescriptions for VA and Medicare patients, the federal government bears little of the nation's annual $150 billion in prescription drug costs. Yet that's about to change in a major way. If Congress agrees on the prescription drug benefit for Medicare, the federal government will soon pay for about 20-25% of America's pharmaceutics, with influence over another 15-20%. More worrisome, though, is that if Medicare reforms go forward, Washington will become the biggest funder of prescription drug purchases in the world. With such a financial stake, Medicare bureaucrats will be tempted to directly control drug costs.

Experience overseas shows that governments that pay for prescription drugs tend to involve themselves extensively in both pricing and availability.

What is especially frightening about this prospect is that Europe already has lots of drug price controls and as a consequence US consumers effectively pay for the lion's share of money that goes into developing new drugs. The US market generates the profits that are the incentive for new drug development. If price controls come to the US as well then drug development efforts will be cut back and our life expectancies will be lower than they otherwise would be if prices stay unregulated.

By Randall Parker    2003 October 06 03:32 PM Entry Permalink | Comments (0)
2003 September 26 Friday
US Leads Europe In Cancer Survival Rates

Don't get cancer in Poland.

The largest international cancer survival study to date, it found the chances of surviving for at least five years after being diagnosed with cancer ranged from a low of 25.2 percent for men in Poland to 57.9 percent for women in France. Regionally, Scandinavia came out best and Eastern Europe worst.

That compares with a survival rate of 62 percent for men and 63.5 percent for women in the United States. Comparable statistics for other areas of the world were not immediately available.

For a more detailed breakdown of the European results see this chart. Unfortunately, that chart does not include the United States. For data on how far ahead the US is of Canada for cancer survival rates (hint: half the US states are ahead of Canada's best province BC) see here for a comparison of American states and Canadian provinces.

The sheer amount of money spent makes a difference.

Germany spent 10.6 per cent of gross domestic product on healthcare, France spends 9.5 per cent. Britain, by contrast, spends 7.6 per cent.

The United States, by contrast, spends substantially more (about 14% and rising in 2002) as a percentage of GDP on health care than any European country.

A more rapid adoption of new approaches seems to characterize the American system. (my bold emphasis added)

Between 1990 and 2000, US prostate cancer mortality fell by one third at ages 50-74, and it fell by one quarter at ages 75-84. Definite decreases are also beginning to be seen in the UK, France and some other European countries.

Early detection, prompt surgery and hormonal treatments are all contributing, according to Professor Sir Richard Peto, from the University of Oxford, UK

By Randall Parker    2003 September 26 05:07 PM Entry Permalink | Comments (0)
2003 September 21 Sunday
Many Drugs Available In United States Not Available In Canada

Sally Pipes, president and CEO of the Pacific Research Institute, has written an excellent article in the Washington Post on the reduced availability of drugs in Canada due to price controls and the bureaucratic barriers to availability of drugs in Canada. The Patented Medicines Prices Review Board (PMPRB) and provincial drug approval boards prevent many drugs from becoming available in Canada.

In addition, each of Canada's 10 provinces also maintains a government-approved formulary, which determines which drugs will be available to Canadians. Once approved by the PMPRB, medication must then get the nod from each of the provincial formularies. Many provinces approve fewer than half of all the new drugs the board has okayed.

Faced with the combination of price controls and the uncertain prospects of various provinces ever approving each drug for some drugs the pharmaceutical companies never even seek permission to sell them in Canada. But for the drugs whose makers do seek approval not all get approved by the PMPRB and of those that do then at the next step not all get approved by each province.

One hundred new drugs were launched in the United States from 1997 through 1999. Only 43 made it to market in Canada in that same period. Canadians are still waiting for many of them.

But since some provinces approve less than half the drugs that first receive PMPRB approval the net result is that less than a quarter of the new drugs that make it to market in the US are available in those provinces. Think about that. Some politicians and left-leaning political commentators in the United States hold Canada up as a shining example due to lower prices for some drugs. Well, the Canadians have taken their desire to avoid spending as much on drugs to the point where individual Canadians can't even get many of the drugs that cost us so much money to buy in the United States. So the governments are saving money big time. But what if you happen to be a Canadian who would benefit from one of those prohibited drugs? Well bummer dude.

