Some 15 years ago, just after the crash, Sen wrote in the LRB
What are the special characteristics that make a system indubitably capitalist—old or new?
Investment funds are allocated mainly through capital markets which also finance the Government's fiscal deficit. This means the Government can help the economy by running a surplus and thus cooling down an overheated economy, or else run a deficit and thus inject money into a stalling economy. General business confidence is reflected by rising or falling stock prices and Government's can take account of this in making policy decisions.
Sen doesn't get these are the characteristics of capitalist countries like UK or US. The rest of his essay is vacuous shite.
If the present capitalist economic system is to be reformed, what would make the end result a new capitalism, rather than something else?
It wasn't reformed. The State intervened to prevent 'contagion' and took on a lot of the down side risk. It created a liquidity trap situation where high tech entrepreneurs could gain enormous market valuations.
A new capitalism came into existence once Institutions like Pension funds- representing the great mass of the employed population- became the principal shareholders of corporate equity. A newer capitalism may involve Artificial Intelligences devoted to increasing their energy, informational and soft and hardware inputs, displacing the Institutional investor and the private equity maven and V.C or tech bro investor.
It seems to be generally assumed that relying on markets for economic transactions is a necessary condition for an economy to be identified as capitalist.
A feudal or barbarous territory may have markets. But it may not have any investment- i.e. capital building. Capitalism has well developed capital markets such that savers can get 'capital gains' or a good return on equity from entrepreneurs who are investing in plant and machinery and R&D.
In a similar way, dependence on the profit motive and on individual rewards based on private ownership are seen as archetypal features of capitalism.
No. One can have this in a stagnant economy with no innovation or large scale infrastructure or other productive investment.
However, if these are necessary requirements, are the economic systems we currently have, for example, in Europe and America, genuinely capitalist?
Yes, if innovation and new infrastructure is being created mainly by private enterprise. If the State expands output and employment directly through the Public Sector we have Socialism or 'State Capitalism'. On the other hand, if this is done for reasons of 'Keynesian' demand management, then this is merely an appearance. Capitalism is being saved by Socialist means. Once business confidence is restored, Privatization may expand the private sector.
All affluent countries in the world - those in Europe, as well as the US, Canada, Japan, Singapore, South Korea, Australia, and others - have, for quite some time now, depended partly on transactions and other payments that occur largely outside markets.
These are 'transfers'. Sadly, entitlements in this respect can suddenly collapse or be greatly curtailed. But then so can private pension funds.
These include unemployment benefits, public pensions, other features of social security,
'transfer payments'. There is also direct Government provision of goods and services-
and the provision of education, health care, and a variety of other services distributed through nonmarket arrangements.
They may be distributed through private contractors.
The economic entitlements connected with such services are not based on private ownership and property rights.
They are linked to legal rights some of which are property rights.
Also, the market economy has depended for its own working not only on maximizing profits but also on many other activities, such as maintaining public security and supplying public services - some of which have taken people well beyond an economy driven only by profit.
But the Defence Department may choose to work with private contractors. There may be a 'military industrial complex'. Many 'public services' may be provided by for-profit firms.
The creditable performance of the so-called capitalist system, when things moved forward, drew on a combination of institutions - publicly funded education, medical care, and mass transportation are just a few of many - that went much beyond relying only on a profit-maximizing market economy and on personal entitlements confined to private ownership.
The reverse was equally true. A dysfunctional public sector might be 'privatized'.
Underlying this issue is a more basic question: whether capitalism is a term that is of particular use today.
Yes. The 'mixed economy' failed because the public sector became sclerotic. Privatization raised productivity and improved the quality of public services. Sadly, if done in a corrupt manner, the reverse outcome was also possible.
The idea of capitalism did in fact have an important role historically, but by now that usefulness may well be fairly exhausted.
It was revived during the Seventies and triumphed with Reagan and Thatcher from the Eighties onward. Sen simply wasn't paying attention.
