In response to an article by Arvind Panagriha in Economic Times discussed on another blog.
I would like to throw out a different way of thinking about this. My point is that this issue has nothing to do with “socialized medicine”. Let me elaborate.
Panagriha’s main contention is:
…it is time to accept the fact that the government has at best limited capability to deliver health services and that a radical shift in strategy that gives the poor greater opportunity to choose between private and public providers is needed.
(i) Number of doctors:
He further makes a point:
With a population of 1.1 billion, this implies approximately 1,700 people per doctor. In comparison, there are just 400 people per doctor in the United States and 220 in Israel.
Why compare to US and Israel? Considering they are one of the richest in the world.
Why not compare to Cuba, a much poorer country? And a much more “socialist” country to boot. Cuba has higher proportion than both US and Israel (in fact one of the highest in the world).
(ii) India actually has one of the lowest spending on health in the world (proportional to total govt. spending) (3% of total expenditure). Compare this with 19% for US, 12% for Israel, 11% for Cuba and 5% for Vietnam. The private spending (of an individual) on health is 5 times the govt. expenditure. In this sense, India has one of the most privatized health care system in the world.
If you compare apples with oranges, you’ll get absurd results.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Saturday, March 22, 2008
Thursday, November 22, 2007
Milton Friedman and Chile
One of the things for which Milton Friedman is both reviled and hailed is his connection with the "Miracle of Chile".
There are at least two questions:
a) What happenned in Chile and was it a "miracle"?
b) Why did Friedman consider it a "miracle"?
Let's try to lay out what happenned in Chile. The relevant time period is 1973-late 80s, the reign of Augusto Pinochet.
In 1970, a democratic socialist politician, Salvador Allende came to power in the Presidential election. He tried to carry out moderate reforms, including minor land reform. Unfortunately, as is the norm in Latin America, this means the President wasn't going to last very long. The CIA immediately started efforts to destabilize the political and economic structure. Nixon famously declared "make the economy scream". On September 11, 1973, what is known as the "first 9/11" in Latin America, Augusto Pinochet overthrew Allende in a coup.
The Pinochet regime is well known for its brutal suppression of labour unions, dissidents and all kinds of torture, massacres and other familiar stuff in Latin America. But it was also notable for its economic policies.
Milton Friedman was in Chile in the initial period and from what I can see, his only direct involvement was giving a speech laying out the case for neoliberal reforms.
However his ideas of economic policy were followed quite widely by a group of economists known as the "Chicago Boys", alumni of the University of Chicago, where Friedman taught. The strategies included large scale "privatization" of industries, cutting taxes, privatizing Social Security and many other familiar features of the neoliberal package.
Amartya Sen, in his book, Hunger and Public Action, examines the economic performance of Chile. From a survey of the literature in the field, he finds:
"This so-called "monetarist experiment"... has been the the object of much controversy, but few have claimed it to be a sucess. The failure of the monetarist experiment to lead to a sustained and broad-based increase in economic prosperity is apparent...The most conspicuous feature of the post-1973 period is that of considerable instability...and no firm and consistent upward trend (to say the least) in the conventional indicators of economic prosperity."
From his data, the per capita GDP fell 20% from 1973-85, real wages declined by approximately the same amount and unemployment rate increased from 4% to 14%.
On the social side, the picture is a little more complex. There has been an undeniable reduction in infant mortality rate (IMR) from 1973-85 from 82 per thousand to 19 per thousand. The life expectancy at birth also increased from 64.8 to 68.3. But life expectancy at age 1 (by definition, less sensitive to IMR) stagnated at 68.6 years. He finds that:
"Favourable IMR trends have not been reflective of a corresponding general improvement in living conditions".
Also, he notes that "there's little disagreement as to what caused the observed improvements in the area of child health and nutrition". Chile had a very long tradition of public action in nutritional and health programs for children, which played the major role in observed trends in IMR.
Friedman did consider the Chilean economy to have performed well.
"Oh, very well. Extremely well. The Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society."
A few comments about that. People can judge for themselves whether it did perform well. As to the second aspect, Friedman displays an extraordinary lack of historical knowledge. Even it Latin America, it was pretty evident, the role of military and business interests in sustaining dictatorial governments. These famous lines come from one of the most decorated American generals in history, Smedley Butler, in his book War is a Racket. He talks about his activities in Latin America in the first half of the 20th century:
"I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents."