Leave aside, for the moment, the effects on individuals in terms of increases in suffering and death. Even from the government's standpoint what the Canadians are doing may be counterproductive. If people could function more efficiently on some some drug then the effect of not having that drug reduces that person's economic output and hence that person's generated income and taxes collected by their government.

Why should Americans care about this? Self interest. Americans would have longer life expectancies if the governments of other governments were not able to force price controls on pharmaceutical companies. The resulting much reduced profit margins reduce the incentive for pharma cos to develop new drugs and hence the total amount of new drug development is lower than it otherwise would be. The US government ought to make the elimination of drug price controls a goal in international trade talks.

See my previous post which links to data on relative cancer case fatality rates in US states and Canadian provinces. The best Canadian province, British Columbia, has higher cancer case fatality rates than half of all US states. This is not an example we should want to emulate.

By Randall Parker    2003 September 21 02:22 PM Entry Permalink | Comments (1)
2003 August 23 Saturday
Richard Epstein On Legal Actions Against Third Parties And Drug Reimportation

Responding to an earlier critique of his argument against drug reimportation by Cato President Edward H. Crane and VP for legal affairs Roger Pilon legal thinker Richard Epstein defends the legal basis for preventing reimportation by illustrating a basic technique used to get legal remedies.

Last step. Why is it so strange to see the United States getting involved? Here the law is filled with all sorts of cases where actions are allowed against third parties because the direct remedy is blocked for some reason. Here is one case: A induces B to break his contract with C. No question that C has an action against B, but there is also no question that C has an action against the inducer, A, as well, for the loss of the arrangement. And why is that so valuable? Well, B may be insolvent, or outside the jurisdiction. Or there may be many Bs who are too numerous to sue, but only one A who has orchestrated the breach, and so on. It is for this reason that we allow owners to sue not only thieves but also the people to whom these goods are sold in some secondary market. If it is possible to kill off the resales, then the original theft or violation of trust is that much less likely to occur.

Ideally, we would like to see the local governments enforce or respect their obligations, but if they choose to violate their contracts with their own sellers, then the sellers could sue the third parties to stop the resale, which is all that happens when the sales back home are enjoined. There is nothing odd about saying that third parties, Americans all, cannot receive goods that they obtain in violation of a prior contract. It happens all the time.

This seems like a pretty good rebutting of Crane and Pilon's argument.

James Pinkerton also weighs in and points out that when government regulations discourage some form of investment the loss usually goes unnoticed by most people.

But now comes the crunch -- and it's biting down, even now, on potential treatments and cures. Advocates of an NHS for America are scarce, but advocates of expanding the government's role in health care are abundant. For a long time now, both federal and state governments have been muscling down drug prices. The argument is always the same: drugs cost too much, so make them cheaper. There's no way to know how much past government action has served to restrain drug R&D; that's one of the problems of government regulation. What's never seen is what never was created.

This is an important point with regard to drug prices and drug development. If the US lets in price-controlled drug imports and the pharmaceutical industry responds by reducing spending on new drug development it is not likely that either the American or European publics will be sufficiently upset by the reduction in new drug development spending to demand that the causes be fixed.

By Randall Parker    2003 August 23 09:45 PM Entry Permalink | Comments (0)
2003 August 05 Tuesday
One Reason Why Some Big Corporations Lobby For Welfare State

Some extensions of the welfare state are supported by big business lobbyists because government spending on old folks saves many corporations money.

But these days self-interest trumps ideology. Many large employers would love to dump the burden of buying drugs for their retirees onto the federal government. (A study by the Congressional Budget Office determined that about one-third of Medicare recipients who now receive drug benefits from former employers would lose them if the plan were to pass.)