For example, the pioneering works of Adam Smith in the eighteenth century showed the usefulness and dynamism of the market economy, and why - and particularly how - that dynamism worked.
Not really. People who actually read Smith discover he was stupid and ignorant. But, he wrote well.
Smith's investigation provided an illuminating diagnosis of the workings of the market just when that dynamism was powerfully emerging.
It had emerged long ago. Scotland was a bit backward relative to Holland and parts of England.
The contribution that The Wealth of Nations, published in 1776, made to the understanding of what came to be called capitalism was monumental.
No it wasn't. As I said, Scotland was backward. Some German bureaucrats and pedants did read Smith. But they also read Alexander Pope's 'Essay on Man'.
Smith showed how the freeing of trade can very often be extremely helpful in generating economic prosperity through specialization in production and division of labor and in making good use of economies of large scale. Those lessons remain deeply relevant even today (it is interesting that the impressive and highly sophisticated analytical work on international trade for which Paul Krugman received the latest Nobel award in economics
Back then Krugman wasn't known to be a kretin. Sen does not mention trade economist Manmohan who had become India's PM 5 years previously.
was closely linked to Smith's far-reaching insights of more than 230 years ago).
No it wasn't. Krugman and Dixit, etc., were able to use a better type of math to capture 'increasing returns' and 'network effects'. This was Marshallian and marginalist, not classical.
The economic analyses that followed those early expositions of markets and the use of capital in the eighteenth century have succeeded in solidly establishing the market system in the corpus of mainstream economics.
There was no academic 'economics' till towards the end of the nineteenth century.
However, even as the positive contributions of capitalism through market processes were being clarified and explicated, its negative sides were also becoming clear - often to the very same analysts. While a number of socialist critics, most notably Karl Marx, influentially made a case for censuring and ultimately supplanting capitalism, the huge limitations of relying entirely on the market economy and the profit motive were also clear enough even to Adam Smith.
They had been clear to Hammurabi. Greed can be a bad thing. Don't spend money on expensive luxuries. Think of your immortal soul.
Indeed, early advocates of the use of markets, including Smith, did not take the pure market mechanism to be a freestanding performer of excellence, nor did they take the profit motive to be all that is needed. Even though people seek trade because of self-interest (nothing more than self-interest is needed, as Smith famously put it, in explaining why bakers, brewers, butchers, and consumers seek trade), nevertheless an economy can operate effectively only on the basis of trust among different parties.
But trust is a function of self-interest. It is sensible to trust those who have an incentive to make good their promises. It is foolish to trust those who suggest you give away all your money because the Day of Judgment is at hand.
When business activities, including those of banks and other financial institutions, generate the confidence that they can and will do the things they pledge, then relations among lenders and borrowers can go smoothly in a mutually supportive way.
This is also the case if the Government demonstrates the willingness and ability to take on the downside risk
As Adam Smith wrote: When the people of any particular country have such confidence in the fortune, probity, and prudence of a particular banker, as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him; those notes come to have the same currency as gold and silver money, from the confidence that such money can at any time be had for them .
This was known to the Lombards and to Londoners from the time that Lombard street was established. Sen thinks Smith made this discovery himself.
Smith explained why sometimes this did not happen, and he would not have found anything particularly puzzling, I would suggest, in the difficulties faced today by businesses and banks thanks to the widespread fear and mistrust that is keeping credit markets frozen and preventing a coordinated expansion of credit.
Obama might actually be a Socialist. He might prefer to help the 'sub-prime' African American from foreclosure rather than bail out the Banks.
It is also worth mentioning in this context, especially since the "welfare state" emerged long after Smith's own time, that in his various writings, his overwhelming concern - and worry - about the fate of the poor and the disadvantaged are strikingly prominent.
No. They are strikingly absent. Other Scottish writers were bewailing the condition of enslaved coal miners and Highland crofters being evicted or young men being press-ganged into the Navy. Hume and Smith were on the side of those with money and power.
The most immediate failure of the market mechanism lies in the things that the market leaves undone. Smith's economic analysis went well beyond leaving everything to the invisible hand of the market mechanism.
