Capitalism in Crisis

Years ago (1950’s – 1970’s in particular), there was a vision of the future put about that showed capitalism and advances in technology freeing people – they would have more leisure time, a higher standard of living, great health, good food, live in a peaceful society, better education, etc. (and in some models of the vision, wore shiny silver suits, had robot servants and food was in the form of pills taken at mealtimes!).

Everyone bought that vision and agreed it was a good future to look forward to – we even had TV programmes about it (e.g. Tomorrows World).

The unspoken assumption of these utopian visions was that the wealth created by these advances would be shared out. Unfortunately, back in the real world, that’s not what happened.

That’s why you’ve got a bunch of people running around shouting about the 1% having it all and the 99% getting shafted with the rough end of a pineapple. I guess the 99% are the ‘Soylent Green.’

@Ernie Ball

Sort of…. Irish pensioners who didn’t get around to admitting they had income other than the state pension. You’d be surprised at what powers the Revenue has.

The same Larry Summers who worked with Greenspan and Rubin to prevent Brooksley Born from regulating the OTC derivatives market?

The same Larry Summers who endorsed the Gramm-Leach-Bliley Act that enabled the banks to get TBTF via their derivatives activities in the shadow banking system?

http://www.pbs.org/wgbh/pages/frontline/warning/

Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha!

Larry Summers pontificating on a crisis in capitalism ranks up there with Kissinger winning the peace prize.

I guess the 99% are the ‘Soylent Green

Oh it’s much worse than that.

Mr Summers is “sponching” here in that he is raising points and making arguments which so not address the core problem with capitalism today. In the context of the global economy, it is as irrelevant to talk about income inequalities, demand for goods, and Baumol’s cost disease as it is irrelevant for our Spronch/SG debaters above to discuss nutrition and food sector jobs. None of these debates address the main issue.

Spronch/SG is made out of people. Our banks are all insolvent.

Our latest crisis of capitalism is a banking crisis. Virtually all the major banks in the western world are insolvent following the bursting of a massive lending binge, unprecedented in human history. The uncertainty, the deleveraging, lack of confidence, lack of investment, unemployment, sovereign debts, currency upheavals, income inequalities, and the endless series of increasingly irrelevant Op-Eds; all stem from one root cause: The insolvency of the banks.

Until the mass insolvency in the banking system is resolved, capitalism as we understood it simply will not exist. We will have no functioning credit system, no profit motive, no moral hazard. We will have no investment. We will have no firm foundations for industry, no stable monetary or fiscal policies, no public confidence the markets or the state. We will have privatisation of imaginary profits, and socialisation of real losses.

We will live in, in the words of Nassim Taleb, in “some wierd combination” of capitalism and socialism, with a “cartel” of banks controlling the economy, with the public serving them, rather than the banks serving us.

Forget everything else. Forget what is happening, forget how we got here. Dealing with the insolvency of our banking system is the principal task of our generation. When the banks are wound up and their debts resolved, then we can conduct some kind of Marshall Plan for capitalism and society. But until that task is complete, our efforts on such things are wasted, consumed by the voracious debts of a bankrupt banking system.

@ The D of C
Drinking habits have changed instead of going out to the pub and getting caught drunk driving, people are buying cheaply in bulk from Aldi and getting pissed quietly at home. Alcohol consumption per capita is probably trending up.

I notice you are less optimistic than usual lately. Always remember that we can say to hell with poverty we will kill a duck and if we have to tighten our belts the best and cheapest poteen comes from Sligo. I liked your link to the Kerry Railway, I was in the Lartigue in Listowel last June. There were a couple of ex CIE people there reminiscing about the good old days and the thousands of livestock that went out on railway carriages on Big Fair days. The Englishman who said “Hope springs eternal in the human breast.” got it right and then there was Paddy Moriarty from Knockanure who said “It is always darkest before the dawn.”.