The article reports that GM and Ford would respectively save $150 million and $50 million per year if the Medicare drug benefit is enacted.

Companies in old industries that go bankrupt also pass pension benefit liabilities onto the taxpayers.

By Randall Parker    2003 August 05 01:47 PM Entry Permalink | Comments (0)
2003 July 24 Thursday
Legislation Proposed To Allow Price-Controlled Drug Imports

While Republicans are supposed to support the free market a pair of Congressional Republicans want to make it easy for foreign country price controls to extend into the US.

The legislation, introduced by Reps. Gil Gutknecht (R-Minn.) and Jo Ann Emerson (R-Mo.), would make it legal for individuals and pharmacies to import FDA-approved prescription drugs from abroad, where price controls typically keep prices well below those in the United States. Although it is technically illegal, Americans already import sizable quantities of drugs from Canada. McClellan and others have been especially concerned about the safety of drugs being ordered over the Internet.

But as Doug Bandow of the Cato Institute points out, high drug prices are an incentive for more drug development.

It's easy to believe that drugs cost too much. At least it is if you aren't the member of my church who just died of stomach cancer; my next-door neighbor and running partner who has been diagnosed with multiple sclerosis; my friend who endured experimental chemotherapy to fight breast cancer; and my journalistic colleague killed by liver cancer last year.

Should Cost More

For all of them, drugs don't cost nearly enough, since a higher cost would bring forth more and better means of fighting cancer, multiple sclerosis and other diseases. Yet legislators seem dedicated to restricting the availability of such pharmaceuticals.

What is worse? That a drug will be too expensive for some people to afford or that the drug will never be developed in the first place?

As it now stands the US drug market funds the lion's share of drug development. If the US drug prices were brought down to the level of the price-controlled levels of various free-loading countries like Canada then many drugs now under development would be cancelled and the search for new drug compounds would decrease dramatically. The result in coming decades would be lower average life expectancies than would otherwise be the case if prices were allowed to remain at market levels.

The US government ought to be actively working thru trade negotiations to end the practice of drug price controls in other industrialized countries. Importing their price controls into the US is the exact wrong direction to go in. Socialism doesn't work.

Update: Writing for the Institute for Policy Innovation Doug Bandow has an article about reasons for different pricing of drugs in different markets.

Canadians also benefit from less, and less expensive, product liability litigation. Economist Richard Manning estimates that one-third to one-half of the drug price differential between the two countries is due to the higher cost of lawsuits in America.

Richard Epstein sets out the bad effects of foreign government price controls on drugs.

It is not only differential demand that creates the risk of market arbitrage. Rather, government regulation in foreign nations that set maximum prices that they will pay for imported products also creates this risk. These governments are canny enough to set those prices a bit above marginal cost so that the company will get positive returns and still decide to send the drugs there. However, the price is set below what the drug company could charge in an unregulated market. There are three bad effects to this regulation. First, the use of this form of monopsony power reduces the global return to innovation, and, thus, the levels of innovation in the domestic market. It also casts a greater burden on the domestic American market to cover a larger fraction of the fixed costs of innovation. Thus, it fuels resentments at home because of the massive premium in domestic price, with the American market subsidizing these foreign markets. Finally, it creates a second chance for arbitrage if quantities of these goods can be resold in the United States.

Update II: Robert Goldberg of the Manhattan Institute brings up the problem of counterfeiting.

The FDA has said that HealthCanada, its counterpart north of the border, has made clear that it doesn't have the manpower, time, or inspection system to determine what happens to drugs that are sent out of Canada, or handled by companies in the business of sending drugs out of Canada. That includes the growing number of Canadian firms that are illegally importing and exporting commercial quantities of drugs from major sources of counterfeit products, such as India and Pakistan. It also includes the companies that are making Canada, in the words of one organized-crime expert, "the world's free-trade zone for counterfeit and illegally sold prescription drugs."

Any product which has a major intellectual property cost as part of its price is more liable to be counterfeited. Drugs are just like music albums and movie videos in this regard.