You may have to send in dragoons to force the crofter off his land.
He was not only a defender of the role of the state in providing public services, such as education, and in poverty relief (along with demanding greater freedom for the indigents who received support than the Poor Laws of his day provided),
No. He thought the parish should do all this but charge fees to pupils and ensure that those receiving public assistance did useful labour in 'workhouses'. Poverty is a profit opportunity.
he was also deeply concerned about the inequality and poverty that might survive in an otherwise successful market economy.
Because you can make money out of poor people.
Lack of clarity about the distinction between the necessity and sufficiency of the market has been responsible for some misunderstandings of Smith's assessment of the market mechanism by many who would claim to be his followers.
Pretending Smith was a Left Liberal who championed the rights of disabled Lesbian darkies involves telling stupid lies. Why not suggest that George Washington was actually a homosexual Red Indian living happily with a Chinese speaking Angolan?
For example, Smith's defense of the food market and his criticism of restrictions by the state on the private trade in food grains have often been interpreted as arguing that any state interference would necessarily make hunger and starvation worse. But Smith's defense of private trade only took the form of disputing the belief that stopping trade in food would reduce the burden of hunger. That does not deny in any way the need for state action to supplement the operations of the market by creating jobs and incomes (e.g., through work programs). If unemployment were to increase sharply thanks to bad economic circumstances or bad public policy, the market would not, on its own, recreate the incomes of those who have lost their jobs. The new unemployed, Smith wrote, "would either starve, or be driven to seek a subsistence either by begging, or by the perpetration perhaps of the greatest enormities," and "want, famine, and mortality would immediately prevail...."
In a stagnant economy. Smith was for Capitalist accumulation and productivity growth which inter alia would raise real wages. But this was the common sense of the time. It was Churchy types who gassed on about the duty of the Monarch to look after the indigent.
Smith rejects interventions that exclude the market—but not interventions that include the market while aiming to do those important things that the market may leave undone.
Like what? Smith says 'get rid of the 'settlements' system- i.e. eligibility to Poor Relief based on birth- because it reduces labour mobility. But does he say the Central Government should fund it? No. He says the parish should do so while figuring out a way to make the poor productive so as to itself benefit from their labour power.
Smith never used the term "capitalism" (at least so far as I have been able to trace),
the term originated in the financing of War through financial markets in eighteenth century France and England. Essentially, the yield on consols was the 'risk-free' price of loanable funds. Moreover 'speculative demand for money' arose out of access to consols for portfolio choice. Smith wasn't a businessman and thus remained ignorant of such things.
but it would also be hard to carve out from his works any theory arguing for the sufficiency of market forces, or of the need to accept the dominance of capital.
Others found it easy. Still, once we understand that Smith was actually a disabled Lesbian of colour protesting the Highland Clearances, we can accept that what he really said was 'Eat the Rich!'.
He talked about the importance of these broader values that go beyond profits in The Wealth of Nations, but it is in his first book, The Theory of Moral Sentiments, which was published exactly a quarter of a millennium ago in 1759, that he extensively investigated the strong need for actions based on values that go well beyond profit seeking.
Stuff like bathing regularly and not knifing your friends when off your head on drink.
While he wrote that "prudence" was "of all the virtues that which is most useful to the individual," Adam Smith went on to argue that "humanity, justice, generosity, and public spirit, are the qualities most useful to others.
Thus having a reputation for such things means you can transact more business or rise higher in public life.
" Smith viewed markets and capital as doing good work within their own sphere, but first, they required support from other institutions - including public services such as schools -
Smith said kids should be encouraged to earn money so as to pay the School Master.
and values other than pure profit seeking, and second, they needed restraint and correction by still other institutions - e.g., well-devised financial regulations and state assistance to the poor - for preventing instability, inequity, and injustice.
He said no such thing. This was because he was actually working in a Lesbian commune in East Bengal and did not know English.