Friedman has held that in fact, this picture is misleading because the state in intertwined with the Big Business (which is true) and thus he held that privatizing and minimizing the state would help things along. Did that happen in Chile? From what I can make out (I need to do more research on this), most of the newly privatized business went to Pinochet's cronies and was just taking things out from the public realm, where it had, however small, a measure of control by the public, into the hands of cronies of the barbaric dictator.
There are at least two questions:
a) What happenned in Chile and was it a "miracle"?
b) Why did Friedman consider it a "miracle"?
Reality
Let's try to lay out what happenned in Chile. The relevant time period is 1973-late 80s, the reign of Augusto Pinochet.
Politics
In 1970, a democratic socialist politician, Salvador Allende came to power in the Presidential election. He tried to carry out moderate reforms, including minor land reform. Unfortunately, as is the norm in Latin America, this means the President wasn't going to last very long. The CIA immediately started efforts to destabilize the political and economic structure. Nixon famously declared "make the economy scream". On September 11, 1973, what is known as the "first 9/11" in Latin America, Augusto Pinochet overthrew Allende in a coup.
The Pinochet regime is well known for its brutal suppression of labour unions, dissidents and all kinds of torture, massacres and other familiar stuff in Latin America. But it was also notable for its economic policies.
Economics
Milton Friedman was in Chile in the initial period and from what I can see, his only direct involvement was giving a speech laying out the case for neoliberal reforms.
However his ideas of economic policy were followed quite widely by a group of economists known as the "Chicago Boys", alumni of the University of Chicago, where Friedman taught. The strategies included large scale "privatization" of industries, cutting taxes, privatizing Social Security and many other familiar features of the neoliberal package.
Performance
Amartya Sen, in his book, Hunger and Public Action, examines the economic performance of Chile. From a survey of the literature in the field, he finds:
"This so-called "monetarist experiment"... has been the the object of much controversy, but few have claimed it to be a sucess. The failure of the monetarist experiment to lead to a sustained and broad-based increase in economic prosperity is apparent...The most conspicuous feature of the post-1973 period is that of considerable instability...and no firm and consistent upward trend (to say the least) in the conventional indicators of economic prosperity."
From his data, the per capita GDP fell 20% from 1973-85, real wages declined by approximately the same amount and unemployment rate increased from 4% to 14%.
On the social side, the picture is a little more complex. There has been an undeniable reduction in infant mortality rate (IMR) from 1973-85 from 82 per thousand to 19 per thousand. The life expectancy at birth also increased from 64.8 to 68.3. But life expectancy at age 1 (by definition, less sensitive to IMR) stagnated at 68.6 years. He finds that:
"Favourable IMR trends have not been reflective of a corresponding general improvement in living conditions".
Also, he notes that "there's little disagreement as to what caused the observed improvements in the area of child health and nutrition". Chile had a very long tradition of public action in nutritional and health programs for children, which played the major role in observed trends in IMR.
Friedman's view
Friedman did consider the Chilean economy to have performed well.
"Oh, very well. Extremely well. The Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society."
A few comments about that. People can judge for themselves whether it did perform well. As to the second aspect, Friedman displays an extraordinary lack of historical knowledge. Even it Latin America, it was pretty evident, the role of military and business interests in sustaining dictatorial governments. These famous lines come from one of the most decorated American generals in history, Smedley Butler, in his book War is a Racket. He talks about his activities in Latin America in the first half of the 20th century:
"I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents."
Friedman has held that in fact, this picture is misleading because the state in intertwined with the Big Business (which is true) and thus he held that privatizing and minimizing the state would help things along. Did that happen in Chile? From what I can make out (I need to do more research on this), most of the newly privatized business went to Pinochet's cronies and was just taking things out from the public realm, where it had, however small, a measure of control by the public, into the hands of cronies of the barbaric dictator.
Wednesday, October 17, 2007
Milton Friedman: Free to choose
I watched the PBS documentary Free to choose (1990 version) featuring Milton Friedman. Each episode features a roughly half-hour narration and analysis by Friedman followed by a 15-20 min discussion between Friedman and a couple other people.
Overall, it's a clear and lucid exposition of Friedman's philosophy. From consulting various sources, here's a summary.