Update III: Derek Lowe points out the double standard of Congresscritters on drug prices versus other prices.

(Of course, as the Manhattan Institute's Robert Goldberg pointed out last week, this importation of cheap goods can go too far. If you don't believe him, why, just ask Gil Gutknecht! When it comes to milk products, he's all for keeping U.S. prices nice and high - Minnesota has a dairy industry, you know. Steel, sugar, what-have-you: all sorts of goods get the high-price treatment from Congressional admirers of cheap pharmaceuticals. It seems we can't possibly get overcharged for those other things. Just drugs. Who knew?)

Lowe also points out that the drug industry's own defense of itself is lame. There are important reasons to oppose reimportation. It is a shame big pharma is too politically dumb to make them.

Update IV: A deal to make the Medicare drug benefit vote pass made the current fight over drug imports possible.

One vote shy of passing a Republican-backed $400 billion measure to give elderly and disabled Americans prescription drug coverage, Speaker J. Dennis Hastert (R-Ill.) negotiated on the House floor with Emerson (R-Mo.) as time ticked down on the crucial roll call in late June. Well past 2 a.m., the two Republicans reached an accord. Emerson would vote aye, so long as Hastert's leadership team agreed to allow a floor vote this month on whether to legalize the reimportation of U.S.-made prescription drugs that sell more cheaply in Canada and elsewhere -- a move the White House and Hastert oppose.

Socialism leads to more socialism.

Update V: Cato President Edward H. Crane and VP for legal affairs Roger Pilon make an opposing argument that the US government should not function to enforce pricing contracts agreed between foreign governments and pharmaceutical companies.

In a nutshell, if foreign governments want to pay less — and will not pay more even if it means their own citizens will go without better drugs — then let those governments police the no-resell terms that enable them to get the lower prices. Right now, not only do Americans pay higher prices because foreigners refuse to pay the actual costs of drugs, but they pay the enforcement costs of that arrangement as well, including restrictions on their freedom. And if foreign governments cannot police those discriminatory contracts — because the incentive to resell, on one side, and to buy more cheaply, on the other side, makes enforcement difficult or impossible — then let a truly free market, encumbered only by enforceable contracts in restraint of trade, set prices at whatever the market will bear. It is neither right nor good that Americans bear so great a portion of the health-care costs of the world.

The real basic question in my mind is what would happen if the US government did allow reimportation. Would the pharmaceutical companies respond by no longer being willing to sign contracts with governments in other countries to sell drugs below market price in those countries? Would those countries then either seize the intellectual property of the drug companies and license other companies to make the drugs at a lower price? Or would the governments cave in and pay the higher market price? If the other governments seized the IP and licensed other makers would the US government be willing to levy trade sanctions against those other governments in order to stop the practice? Or would the US government do nothing to help the drug companies and would the drug companies then even be faced with drugs made by other makers flooding into the US market and undermining their IP even further?

By Randall Parker    2003 July 24 11:25 AM Entry Permalink | Comments (16)
2002 November 15 Friday
Waiting Times For Canadian Health Care

David Frum reports on the sorry state of Canadian health care:

Every year Canada’s leading free-market think-tank, the Fraser Institute, compiles waiting times across Canada in a report called “Waiting Your Turn.” Here are some highlights from this year’s edition.

Median waiting time for radiation treatment for breast cancer in province of Ontario: 8 weeks
Median waiting time for angioplasty in the province of British Columbia: 12 weeks
Median waiting time for radiation treatment for prostate cancer in province of Quebec: 12 weeks
Median waiting time for cataract removal in the province of Ontario: 20 weeks.
Median waiting time for cataract removal in the province of Saskatchewan: 52 weeks.
Median waiting time for a tonsillectomy in the province of Saskatchewan: 80 weeks.

If you want to see how much worse Canadian healthcare availability has gotten then see the graphs in page two of this PDF (note: Acrobat Reader or equivalent PDF viewing app needed). Also see page 3. Once a person finally gets in to see a specialist that doesn't mean they are anywhere near getting an actual surgical treatment done to them. The text version as a PDF is available as well.