If we were to look for a new approach to the organization of economic activity that included a pragmatic choice of a variety of public services and well- considered regulations, we would be following rather than departing from the agenda of reform that Smith outlined as he both defended and criticized capitalism.
More particularly if we actually worked in a Lesbian Commune in East Bengal just like Smith. The plain fact is that if Scotland had introduced an Income Tax so as to pay for universal education and generous Poor Relief, entrepreneurs and wealthy folk would have fled the jurisdiction. The country would have become poorer, not richer. The Highland Clearances were cruel but they made some Lairds wealthy which meant they could spend more money in Edinburgh thus raising prosperity there.
Historically, capitalism did not emerge until new systems of law and economic practice protected property rights and made an economy based on ownership workable.
Capitalism has emerged in several places at different times. What made Western European Capitalism different was stable financial markets featuring risk-free assets- i.e. consols. This greatly assisted financial arbitrage and portfolio choice. However, the condition for this was rising Oceanic trade- militating for greater factor mobility- as well as innovation based productivity improvement.
Commercial exchange could not effectively take place until business morality made contractual behavior sustainable and inexpensive
No. It took place regardless of 'business morality'. However, exponential growth in Capital Stock militated for better and cheaper contract enforcement. Justice is a service industry. If the demand for it rises quickly, the supply too will rise.
—not requiring constant suing of defaulting contractors, for example.
There is plenty of such suing. What matters is that the provision of 'risk pooling'- e.g. professional indemnity insurance becoming cheaper and more ubiquitous.
Investment in productive businesses could not flourish until the higher rewards from corruption had been moderated.
Though both could rise together till a 'phase transition' occurred. If the reward for corruption declines relative to that for probity, the former becomes contemptible.
Profit-oriented capitalism has always drawn on support from other institutional values.
No. It either actually makes a profit or ceases to exist even if other institutional values are constantly braiding its hair and offering emotional support.
The moral and legal obligations and responsibilities associated with transactions have in recent years become much harder to trace, thanks to the rapid development of secondary markets involving derivatives and other financial instruments.
Actually, they are easier to trace because technology has improved. Part of the problem was that digitization etc. had not occurred quickly enough in specific markets.
A subprime lender who misleads a borrower into taking unwise risks can now pass off the financial assets to third parties - who are remote from the original transaction.
That was always the case. This is mere arbitrage.
Accountability has been badly undermined, and the need for supervision and regulation has become much stronger.
Nope. The problem was incentive incompatibility. Better mechanism design was required. Shareholders needed to insist on this.
And yet the supervisory role of government in the United States in particular has been, over the same period, sharply curtailed, fed by an increasing belief in the self-regulatory nature of the market economy.
This was because 'Agency Capture' had all too evidently occurred much before.
Precisely as the need for state surveillance grew, the needed supervision shrank. There was, as a result, a disaster waiting to happen, which did eventually happen last year, and this has certainly contributed a great deal to the financial crisis that is plaguing the world today.
The problem is that regulators would have made the same mistakes in any case. Other countries which took a big haircut had stricter regulation. But if everybody believes stupid shit, stupid shit will go down regardless of oversight or regulation.
The insufficient regulation of financial activities has implications not only for illegitimate practices, but also for a tendency toward overspeculation that, as Adam Smith argued, tends to grip many human beings in their breathless search for profits. Smith called the promoters of excessive risk in search of profits "prodigals and projectors" - which is quite a good description of issuers of subprime mortgages over the past few years.
The Government was forcing the industry down this road. Would they take on the downside risk?- i.e. pay off mortgages and thus prevent foreclosures? No. They'd bail out some Banks but not poor folk with 'negative equity'.
Discussing laws against usury, for example, Smith wanted state regulation to protect citizens from the "prodigals and projectors" who promoted unsound loans: A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy.
Stuff like the South Sea Bubble. Smith was particularly worried about Scottish colonial schemes which could ruin his own class of people.