@ Darren Snow
I agree with you.
Manufacturing today is heavily automated and geared to high volume output. The incremental cost per unit above the breakeven output is a small fraction of what it used to be. Samsung and Philips with their joint venture LCD/LED TV manufacturing in Korea are a good example. The quality has steadily improved as the prices plummeted. The labour content in manufacturing is declining all around the world. The labour involved in banking has been declining for the last 25 years. Both manufacturing and service industries will continue to expand without adding workers. The low Yuan keeps Chinese labour productive but competition from automated processes will limit the upward movement of wages as it has in the G8. The Henry Ford model of well paid workers buying expensive products is breaking down as labour loses bargaining power. Automation is a major factor even though Chinese cheap labour gets most of the blame. We are living in interesting times, I wish I knew how governments will meet the challenges they are now facing.

Capitalism with much diminished markets at home and abroad. How will that evolve. Even worse, a surfeit of production capacity world wide.

American capitalism is certainly in crisis but those who are easily sold on simple answers to complex issues, should pause before latching onto one mantra.

Larry Summers refers to Michael Spence and the latter as chairman of a commission on development some years ago highlighted that sustained high growth in developing economies is a recent, post-World War II phenomenon.

Each and every one of the economic miracles that were examined had an export sector as a driver of growth and an increasing share of trade in GDP. There were no exceptions. Every growth miracle involves leveraging the demand and resources of the global economy.

Communist ruled China today more resembles the capitalism of Karl Marx’s times than that in the contemporary European social democracies.

US worker pay has fallen to a 50-year low as a ratio of company sales and US GDP according to JP Morgan Chase, one of America’s biggest financial firms.

Profit margins were at their highest level in 2010 since the mid-1960s.

Last October, Bill Gross the founder of PIMCO, the trillion-dollar bond fund manager said: “Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor. Washington, London, Berlin and yes, even Beijing must accept this commonsensical reality alongside several other structural initiatives that seek to rebalance the global economy. The United States in particular requires an enhanced safety net of benefits for the unemployed unless and until it can produce enough jobs to return to our prior economic model which suggested opportunity for all who were willing to grab for the brass ring – a ring that is now tarnished if not unavailable for the grasping. Policies promoting “Buy American” goods and services – – which in turn would employ more Americans – – should also be reintroduced. China and Brazil do it. Why not us?”

Yet a multmillionaire former private equity firm head may become the next president.

Newt Gingrich attacked Mitt Romney’s business background of buying and selling companies at the investment firm Bain Capital, saying Sunday afternoon that the work was comparable to “rich people figuring out clever legal ways to loot a company.”

In the context of globalisation and support for free trade, the current imbalances in the US are a serious risk to the economy.

@ Paul Hunt

What is innovation?

It’s an interesting question as like the proverbial motherhood and apple pie, everyone sees it as a positive.

Gaggia S.p.A. is the best known Italian manufacturer of coffee machines for professional and household use. The company was founded in 1948 by Achille Gaggia, the man to whom we are indebted for the success of espresso coffee all over the world: it was he who on September 5th 1938 filed patent no. 365726 with which the modern steam-free coffee with cream machine may be said to have been born. The brand was purchased in 1999 by the Saeco International Group, which is itself a subsidiary of Philips, the Dutch group.

It was Howard Schultz, a native of Brooklyn, who created a global coffee shop brand.

Both Gaggia and Schultz are innovators.

In Walter Isaacson’s book on Steve Jobs, there’s a story about a furious Jobs confronting Bill Gates about the interface for the newly launched Microsoft Windows.

Gates looked back at Jobs calmly. Everyone knew where the windows and the icons came from. “Well, Steve,” Gates responded. “I think there’s more than one way of looking at it. I think it’s more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.”

@Paul Hunt… I dont have your expertise or indeed patience…. but that article from the ERSI is just more of the same old crap.

The Government could also foster domestic demand for innovation through well-designed public procurement policies, regulations and standards.

