Tagged: SOCIALISM

Why Can’t Republicans Beat Socialism?

As we await the outcome of the vote recounts around the country and the inevitable court battle over the artificial boost in Biden votes in Michigan, it is time to ask some pertinent questions about why Americans keep voting for socialist politicians.

Even more important is the question why the Republican party, which has declared itself anti-socialist, continues to fail in decisively beating back this nasty ideology.

In my new book Socialism or Democracy: The Fateful Question for 2024 (Palgrave), I take an in-depth look at the structure, function and consequences of socialism. My analysis traces the roots of socialism all the way back to Marx. I explain how his economic analysis has defined socialism in both theory and practice throughout the past 150 years.

I also explain that there are two strains of socialism. The first strain is well known as the version practiced in Cuba and North Korea. This is the Stalinist form where government owns all property and plans the entire economy.

Republican politicians, and conservatives in general, are very good at lambasting this communist version of socialism. We can hear prominent Republicans such as Liz Cheney make speeches to this effect. Cheney, specifically, has been forceful in her criticism of Stalinist socialism, as exemplified by her excellent speech at the International Democratic Forum in the fall of 2019.

The problem is that most Americans do not believe that the Democrat party stands for this abhorrent version of socialism. Rightly so: there is not a trace of Stalinism in mainstream Democrat policies. Bernie Sanders, the long-standing radical socialist Senator from Vermont, has openly and repeatedly declared that his socialism is not of the Soviet kind.

Plain and simple: Soviet socialism is not on the agenda of the American left.

What is on their agenda is the other strain of socialism, the one that is typically “democratically” prefixed. To be a democratic socialist is perfectly normal in American leftist circles.

This is the strain of socialism that America’s conservatives in general are having a very hard time fighting. The same is definitely true for the Republican party and for Liz Cheney. Despite her sincere commitment to fight socialism, she keeps missing the target. The reason is not that they lack dedication to fight socialism per se – the reason is that they deny that democratic socialism is socialism, period.

As I explain in my book, this is dead wrong. Democratic socialism is just another format under which socialism is practiced. The reason why Republicans fail to understand this is that they have fundamentally misunderstood socialism as an ideology: they still believe that it is all about confiscating private property.

Not once do they stop to ask themselves: why would socialists want to confiscate private property?

When practiced in its “democratic” form, socialism does not confiscate property. It leaves intact property rights in their traditional sense. Instead, the “democratic” socialist uses taxation and government spending to achieve his ideological end goal.

What is that goal? It is the very same that motivates the Stalinist socialist – the communist – to confiscate private property and put the whole economy under teleological central planning. My book explains this goal in detail, as well as its practice in the two strains of socialism.

Economic redistribution. That is what socialism is all about. It is about reducing and eventually eliminating economic differences between individuals. Under communism, this is done quickly by means of private-property confiscation. When ownership of property – including wealth – is outlawed, so are the proceeds of said property. If you cannot earn good money by owning and running a business, you cannot make more than anyone else.

But it does not stop there. Communism dictates that people be paid based on the labor value of their work. This value is crude and entirely alien to human nature, but it is what communists practice. It destroys the free market, which is entirely intentional: according to communist doctrine, a surgeon should get paid less than a factory worker because his production of labor value is lower.

In short: communism outlaws all means by which one person can earn more than another. The only exception is the cumulative addition of labor value, which favors labor-intensive manufacturing and un-mechanized agriculture over medical services.

By contrast, “democratic” socialists use democratic methods for the advancement of their ideology. They pass laws that raise taxes on “the rich”, redefine the definition of “rich” as they run out of them, and spend more and more money on handing out entitlements. The goal is to erode economic differences by means of economic attrition:

  1. More and more people get benefits from government in the form of health care, education (including college), income security, retirement and plain cash handouts;
  2. More and more higher-income households lose more and more of their money to taxes.

Working both ends of the stick, the “democratic” socialist gradually uses the welfare state to reduce and eventually do away with economic differences.

We already have a welfare state. We have one of the most progressive, most redistributive, most socialist tax codes in the world. We already have a wide roster of entitlement spending for the very purpose of redistributing income, consumption and wealth. From Social Security all the way down to the Earned Income Tax Credit; from Medicare and Medicaid to public education; we already have a major apparatus in place in America for the practice of “democratic” socialism.

It is this very strain of socialism that the Democrat party wants to expand and practice more intensely. When Republicans define socialism as communism and then put that label on the Democrat party, they appear to be just as incoherent as they are.