The implicit faith in the ability of the market economy to correct itself, which is largely responsible for the removal of established regulations in the United States,
No. It was the realization that the thing was useless or mischievous. The Americans had already seen grave misconduct in supposedly very tightly regulated markets.
tended to ignore the activities of prodigals and projectors in a way that would have shocked Adam Smith. The present economic crisis is partly generated by a huge overestimation of the wisdom of market processes, and the crisis is now being exacerbated by anxiety and lack of trust in the financial market and in businesses in general - responses that have been evident in the market reactions to the sequence of stimulus plans, including the $787 billion plan signed into law in February by the new Obama administration.
What if Obama goes ape and shows the Socialist cloven hoof? Did you know he was actually born in Kenya to a KGB officer? The bigger problem was that the 'War on Terror' which was supposed to turn a profit, had turned into an expensive quagmire.
As it happens, these problems were already identified in the eighteenth century by Smith, even though they have been neglected by those who have been in authority in recent years, especially in the United States, and who have been busy citing Adam Smith in support of the unfettered market.
This is nonsense. The Americans knew their own economy much better than this brown monkey. Regulation led to 'Agency Capture'. It meant more, not less, risk and bad economic choices.
While Adam Smith has recently been much quoted, even if not much read, there has been a huge revival, even more recently, of John Maynard Keynes.
No one suspected we'd have such a big 'liquidity trap'. It turned out Keynes was utterly useless.
Certainly, the cumulative downturn that we are observing right now, which is edging us closer to a depression, has clear Keynesian features;
There was no big rise in structural unemployment because the Government took care of contagion risk and the labour market was already pretty flexible thanks to 'Workfare' etc.
the reduced incomes of one group of persons has led to reduced purchases by them, in turn causing a further reduction in the income of others. However, Keynes can be our savior only to a very partial extent, and there is a need to look beyond him in understanding the present crisis.
There was no such need. The problem was 'mechanism design' and bad 'incomplete contracts' such that 'incentive incompatibility' arose.
One economist whose current relevance has been far less recognized is Keynes's rival Arthur Cecil Pigou, who, like Keynes, was also in Cambridge, indeed also in Kings College, in Keynes's time. Pigou was much more concerned than Keynes with economic psychology and the ways it could influence business cycles and sharpen and harden an economic recession that could take us toward a depression (as indeed we are seeing now). Pigou attributed economic fluctuations partly to "psychological causes" consisting of variations in the tone of mind of persons whose action controls industry, emerging in errors of undue optimism or undue pessimism in their business forecasts .
Screw Pigou. There was a question about whether the US government would take on the down-side risk. They did- for Americans. Some European countries- e.g. 'PIGS'- had to take a lot of bitter medicine for a decade or else, like Iceland, walk away from their debts.
It is hard to ignore the fact that today, in addition to the Keynesian effects of mutually reinforced decline, we are strongly in the presence of "errors of...undue pessimism."
We weren't pessimistic enough about the War on Terror or the rise of China, Iran, Russia etc.
Pigou focused particularly on the need to unfreeze the credit market when the economy is in the grip of excessive pessimism: Hence, other things being equal, the actual occurrence of business failures will be more or less widespread, according [to whether] bankers' loans, in the face of crisis of demands, are less or more readily obtainable.
Nothing wrong with a good 'shake out'. Recovery begins within 18 months and a better trajectory is possible because of 'deadheading'.
Despite huge injections of fresh liquidity into the American and European economies, largely from the government, the banks and financial institutions have until now remained unwilling to unfreeze the credit market.
It took time to unwind positions. Also, Obama was bleck. What if he was also a Socialist?
Other businesses also continue to fail, partly in response to already diminished demand (the Keynesian "multiplier" process), but also in response to fear of even less demand in the future, in a climate of general gloom (the Pigovian process of infectious pessimism). One of the problems that the Obama administration has to deal with is that the real crisis, arising from financial mismanagement and other transgressions, has become many times magnified by a psychological collapse. The measures that are being discussed right now in Washington and elsewhere to regenerate the credit market include bailouts - with firm requirements that subsidized financial institutions actually lend - government purchase of toxic assets, insurance against failure to repay loans, and bank nationalization. (The last proposal scares many conservatives just as private control of the public money given to the banks worries people concerned about accountability.)