Second, given fiscal constraints, it should make sure that money spent on innovation, both in business and higher education, is well-spent. This means collecting more robust measures of outputs and outcomes, and undertaking more rigorous independent evaluations of the policy effectiveness.

i.e. spend more money with outfits like the ERSI and pretend to do something

Im sure if there was a famine here, the same class of people would be calling for lots of money to research into the effects of hunger as a priority.

Jeff Madrick on Ireland

http://www.nybooks.com/blogs/nyrblog/2012/jan/06/europe-cutting-hope/

“And then there is Ireland. The recent experience of this once booming country should be deeply embarrassing to those who advocate austerity economics. For six months early last year, its national income started growing again after a couple of years of dramatic collapse following its own financial crisis. Ireland guaranteed all the debt of its over-aggressive failing banks to appease investors and then paid for it by cutting social spending sharply. Ireland’s leaders said with almost religious authority that this painful self-discipline was necessary to right the economy, and officials in Ireland and across Europe hailed the country’s brief rebound in 2011 as proof that it works. But then the Irish economy plunged in the third quarter of 2011 at its fastest rate ever. The upturn in the economy proved only temporary under the restraints of austerity economics. It may yet need another bailout. “

@ Paul Hunt

Paul, I got your drift.

Policymakers and academics seem to have the narrow focus on test tubes.

I remember Alan Greenspan came out in 2008 declaring that his belief in the benifits of free market capitalism had been misplaced. His new found self questioning was soon rescinded and he regained his nerve.

I would be surprised if these musings from Summers are any different. As soon as he gets a chance he will be back implementing policy to benefit the 1%.
As Michael Hennigan has already pointed out Profit margins were at their highest level in 2010 since the mid-1960s.
Summer policy implementations are generally a mix of strong free market Ideology followed by Large scale bail outs for the financial (and other protected industries) sectors.

I recon this article is a mere appeasement piece and PR exersize.

The two main points he makes in the article are directly lifted from well established moderate social democrat thinking. I doubt he cares/believe one word of it.

The part about the shock in the American economy being a result of moving from agriculture to manufacture during the 30’s being similar to the move from manufacture to services now is taken straight from a Joe Stiglitz article in Vanity fair.

The part about certain things going up in price while others go down and the overall effect on American households was very like the work done by Elizabeth Warren. She gave an excellent lecture in this area in 2008. http://www.youtube.com/watch?v=akVL7QY0S8A.
Its worth a watch.

Summers seems confident and happy that the US will be able to borrow cheaply for the next few years. Warren sees the overall level of debt n the US economy as a part of the problem.

Wow, Hugh Sheehy, you’re a genius! Why hasn’t anyone thought of this or tried it? Imagine! We could actually [b]privatize[/b] areas that are traditionally the province of government! Genius!

To see how well it would work, we need only look at health care provision in the US, which is largely given over to market forces and where they spend twice per capita what anyone else spends and leave 20% of the population uninsured. Market efficiency!

@Ernie

Insults and sarcasm behind a pseudonym. Such high integrity.

Yes, it is rather obvious, isn’t it? Areas of business run by the state show very little if any productivity increase. Areas run in free markets have shown dramatic productivity increases, on both manufacture and services. Not all services, but most.

As for the US health industry, it’s certainly a mess – no argument there – but it does also create some rather large externalities that much of the world piggy-backs on top of.

Meantime, we could always view the halcyon days when Aer Lingus dominated the Dublin-London route, or when it took years to get a phone line (unless you were a priest, union official or similar), or when improvements in patient care in our hospitals were subject to union approval and demarcation arguments. Oh, wait, that third case is still real.

@Ernie

Mostly, I do. So does most of the world. 20 years ago the USSR finally collapsed. It’s probably a matter of some regret to you, but not to most people.

Meantime, 20 years ago it cost hundreds of pounds to fly to London. Many people rented televisions. Phones were never mobile and had only recently become easy to get.