If Republicans ever want to win the battle against socialism, they must first learn what socialism is. Every Republican, every conservative and every libertarian in America needs to read my new book Socialism or Democracy: The Fateful Question for 2024. It goes into production at the end of this month. Stay tuned for preorder information.

Covid-19 and Medicaid for All: Part 2

This the second part of my article on the recent epidemic and government-run health care takes a look at the health care systems in Europe. In most countries over there, government is the main payer – in many cases the only meaningful funding source – for medical services. This has put the health care systems across Europe under stress in a way that we have not experienced here in America.

At the heart of the problem is, as I explained in Part 1:

-The advancement in medical skills and technology that come from research and innovation; and

-The decoupling of that cost increase from the free market that is necessary under a government-run system.

Under a free-market system the cost increases from advancements in technology and skills are mitigated by medical providers who learn to do more with less. He who excels at that will be more successful. By contrast, a government-run system has no limitations on cost hikes. Since government does not spend its own money it does not have any incentives to do more with less. Therefore, it maxes out what its taxpayers can afford – and then some – whereupon it has to turn to health-care rationing.

This is precisely what we have seen in Europe. Countries like Italy, Spain, Greece and Cyprus are frightful examples of what happens when government can no longer deliver on its health-care promises.

More on that in a moment. First, let us see what happened when European health systems were confronted with Covid-19.

Government only has one method for containing costs: rationing. Also known as “waiting lists”, health-care rationing is unavoidable under a Medicaid-for-All style system. To use Sweden as an example – a very popular country among the American left – their health care system costs every working adult 14 percent of their pre-tax income.[1] This is just the direct tax; there are services provided by local governments and there are subsidies from the central government that add up on top of this tax.

In total, the cost for hospitals, clinics, as well as ambulatory, elderly and rehabilitative care, amounts to about 12.5 percent of the Swedish GDP. To cover this entire bill, In other words, the 14-percent health care tax on personal income does not cover the full cost. Health districts – regions or landsting as they used to be called – also get substantial funding from the central government. All in all, Swedish taxpayers surrender about 20 percent of their personal income to government, solely for the funding of their health care system.

What do they get for the money? To begin with, patients have to dole out a substantial amount of money out of pocket. Based on OECD and Eurostat health expenditures data, out-of-pocket costs – we know them as deductibles and copays – account for 16 percent of the total funding of Swedish health care. This is money that patients have to pony up after government has imposed its heavy taxes on their incomes.

Swedish health care is also rationed. The Swedish government tries to conceal aspects of this problem; to take one example, Sweden does not report the staffing structure of its health care system to the EU statistics agency Eurostat. Other countries do this; in Greece, 24 percent of all hospital employees are medical doctors; about as many are nurses or midwives; just below 30 percent are other medical professionals or employees; and the rest are administrators.

We are going to review the staffing structure later. It is important to do so, as the staffing structure conveys important information on the quality of the health care a patient can expect. Put simply, the more medical doctors there are, and the more medical doctors there are per capita, the higher the presumed quality of care.

Likewise, one can measure access to health care by the staff-to-population ratio. All other things equal, the more health care staff there are per capita, the more accessible health care will be. Again, no such profile is reported by the Swedish government, [2] but Eurostat and the OECD publish valuable data for other European countries.

First, though, we turn our attention to another metric with useful information on health care quality: hospital beds. Figure 1 reports an interesting trend in the number of hospital beds per 1,000 residents. The trend is prevalent across Europe:

Figure 1: Hospital beds per 1,000 residents

Source: OECD

The density of hospital beds has declined across the board, with more health-care procedures shifting from in-patient to out-patient. However, there is a distinct outlier in Figure 1, and – again – that is Sweden. This hard-line single-payer system, which has a practically universal ban on private hospitals and – again – relies almost entirely on government for its funding, underwent a catastrophic rationing reform during the 1990s. Today, Sweden ranks at the bottom among its European peers in terms of hospital-bed supply.

It is important to note the Swedish hospital massacre. It happened during a very serious fiscal crisis, one that I covered in detail in my book Industrial Poverty. To mitigate heavy losses in tax revenue, government resorted to drastic tax hikes; at one point the tax-to-GDP ratio topped 60 percent. Yet despite bone-crushing increases in taxes in the midst of an economic crisis, government still could not balance its budget. Gasping for air in the chokehold of fiscal panic, the Swedish government coupled its confiscatory tax hikes with a long series of very hard spending cuts.