Such Banks were profitably privatized.
As the weak response of the market to the administration's measures so far suggests, each of these policies would have to be assessed partly for their impact on the psychology of businesses and consumers, particularly in America.
Stupid peeps can't assess shit. Sen published this in February. In March, the longest bull market in history began. It lasted till COVID.
The contrast between Pigou and Keynes is relevant for another reason as well.
Neither mattered. They were English at a time when the UK was in irretrievable comparative economic decline. Not so, America.
While Keynes was very involved with the question of how to increase aggregate income, he was relatively less engaged in analyzing problems of unequal distribution of wealth and of social welfare. In contrast, Pigou not only wrote the classic study of welfare economics, but he also pioneered the measurement of economic inequality as a major indicator for economic assessment and policy .
This is the so called 'Pigou Dalton' principle. It is silly, if smart peeps are making better investment decisions, it is to the advantage of poor and stupid people like me, for there to be more not less inequality.
Since the suffering of the most deprived people in each economy - and in the world - demands the most urgent attention, the role of supportive cooperation between business and government cannot stop only with mutually coordinated expansion of an economy.
Both the private and public sector must go in for virtue signalling and DIE and championing the rights of disabled Lesbian goats.
There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion.
For countries which had borrowed too much, the critical need was for depriving the underdogs of their juicy bones and squeaky toys- i.e. generous welfare provisions. Austerity or entitlement collapse shrank the deficit and restored fiscal solvency.
Families threatened with unemployment, with lack of medical care, and with social as well as economic deprivation have been hit particularly hard.
They would get hit harder in countries which had over-borrowed and whose currencies could not depreciate.
The limitations of Keynesian economics to address their problems demand much greater recognition.
What had to be recognized was that entitlement collapse occurs when a country goes off a fiscal cliff. Recognizing that the Government can't raise the real income of the unproductive by utilizing a magic money tree was the need of the hour.
A third way in which Keynes needs to be supplemented concerns his relative neglect of social services - indeed even Otto von Bismarck had more to say on this subject than Keynes.
Bismarck built on pre-existing 'Sickness funds' which covered about 30 percent of the working population. Employees and Employers, not taxes, funded coverage. Sen thinks Bismarck was taxing the rich to help the poor. He is a cretin.
The plain fact is, the Government can promise to give lots of money to the poor but it then has to renege on that promise because it can't borrow enough.
That the market economy can be particularly bad in delivering public goods (such as education and health care) has been discussed by some of the leading economists of our time, including Paul Samuelson and Kenneth Arrow.
Who taught at places which charged high fees. The government funded Colleges of India are far superior to Harvard and MIT- right?
(Pigou too contributed to this subject with his emphasis on the "external effects" of market transactions, where the gains and losses are not confined only to the direct buyers or sellers.)
Coase showed that markets can find ways to internalize externalities.
This is, of course, a long-term issue, but it is worth noting in addition that the bite of a downturn can be much fiercer when health care in particular is not guaranteed for all.
And health care for all can collapse during such a downturn. People realize they needed to save for a rainy day. It was folly to rely upon the Government.
For example, in the absence of a national health service, every lost job can produce a larger exclusion from essential health care, because of loss of income or loss of employment-related private health insurance.
But a national health service can turn to shit unless- as happened in the UK under Cameron- there is 'austerity'- i.e. cuts in transfer payments- supplemented by immigration.
The US has a 7.6 percent rate of unemployment now, which is beginning to cause huge deprivation.
It peaked at 20 percent in 2010. The War on Terror was an expensive mistake. Still, Obama was able to restore prosperity by bailing out the rich.
It is worth asking how the European countries, including France, Italy, and Spain, that lived with much higher levels of unemployment for decades, managed to avoid a total collapse of their quality of life.