Competitive market provision of goods and services has transformed most things. That doesn’t mean that unregulated wild-west markets are the best type of market. It also doesn’t mean that government provision of goods and services is ever the best way to do it.

It is a very relevant discussion when you look at the issues that Summers mentioned in his piece.

Do try to engage with the discussion instead of trawling out irrelevant Beggsianisms.

@ Hugh Sheehy

With over 10% unemployment across the eurozone we don’t need productivity improvements, we need jobs. And by the way while productivity has increased steadily over the past three decades real wages have virtually stagnated (in the US they have actually declined) and unemployment is roughly three times higher than it was in 50’s and 60’s. There is a lot more to a healthy economy and society than endless productivity improvements.

http://www.csls.ca/reports/csls2008-8.pdf

@EWI

I’m sure you’ll give some detailed examples of the applications of military R&D to mobile phone development. From the last 20 years. And their comparative weight in the technology development over the last decades. And how apple used military technology in the iphone. And how Samsung and LG are in receipt of huge military investment. And how HTC in Taiwan has benefited. And the huge investment that the Finnish military made in Nokia. And how military developments – using public money – were always immediately funneled through to make consumer products rather than being kept secret for as long as possible, and how Russian consumers benefited from all the USSR’s military investment…….oh, wait, they didn’t.

As for properly licensed and regulated radio frequencies, I think I’ve said a number of times that unregulated wild west markets are not necessarily the best kind. Radio based services is one such area.

@Hugh Sheehy,

DFTT. As someone who has been conferred with troll status here I remain persuadable by argument based on facts, evidence and analysis. These folks, apparently, are not.

The boundaries between the state and markets and the definition and provision of public goods are at the core of Prof. Summers’s piece and need continuous attention in any democratic polity. There is no fixed eternal answer – contrary to what the dogmatists and ideologues (both left and right) may assert. It is a never-ending battle. In addition, having been kicked off in the leader’s speech at the Labour conference last autumn, the governance of capitalism is now becoming a hot topic in Britain. Unfortunately, the role of effective representation and advocacy of consumers’ collective interests in restraining the malign behaviour of capitalists and in improving the functioning of markets has yet to be considered.

It may be that it would upset the various producer interests being advanced and protected either separately or jointly by the left and the right. Ireland is so far behind the curve in terms of tackling these issues, it would be hilarious if it were not so frightening.

Innovation per se can be good or bad. It was innovative to build apartment blocks in Co Roscommon without any buyers lined up.

Productivity doesn’t have to be effective or even desirable. The senior management at AIB worked late into the night many times during 2006 to win business from Anglo Irish.

The boy Summers’ idea is something we should all keep in mind. Avatar says that we need jobs, but where are those jobs to come from when Capitalism has considered the words “Innovation” and “Efficiency” to be interchangeable. “Build a better mousetrap” has become “Build a better mousetrap with 20% of the labour force”.
If it takes 20% of the labour force now compared to 30 years ago to fulfill all of my purchasing needs, then where is the other 80%’s part of the pie. How do they have jobs, what do they make? The growth of financial services as a labour creator has reached a peak, information technology will reduce that labour force, so where is the next labour creator … our children will enter the market place with very limited opportunities unless we have a real paradigm shift.

Yours Doomingly,

Alfalfa

@Paul
Question.
Why did CIE not keep & develop the Foynes line ?