One of its many cost-slashing measures was to dramatically “reform” the health care system. The plunge in hospital bed supply was part of that “reform”. Another was to fire a lot of administrators at hospitals, forcing medical professionals to take over administrative duties and thus spend less time with patients. This, of course, only exacerbated the rationing of medical services.

It is here that the coronavirus epidemic brings together Medicaid for All, our current budget deficit and the challenges that come with a health-care epidemic. So long as the health care system can provide treatment on an out-patient basis, the decline in beds is of no consequence. The problems start piling up when a public-health epidemic breaks out and its treatment requires widespread in-patient treatment, i.e., hospitalizations.

The coronavirus outbreak provides an excellent test case for how responsive a health-care system is, or is not, to such an event. Behold Table 1 below, which compares hospital-bed supply to Covid-19 mortality rates as reported in May 2020 at the height of the epidemic by the Johns Hopkins University Covid-19 database.[3]

Interestingly, countries with a bed count above four per 1,000 residents have a visibly lower mortality rate than countries with a bed ratio below four:

  • In the left column in Table 1 are the countries with a bed count above four (average 5.85); their mortality rate is 6.27 percent;
  • In the right column in Table 1 are the countries with a bed count below four (average 2.94); their mortality rate is 8.52 percent.

Of the 15 countries in the higher-bed-count group, only three had a mortality rate above ten percent, while more than half had a mortality rate below five percent. By contrast, in the low-bed-count group five out of 12 countries experienced more than ten percent deaths, while only four saw mortality below five percent:

Table 1: Hospital beds and Covid-19 mortality

 BedsMort. BedsMort.
Belgium5.6616.4%U.K.2.5414.3%
France5.9815.3%Italy3.1814.1%
Hungary7.0212.9%Netherlands3.3212.9%
Slovenia4.507.0%Sweden2.2212.5%
Switzerland4.536.2%Spain2.9711.9%
Greece4.215.7%Canada2.527.5%
Poland6.625.0%Ireland2.966.3%
Germany8.004.5%USA2.776.1%
Austria7.373.9%Denmark2.504.9%
Estonia4.693.6%Finland3.284.7%
Lithuania6.563.6%Portugal3.394.2%
Czechia6.633.5%Norway3.602.8%
Luxembourg4.662.7%
Latvia5.572.0%
Slovakia5.821.8%
Sources of raw data: OECD (beds); Johns Hopkins University (mortality)

The numbers reported here are experimental, of course. They are based on two important premises:

  1. The hospital bed count, which is from 2017, is assumed to be representative of the bed-count number for 2020. This is an imperfect assumption, but with the exception of chainsaw-like reductions in hospital funding as in Sweden in the 1990s, the supply of beds only changes slowly over time.
  2. The bed count includes all hospitals, in other words psychiatric ones as well as those for general-admission purposes. This could be challenged as too blunt of a bed count, but there has also been anecdotal evidence in European media during the epidemic that beds in specialized facilities have been converted for the purposes of treating Covid-19 patients. Therefore, using the totality of hospital beds is a reasonable measure of the epidemic-response capacity limit of a nation’s hospital system.

Despite the experimental status of this comparison, it does suggest that health-care systems that are starved for hospital beds tend toward higher mortality rates.

Table 2 compares the same bed count, in the same two groups, with the coronavirus infection rate, or the number of confirmed cases per million residents. The average rate of coronavirus cases in the higher-bed-count group is 1,772 per million residents, with five of the 15 countries above 2,000 and eight below 1,000. Among the lower-bed-count countries, nine out of 12 exceeded 2,000 cases per million residents. Not one of these countries had an infection rate below 1,000, making for an average of 3,013:

Table 2: Hospital beds and ratio of Covid-19 cases

 BedsCases BedsCases
Luxembourg4.666,390Spain2.974,904
Belgium5.664,770Ireland2.964,885
Switzerland4.533,571United States2.774,344
France5.982,681Italy3.183,709
Germany8.002,111United Kingdom2.543,571
Austria7.371,818Sweden2.222,855
Estonia4.691,333Portugal3.392,781
Czechia6.63786Netherlands3.322,539
Slovenia4.50704Canada2.522,007
Lithuania6.56545Denmark2.501,893
Latvia5.57505Norway3.601,540
Poland6.62474Finland3.281,129
Hungary7.02350
Slovakia5.82272
Greece4.21262
Sources of raw data: OECD (beds); Johns Hopkins University (cases)

Again, countries with a more generous hospital system are better prepared to deal with a public-health threatening epidemic than those with a more stingy health care system.