Immigration. Bring in darkies to do the jobs the indigenous folk are too lazy to do.
The answer is partly the way the European welfare state operates, with much stronger unemployment insurance than in America and, even more importantly, with basic medical services provided to all by the state.
This is why smart European academics tend to end up shifting to US campuses.
The failure of the market mechanism to provide health care for all has been flagrant, most noticeably in the United States,
particular States are welcome to have a comprehensive health service of their own. Voters may not want this.
but also in the sharp halt in the progress of health and longevity in China following its abolition of universal health coverage in 1979.
That halt was caused by commissars no longer cooking the books.
Before the economic reforms of that year, every Chinese citizen had guaranteed health care provided by the state or the cooperatives, even if at a rather basic level.
Then barefoot doctors in the rural areas bought themselves a pair of trainers and ran the fuck away. Also, everybody started to smoke like crazy and thus started to die of cancer. Air pollution too greatly worsened.
When China removed its counterproductive system of agricultural collectives and communes and industrial units managed by bureaucracies, it thereby made the rate of growth of gross domestic product go up faster than anywhere else in the world. But at the same time, led by its new faith in the market economy, China also abolished the system of universal health care;
which was shitty
and, after the reforms of 1979, health insurance had to be bought by individuals (except in some relatively rare cases in which the state or some big firms provide them to their employees and dependents). With this change, China's rapid progress in longevity sharply slowed down.
Also because people were smoking and drinking more while eating tasty fast food. The bigger problem was that statistics were no longer being dictated by commissars.
This was problem enough when China's aggregate income was growing extremely fast, but it is bound to become a much bigger problem when the Chinese economy decelerates sharply, as it is currently doing.
It became a smaller problem thanks to the Healthy China initiative launched in October 2009. Shifting from shitty barefoot doctors to proper hospitals and effective medications meant out of pocket expenses rose steeply before falling back again thanks to improved risk pooling.
The Chinese government is now trying hard to gradually reintroduce health insurance
which collapsed in the Eighties because people felt they weren't getting value for money. That's the problem with the market. People won't pay for worthless shite if they can save up and get something which actually works.
for all, and the US government under Obama is also committed to making health coverage universal. In both China and the US, the rectifications have far to go, but they should be central elements in tackling the economic crisis, as well as in achieving long-term transformation of the two societies.
Nope. The thing does not greatly matter. If you provide good medical treatment, people will get insurance so as to get treatment. If medical treatment is shit, they won't bother.
The revival of Keynes has much to contribute both to economic analysis and to policy, but the net has to be cast much wider.
Why not give ten million dollars to every poor person? That would solve the problem of poverty.
Even though Keynes is often seen as a kind of a "rebel" figure in contemporary economics, the fact is that he came close to being the guru of a new capitalism, who focused on trying to stabilize the fluctuations of the market economy (and then again with relatively little attention to the psychological causes of business fluctuations).
Cut taxes. Laffer says it's a good idea. True the deficit may balloon but if you have the best capital markets, foreigners may finance it. You are getting 'seigniorage' from 'exorbitant privilege'- i.e. the fact that the world uses your currency to trade.
Even though Smith and Pigou have the reputation of being rather conservative economists, many of the deep insights about the importance of nonmarket institutions and nonprofit values came from them,
No. They were sensible people who knew that the Government likes taking money and pissing it against the war. It may promise to give you lots of money in bad times but it breaks those promises easily enough.
rather than from Keynes and his followers.
Who thought you could fool workers through 'money illusion'- i.e. inflate the currency and the Unions won't notice they have been short changed.
A crisis not only presents an immediate challenge that has to be faced. It also provides an opportunity to address long-term problems when people are willing to reconsider established conventions.
Very true. That is why it is a good idea to get hit by a bus. Your crisis will provide you an opportunity to think about gender reassignment surgery and a new career as a Beyonce impersonator in Wigan.
This is why the present crisis also makes it important to face the neglected long-term issues like conservation of the environment and national health care, as well as the need for public transport, which has been very badly neglected in the last few decades and is also so far sidelined— as I write this article - even in the initial policies announced by the Obama administration.