Friedman holds that individual freedom is both the best means and the ends of human activity. To this end, he proposes that any coercion is wrong on the part of the govt. unless it's given a justification. Most forms of intervention, he argues, just make things worse. He writes, in Capitalism and Freedom:
Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion--the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals--the technique of the market place.
Friedman, however, believes that there is a role for govt. - a limited role - in which it's main objectives are to maintain law and order, and rules to ensure private contracts - namely defense and security.
General comments on philosophy:
a) Since it's a very general philosophy, we must be careful of what it implies. The documentary gives a number of illustrations of the proposition. We can evaluate them and see what's going on.
b) His conception of "socialism". Not surprisingly, since we tend to have nuanced opinions about out own position and to caricaturize the opponent, his view of socialism is pretty one-dimensional. It roughly corresponds to govt. ownership of means of production.
An illustrative example happens in the fourth episode "The failure of socialism". At some point during the discussion, Henry Levin, who's supposed to be the "left" end of the spectrum, says something like "employee-owned business is also a possibility". Friedman says he has no objection to the thing per se, but that it is artificially propped up by govt. subsidies in the US.
To appreciate the joke in the idea fully, we must realize that the core of socialism, as always understood by almost every theorist, is workers' control over the means of production. Now, there are differences as to whether there should be an intermediate state facilitating the goal (communism), or should it be realized directly (anarcho-syndicalism).
In placing the "left" and the "right", we should realize, as Orwell did in his Homage to Catalonia, that Communism was a right-wing deviant of socialism (for example in the Spanish Civil War), not its core.
One of the works I'd recommend to understand this is Chomsky's Notes on Anarchism.
c) Friedman say he's opposed to concentrated power. But he has hardly any discussion of concentrated power in private hands, namely corporations. He holds that, in a competitive market, things will tend to disperse this power. I'm not convinced by his very limited argument here.
d) His role of govt. in defense and security. We can ask the question: what view of the police, security guards and the army does the ordinary worker have? Keep in mind that the US has an extremely violent labour history with security guards killing droves of union activists. The workers' views on the army (Friedman was opposed to the draft by the way), is pretty negative as well. They regarded the army as "sending poor folk to die for a war for rich folk". To get a sort of "radical leftist" - meaning workers' - view of the army, I recomment Howard Zinn's books.
Some more comments on the discussion.
a) Invariably there are discussions between Friedman, sort of a "conservative" like bankers, wall street guys or some such in the discussion together with a sort of "Keynesian" - which is in my book, sort of "centrist". They may range from "capitalism is good, but we need more safety nets" Michael Kinsley to the "capitalism does not work, both in theory and practice" Steve Cohen. Watching the objections raised by Galbraith in the first episode, I was pretty amused.
The observation I make is pretty common in the media. FAIR notes that invariably the discussion is framed in the media between committed right-wingers and sort of moderate centrists taking on the role of "left".
b) Again, the discussion presupposed a framework where socialism is "govt. intervention" or "protectionism" and capitalism is "free markets". Cohen makes a good point about this: like Eskimos having thirty words for "snow", protectionism is not a single strategy. In his view, Japan had a very intelligent govt. intervention in the economy. I'll talk more about the discussion with Cohen later.
c) There weren't any voices, both in the narration and the subsequent discussion from, say union activists. (one exception is the small quote from a teacher's union representative in the education segment, which I regard as the strongest, though still not satisfactory - more on that later.
This only scratches the surface, more on this later.
Overall, it's a clear and lucid exposition of Friedman's philosophy. From consulting various sources, here's a summary.
Friedman holds that individual freedom is both the best means and the ends of human activity. To this end, he proposes that any coercion is wrong on the part of the govt. unless it's given a justification. Most forms of intervention, he argues, just make things worse. He writes, in Capitalism and Freedom:
Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion--the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals--the technique of the market place.
Friedman, however, believes that there is a role for govt. - a limited role - in which it's main objectives are to maintain law and order, and rules to ensure private contracts - namely defense and security.
General comments on philosophy:
a) Since it's a very general philosophy, we must be careful of what it implies. The documentary gives a number of illustrations of the proposition. We can evaluate them and see what's going on.
b) His conception of "socialism". Not surprisingly, since we tend to have nuanced opinions about out own position and to caricaturize the opponent, his view of socialism is pretty one-dimensional. It roughly corresponds to govt. ownership of means of production.