The next question is how the staffing and funding structure itself affects a health care system. More on that in Part 3.


Footnotes:

[1] It is technically known as a municipal income tax, but a portion of the 30+ percent tax charged by municipalities is dedicated to the health care districts.

[2] They do report their numbers to the World Health Organization, but since their database suffers from other incompletion problems, it does not help in determining the structure of Swedish health-care staff.

[3] Please see: https://coronavirus.jhu.edu/map.html. Numbers were retrieved on May 16, 2020. The reason for choosing the month of May is to capture the readiness of a health-care system at the very onset of a crisis. More recent data would obfuscate the role of the institutional structure of the health care system itself.

Covid-19 and Medicaid for All, Part 1

The Covid-19 epidemic has given the world a good opportunity to study the quality of health care systems. We often hear from proponents of single-payer systems that we would get so much better health care if we just handed it all over to government.

Experience from this epidemic says otherwise. On the contrary, Europe, which is saturated with government-run health care systems, has struggled quite a bit with the epidemic. At the forefront of their problems has been a shortage of hospital beds.

Before we get there, though, we first need to take a quick look at the U.S. system. Thankfully, we don’t have a Medicaid-for-All system, but politically we are closer to it than most people realize. We are in fact hanging on the precipice of it, which makes the recent European experiences so much more important. There are few people remaining on the right side of the political aisle who are willing to fight back against the Medicaid-for-All movement. Outside of the Republican Study Committee, whose report last year presented a great plan for strengthening free-market health care, there is not too much happening among conservatives and libertarians.

This is strange and tragic. A Medicaid-for-All system is the crown jewel of the socialist welfare state, and since the libertarian movement has essentially surrendered on the welfare state in general, it lacks the ideological prowess to fight back on the Medicaid-for-All issue.

The lack of interest in fighting socialism in practice – the welfare state – is clearly noticeable across the libertarian movement. Their own party and presidential candidate barely even pay token interest to the welfare state. Worse still, America’s leading libertarian think tanks only use about ten percent of their resources to the fight against socialism in practice:

  • The Cato Institute reports 67 experts on their website; six of those can be said to be working with issues even tangentially related to the welfare state and its systemic impact on the U.S. economy;
  • American Institute for Economic Research, with its 63 experts, has four or five that touch the welfare state in their work (depending on how thin you want to stretch the definition);
  • The Reason Foundation, proudly libertarian since 1968, boasts no more than three welfare-state interested individuals among its 32-strong expert crew;
  • The Mercatus Center, the think tank at George Mason University, has practically enrolled the entire economics-department faculty among its 60 scholars, yet they still cannot find more than five whose research interests even affiliate with the welfare state.

The Heritage Foundation is the strongest institution in this respect. They have the Grover Hermann Center, which is dedicated to the study of the federal budget. In total, spread across all their departments, the Heritage Foundation has 12 welfare-state oriented experts, out of 96. Still spending only a small minority of their resources on the most critical problem of our time, Heritage nevertheless leads the libertarian movement in that regard.

With this scant attention to the practice of socialism in general, there is very little in the libertarian movement that can stop a Medicaid-for-All program. This leaves the field essentially open to the neoconservatives within the Republican party (who want a single-payer system because Irving Kristol said so) and the socialist left. Our hope lies with the aforementioned RSC report and its appeal to more conservatively minded Republicans.

Hopefully, they can find some strength in the numbers presented below. It looks increasingly as if private health-care funding is instrumental in protecting public health. This is not surprising, given that government-run health care systems suffer from two deficiencies, the first of which is its reliance on taxes for funding. By virtue of advancements in medical skills and health-care technology, the cost of providing health care goes up over time. In other words, just to keep health care quality intact, medical professionals need to raise prices over time.

This tendency, in turn, is countered by market forces. He who does more with less will always win over less productive competitors. Only a market-based health care system can strike a proper balance between the rise in costs due to quality advancements and the competition-driven decline in prices.

As an example of what this means, the health-care share of our economy (our GDP) has increased over time: looking at medical technology alone – disregarding for now all other components of health care expenditures – it was 1.3 percent of our GDP in 1980. In 2017, the latest year for which the Department of Health and Human Services publishes comprehensive data, that share is more than twice as high at 2.9 percent.