Why stop there? Why not defund the Army and invite Al Qaeda to invade? That crisis will give you an opportunity to face long neglected issues like compulsory gender reassignment surgery for Estate Agents.
Economic affordability is, of course, an issue, but as the example of the Indian state of Kerala shows, it is possible to have state-guaranteed health care for all at relatively little cost.
Provided you have a remittance economy and also export Doctors and Nurses.
Since the Chinese dropped universal health insurance in 1979, Kerala - which continues to have it—has very substantially overtaken China in average life expectancy and in indicators such as infant mortality, despite having a much lower level of per capita income.
But a much larger percentage of Keralites have to do manual labour in the Gulf. Also poor people don't get to eat and drink enough of the sort of things which worsen their health
So there are opportunities for poor countries as well.
If America wants to have higher life expectancy, it should aim to become poorer than Kerala.
But the largest challenges face the United States, which already has the highest level of per capita expenditure on health among all countries in the world, but still has a relatively low achievement in health and has more than forty million people with no guarantee of health care.
The figure is thought to be about 26 million now.
Part of the problem here is one of public attitude and understanding. Hugely distorted perceptions of how a national health service works need to be corrected through public discussion.
Propaganda doesn't work. Keep telling Americans that Cubans are better off and Americans start suggesting you have shit for brains.
For example, it is common to assume that no one has a choice of doctors in a European national health service, which is not at all the case.
Unless it is. If only one surgery is taking patients in your area, you have no choice. Also you can't demand to be treated at a better hospital or to have a better surgeon unless you can pay to go private.
There is, however, also a need for better understanding of the options that exist. In US discussions of health reform, there has been an overconcentration on the Canadian system - a system of public health care that makes it very hard to have private medical care - whereas in Western Europe the national health services provide care for all but also allow, in addition to state coverage, private practice and private health insurance, for those who have the money and want to spend it this way.
Sen didn't understand that the US could have had higher coverage but only by forcing some people to take a really shitty deal. In any case, because of its vast size, different States would need to implement different types of schemes.
It is not clear just why the rich who can freely spend money on yachts and other luxury goods should not be allowed to spend it on MRIs or CT scans instead.
Canadians can cross the border and do this easily enough. Apparently, a lot of private clinics were breaking the law in any case.
If we take our cue from Adam Smith's arguments for a diversity of institutions,
which were like his arguments for mandatory gender reassignment surgery for actuarial scientists- i.e. they didn't exist
and for accommodating a variety of motivations, there are practical measures we can take that would make a huge difference to the world in which we live.
Name one you vacuous blathershite.
The present economic crises do not, I would argue, call for a "new capitalism," but they do demand a new understanding of older ideas, such as those of Smith and, nearer our time, of Pigou, many of which have been sadly neglected.
If everybody read Pigou while Adam Smith performed gender reassignment surgery on them, then world would be nice nice.
What is also needed is a clearheaded perception of how different institutions actually work,
which is what Sen lacks.
and of how a variety of organizations - from the market to the institutions of the state - can go beyond short-term solutions and contribute to producing a more decent economic world.
by doing what? Creating entitlements which will collapse when the country goes off a fiscal cliff? Recall 'sub-prime' was about helping poorer people get a foot on the housing ladder. It encouraged improvident borrowing and lending. The aim may have been to produce a more decent world- but that was also the supposed aim of the war on terror. Like Sen's economics, they were stupid shite.
A new Capitalism may be coming which is based on a riskless asset which is not any type of Government security. It may feature AIs rather than hedge fund mavens. But if it is based on borrowing and lending then what matters is whether borrowed money is spent wisely or if it is pissed against a wall.
Sen stands for pissing money against a wall. Obama, however, was a bit of a fiscal hawk. He wanted to take an axe to Social Security spending. It is easy to castigate him for his foreign policy mistakes. But never forget, America's first black President was for sound money and careful budgeting.
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