An illustrative example happens in the fourth episode "The failure of socialism". At some point during the discussion, Henry Levin, who's supposed to be the "left" end of the spectrum, says something like "employee-owned business is also a possibility". Friedman says he has no objection to the thing per se, but that it is artificially propped up by govt. subsidies in the US.
To appreciate the joke in the idea fully, we must realize that the core of socialism, as always understood by almost every theorist, is workers' control over the means of production. Now, there are differences as to whether there should be an intermediate state facilitating the goal (communism), or should it be realized directly (anarcho-syndicalism).
In placing the "left" and the "right", we should realize, as Orwell did in his Homage to Catalonia, that Communism was a right-wing deviant of socialism (for example in the Spanish Civil War), not its core.
One of the works I'd recommend to understand this is Chomsky's Notes on Anarchism.
c) Friedman say he's opposed to concentrated power. But he has hardly any discussion of concentrated power in private hands, namely corporations. He holds that, in a competitive market, things will tend to disperse this power. I'm not convinced by his very limited argument here.
d) His role of govt. in defense and security. We can ask the question: what view of the police, security guards and the army does the ordinary worker have? Keep in mind that the US has an extremely violent labour history with security guards killing droves of union activists. The workers' views on the army (Friedman was opposed to the draft by the way), is pretty negative as well. They regarded the army as "sending poor folk to die for a war for rich folk". To get a sort of "radical leftist" - meaning workers' - view of the army, I recomment Howard Zinn's books.
Some more comments on the discussion.
a) Invariably there are discussions between Friedman, sort of a "conservative" like bankers, wall street guys or some such in the discussion together with a sort of "Keynesian" - which is in my book, sort of "centrist". They may range from "capitalism is good, but we need more safety nets" Michael Kinsley to the "capitalism does not work, both in theory and practice" Steve Cohen. Watching the objections raised by Galbraith in the first episode, I was pretty amused.
The observation I make is pretty common in the media. FAIR notes that invariably the discussion is framed in the media between committed right-wingers and sort of moderate centrists taking on the role of "left".
b) Again, the discussion presupposed a framework where socialism is "govt. intervention" or "protectionism" and capitalism is "free markets". Cohen makes a good point about this: like Eskimos having thirty words for "snow", protectionism is not a single strategy. In his view, Japan had a very intelligent govt. intervention in the economy. I'll talk more about the discussion with Cohen later.
c) There weren't any voices, both in the narration and the subsequent discussion from, say union activists. (one exception is the small quote from a teacher's union representative in the education segment, which I regard as the strongest, though still not satisfactory - more on that later.
This only scratches the surface, more on this later.
Thursday, October 11, 2007
Milton Friedman
I've been studying, among other things, Milton Friedman in the past few days. Of course, I'm no economist, so I can only read relatively nontechnical things.
Here's the resources I've looked at:
Friedman's interview with Charlie Rose in 2005(?).
Friedman's Nobel Prize lecture.
Friedman's interview with PBS, in particular his remarks on Chile.
Friedman's draft on Indian planning.
I've just got Friedman's Capitalism and Freedom and will go through it soon.
I'll make a detailed post (or a few) on Friedman later. A few remarks though.
Friedman, in his own words, is a '"libertarian" with a small "l" and a "Republican" with a capital "R"'. I happen to hold a "left-libertarian" or "anarchist" view myself with mistrust of govt. and states. So, immediately there is a certain point of agreement and many of his observations concur with my own.
However, when it comes to, say markets and corporations, I feel that for the argument to be consistent, I should be mistrustful of corporations as well. Anarchism is basically opposition to power. On the other hand, Friedman notes that corporations are "bad" only when they're tied in with the state (which I feel they are).
That's regarding philosophy. I'll elaborate more in this and also primarily concentrate on the implementation of the philosophy.
Here's the resources I've looked at:
Friedman's interview with Charlie Rose in 2005(?).
Friedman's Nobel Prize lecture.
Friedman's interview with PBS, in particular his remarks on Chile.
Friedman's draft on Indian planning.
I've just got Friedman's Capitalism and Freedom and will go through it soon.
I'll make a detailed post (or a few) on Friedman later. A few remarks though.
Friedman, in his own words, is a '"libertarian" with a small "l" and a "Republican" with a capital "R"'. I happen to hold a "left-libertarian" or "anarchist" view myself with mistrust of govt. and states. So, immediately there is a certain point of agreement and many of his observations concur with my own.