How would a single-payer system handle this? Since it lacks a countervailing force to the cost drive from quality advancements, and since health-care costs evolve independently of what taxpayers can afford, the only choices for a single-payer government are to raise taxes constantly, or ration health care access.

If we had operated a Medicaid-for-All single payer system, and if Congress had been wise enough not to raise taxes, we would have been forced to keep the med-tech share of our health care costs constant. We would therefore have had to forfeit advances in medical technology – or raise taxes.

But what is a tiny share of our economy like this one to quarrel about? As a general point, this is a valid question, of course. As share of GDP, spending on medical technology looks like chump change. However, looking at it as a market within the economy, medical technology actually translates into significant numbers. In 2017 we spent a total of $569 billion on medical technology. This includes durable technical instruments, non-durable instruments, prescription drugs, health-care facilities and the medical equipment needed for them to be operational.

If we had kept the med-tech share of GDP constant, from 1980 to 2017 we as a nation would have been limited to spending only $267.4 billion on medical technology. This would have meant a loss of more than $301 billion worth of instruments, equipment, clinics, hospitals and pharmaceutical products.

Such rationing would have had serious consequences for health care access. For every $1 million we reduce spending on medical technology, we have to make proportionate reductions in staffing. Over time, this kind of rationing has serious cumulative effects: as a thought experiment, consider what the effects would be if we removed 53 percent of all health-care spending in our country.

Another key question is, of course, what incentives entrepreneurs would have had to develop new technology for our health care system. To stick with the time horizon from 1980 and on, where would our health care have been today in terms of quality and ability to cure and heal?

Proponents of health care socialism often bring up administration as the holy grail of cost reductions. What they forget is that the decisions being made by administrators in today’s systems also must be made under a single-payer system. Hospitals and clinics still need to file claims for every procedure; someone needs to evaluate every claim; someone needs to process every claim; someone needs to cut the checks and send them out to the health care provider.

Someone still needs to keep track of supplies, order supplies, pay for them, make sure deliveries were according to specifications, distribute the supplies within the hospital… Human resources staff still need to make sure there are enough doctors, nurses, midwives, cleaning staff, procurement staff, computer experts and other employees throughout the health care system.

And someone still needs to evaluate the health care procedures to make sure that resources are not being wasted. For a glimpse of what this means under a government-run system, see the chapter on fiscal eugenics in my book The Rise of Big Government.

Table 1 explains the components of health-care costs (billions of dollars) in 2017, for the nation’s entire health care system.

Health Care Cost BreakdownUS$ billion
National Health Care Expenditures       3,492.1
Of which:
Hospital operations       1,142.6
Physician and clinical expenditures          694.3
Dental services          129.1
Other health-care professionals            96.6
Home health care            97.0
Non-durable medical products            64.1
Prescription drugs          333.4
Durable medical products            54.4
Nursing, continuing care          166.3
Other health care          183.1
Administration, net insurance costs          274.5
Public health activity            88.9
Research            50.7
Structures and equipment          116.9
Source: U.S. Department of Health and Human Services

Administration costs amount to less than eight percent of total health-care expenditures. Of this, 83.6 percent is the net cost for insurance. In other words, even if the entire insurance administration cost was eliminated it would only save the health care system 6.6 percent of its total costs.

This would, again, be possible if and only if there would be no need for any administration in a single-payer system. As mentioned earlier, that kind of administration is always going to be needed. Government doesn’t just funnel money out to hospitals, clinics and other health-care providers without any kind of information on what is being done, when, how, why and for how much money.

On the contrary, a single-payer system would come under intense cost scrutiny, given the very high taxes it would require. If anything, administration would increase to minimize waste, fraud and abuse. It is simply a pipe dream to think that elimination of administrative overhead would have paid for the $301 billion in med-tech advancements that we would have had to give up in order to not raise health care taxes from 1980 for our hypothetical Medicaid-for-All system.

But that’s not all. A single-payer system requires another layer of administration: central planning of all resources. It would require National Medicaid-for-All Agency that would micro manage the appropriations for every hospital bed, every medical procedure, every drug prescription and every other transaction within the entire American health care system.

That takes a lot of people, and a lot of people cost a lot of money.

Once the single-payer system is in place, government will freeze its costs in parity with the tax base. This means making health-care rationing a standard operating procedure for the allocation of health care resources, meaning in practice that access and quality are made scarce.

In Part 2 I explain what this means in practice and what it meant during the Covid-19 epidemic. In the meantime, listen to our podcast that talks about this very same issue.