Frum suggests comparing Northwestern US states and Western Canadian provinces that have similar ethnic makeup (as different ethnic groups get cancer at different rates in the first place) and other characteristics for cancer fatality rates. See these tables and compare Colorado, Idaho, and Utah with the Canadian Western provinces. For instance, Utah and Alberta have almost identical cancer incidence rates at 307 and 312.8 respectively but the male case fatality rates are .3456 and .43798 respectively. British Columbia scores lowest in case fatality rates of all Canadian provinces and yet it is worse than almost half the US states.

In the face of this wonderful trend in Canadian health care access the provinces are lowering the growth rate in health care spending. From the Canadian Institute For Health Information this PDF is a summary of Canadian health spending.

Update: David Frum responds to some of the critics of his original piece:

c) The Canadian population is demographically different from America’s in important ways. The average age of the Canadian population is lower than that of the United States. There is less obesity in Canada, fewer premature births, fewer victims of assault and attempted homicide. Canadians also drive fewer miles per year than Americans. These differences impose costs on the United States that the Canadian system does not bear. Even under exactly identical health-care policy regimes, one would expect health-care expenditure in the United States to be significantly higher than in Canada.

d) Advocates of single payer often cite Canada’s lower expenditure on healthcare as an argument in favor of the Canadian system. Then, when confronted with the evidence of the Canadian system’s failure, they admit that America’s 14% is not all frittered away on advertising and obscene HMO profits – that it does indeed buy superior care. But if the American system is not riddled with waste that single-payer will squeeze out, then extending a single-payer system to cover the entire U.S. population will be just as hugely expensive as conservative critics fear.

By Randall Parker    2002 November 15 04:37 PM Entry Permalink | Comments (2)
2002 October 31 Thursday
1 in 10 UK Hospital Patients Harmed By Hospital

America is clearly getting some value from its more expensive and more privatized medical industry. But at least Brits can console themselves that its even worse in Australia.

The 10 per cent risk to patients, caused by blunders, superbugs, faulty equipment and drug side effects, was contained in a 250-page study of the state of the planet's health.

This is similar to figures for some other European countries, but almost three times greater than in the United States. It is well below Australia's "alarming" 16.6 per cent.

Update: Writing in The Daily Telegraph of the UK Theodore Dalrymple describes a new contract that the UK NHS is trying to get British doctors to accept:

The new proposed contract is inherently corrupt and corrupting. It gives the managers extensive power to decide what doctors' goals, targets and objectives should be. Since the managers will themselves be rewarded according to their fulfilment of goals, targets and objectives laid down by the Government, the politicisation of clinical decision-making would be an inevitable consequence.

If the Government decided that its electoral future depended upon the reduction of waiting lists, this reduction would take precedence over more clinically urgent matters. In such a system, crimes against humanity would not be inconceivable.

By Randall Parker    2002 October 31 05:40 PM Entry Permalink | Comments (0)
China Faces Organized Unemployed Labor Unrest

This article in the Far Eastern Economic Review provides a good overview of the rising ranks of the unemployed and desperate in China. The unemployed are becoming a threat to political stability.

In the early days of dismissals, it was relatively easy to find new jobs. No longer. The Development Research Centre, which is linked to the State Council, China's cabinet, puts urban unemployment at 10% and warns it could rise to 15% in the next few years. The DRC and Asian Development Bank estimate there are 37 million urban poor--12% of the urban population. World Trade Organization membership and growing competition have brought new pressures. The employment situation is "very grim," admitted Minister Zhang in an address to lawmakers, adding that with population growth the number of new entrants to the workforce in China will hit a peak sometime between now and 2005.

The result could be more frequent strikes and increasing social disorder. Workers with grievances--late wages, pension payments or redundancy--are no longer just getting mad; they are organizing.

By Randall Parker    2002 October 31 05:28 PM Entry Permalink | Comments (0)
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