However, when it comes to, say markets and corporations, I feel that for the argument to be consistent, I should be mistrustful of corporations as well. Anarchism is basically opposition to power. On the other hand, Friedman notes that corporations are "bad" only when they're tied in with the state (which I feel they are).
That's regarding philosophy. I'll elaborate more in this and also primarily concentrate on the implementation of the philosophy.
Saturday, September 15, 2007
Economics and human nature: selfishness and solidarity
My point here is that human nature is a complex thing. There is a selfish streak, but there are also other considerations, like truth, justice, solidarity. Human values/morals are not axiom systems.
It follows that many of the concepts in economics are ideological rather than "scientific". That's not necessarily a bad thing. Our understanding always progresses by simplifying and making assumptions. But it's always prudent to consider alternative systems, with different assumptions, especially as they relate to human nature.
To illustrate, let's take the case of Pareto efficiency. That's a specific type of economic efficiency. Basically it says that if everyone is no worse off, but someone is better off, then it's a Pareto improvement. And if no further improvements can be made, it's Pareto optimal.
Markets are intimately connected with Pareto optimal solutions.
Now, that's a highly ideological notion. There's nothing holy about it. And in fact, these caveats can be found throughout the development of neoclassical economics.
To take a simple but far from obvious case. Consider a owner and a slave. The slave labours and the owner looks over him, maybe directing him to do this and that. They make a profit. And then the owner takes 90% and gives the slave 10%. That's a Pareto optimal solution. Is it acceptable?
To make this interesting, let's consider analogous scenarios.
a) Replace the slave with a beast of burden. Now what?
b) Replace the slave with a wage slave, namely a worker. Now what?
It's clear that the other cases (as well as the original one) are far from clear. It very largely depends upon our view. Should animals be treated like human beings? If not, how different?
It's clear that "culture" or "justice" or things like "solidarity" play a very important role. These things, though hard to quantify, are deeply rooted in human behaviour.
The task of social movements, past and present, is to change this view. Intellectual discussions are important, but won't solve the root problem. The way of changing the view is through education and awareness, at least.
For instance, let's look at slavery. Slave owners were giving many plausible arguments. Do you take better care of your car when you own it, or rent it? Therefore, we should own the slaves. Not rent them, like labour bonded to capital.
This argument was abolished only when the people decided that people ought not to be owned. That's a value judgement. It's extremely hard. It was not done by arguing about the merits of private property.
It follows that many of the concepts in economics are ideological rather than "scientific". That's not necessarily a bad thing. Our understanding always progresses by simplifying and making assumptions. But it's always prudent to consider alternative systems, with different assumptions, especially as they relate to human nature.
To illustrate, let's take the case of Pareto efficiency. That's a specific type of economic efficiency. Basically it says that if everyone is no worse off, but someone is better off, then it's a Pareto improvement. And if no further improvements can be made, it's Pareto optimal.
Markets are intimately connected with Pareto optimal solutions.
Now, that's a highly ideological notion. There's nothing holy about it. And in fact, these caveats can be found throughout the development of neoclassical economics.
To take a simple but far from obvious case. Consider a owner and a slave. The slave labours and the owner looks over him, maybe directing him to do this and that. They make a profit. And then the owner takes 90% and gives the slave 10%. That's a Pareto optimal solution. Is it acceptable?
To make this interesting, let's consider analogous scenarios.
a) Replace the slave with a beast of burden. Now what?
b) Replace the slave with a wage slave, namely a worker. Now what?
It's clear that the other cases (as well as the original one) are far from clear. It very largely depends upon our view. Should animals be treated like human beings? If not, how different?
It's clear that "culture" or "justice" or things like "solidarity" play a very important role. These things, though hard to quantify, are deeply rooted in human behaviour.
The task of social movements, past and present, is to change this view. Intellectual discussions are important, but won't solve the root problem. The way of changing the view is through education and awareness, at least.
For instance, let's look at slavery. Slave owners were giving many plausible arguments. Do you take better care of your car when you own it, or rent it? Therefore, we should own the slaves. Not rent them, like labour bonded to capital.
This argument was abolished only when the people decided that people ought not to be owned. That's a value judgement. It's extremely hard. It was not done by arguing about the merits of private property.
Subscribe to:
Posts (Atom)