Got this from wiki –

“Foynes railway station was opened on 29 April 1858, but closed to passenger traffic on 4 February 1963.[4] Freight traffic continued until the line was mothballed in 2001 and there has been no trains since 7 May 2002 when the annual Irish Rail weed spray train visited the line.[citation needed] The last known movement on the line was on 9 January 2003 when a permanent way inspection car visited Foynes.[citation needed] The line is not currently operational but the Shannon Foynes Port Company and others maintain contact with Irish Rail to review opportunities for reopening it for future bulk cargo projects.[citation needed]

In an interview on Limerick’s Live 95 fm on April 18th 2011, Kay McGuinness Chairperson of Shannon Foynes Port Company said that they are confident that the rail link could be reopened for €7 million, which was considerably less than initially quoted price of €30 million by Irish Rail following the involvement of consultants and it was now a do-able project”

Also it could be a fine DMU 2 set passenger train service not unlike the Midleton line.
As you leave Limerick you pass Rossbrien , Kilteragh ,Huntsfield & Glencaim estates with adjacent Raheen Industrial estate which I imagine has a substantial population and the area does not appear that destitute by any means – ie it could afford a train fare at least until the collapse of 2007 / 08
It then moves out to Patrickswell ,Adare ,Ballingrane , Askeaton & Foynes.

CIE is a mystery wrapped up in a enigma.

The only state run train company left in Britain (DRS) is now running regular passenger trains for Sellafield nuclear workers and other passengers.
http://www.rail.co/…/direct-rail-services-launch-trial-for-sellafield-special

Why could they not have had the imagination to run a smaller DMU service for both Anguish Alumina workers & the local population west of Limerick and its western suburbs.
Its all very strange – and points to the extreme dysfunction withen CIE during the boom years and indeed today.

@avatar

>With over 10% unemployment across the eurozone we don’t need productivity improvements, we need jobs.

Yes. But if you’re implying a causality relationship between the two, I’m not sure it follows. The US has historically had both very high productivity and employment levels. Anyway the reason I’m calling this out is to challenge another possible implication of what you’ve written, that somehow un-productiveness equals job growth. I think it is a fallacy to think that waste of resources, in this case both labour and capital, can ever be good for anything. That is the “why do it right the first time when you can get paid again to do it right the second time” mentality. PS – if productivity improvements can in fact be shown to cause job losses, the argument is still incomplete on that basis alone. Cf. Baseline fallacy.

@Paul
“In the case of investment in a specific mode of transport, this isn’t easy when you have competing modes of transport. (It is easier in the case of, say, electricity, where it is a universally required “essential” service and there is limited competition from other fuels”

Well we are seeing road transport begin to decline in the UK when you have parallel rail lines – its largely about the price of fuel , it changes the dynamics of things in quite radical ways – despite the fact that Rail in the UK is thee most expensive in Europe by many measures.
Perhaps the Sea France liquidation is another victim of high fuel prices relative to rail.

I see intensive road use as a product of its time – the $ petro century which really got going in 1922.
FOFOA -2010
“The US exorbitant privilege began at the International Monetary Conference of 1922 when for the first time international banks were allowed to accept not only physical gold, but also US dollars (paper gold) as reserves. But all US dollars held by foreign banks were put on deposit back in New York City banks. And there they were counted as local US deposits, the same as if you and I put our gold into the bank, in addition to being counted abroad.

These deposits were used as the basis for credit expansion in both the US and in the foreign countries claiming them as reserves. This process doubled the money supply paid out through the US balance-of-payments deficit for the last 88 years (except that money which France demanded in gold). US deficits never contracted the aggregate purchasing power of the US after 1922, the way deficit settlement is supposed to. It also exported US inflation outward. And it continues today. ”

If this era is ending then the M20 which runs parallel to the Foynes line on its initial stretches can only be seen as a malinvestment that may be efficiently run down over the next decades much like how the Irish narrow gauge railway line was run down during the FRNs prime.
Its all about the input costs – if they continue to rise year after year then it will probally be not a good investment.
But these input costs are not seen on the road network as such but in the trade balance.
The 90,000 or so new private cars capital cost , the cost of oil imports rising despite a collapse of road freight traffic etc etc
Our accounting & subsequent development is just not working out is it Paul ? , because it is flawed – it is not holistic.
But we have these Nazca lines drawn into the Bog now – what do we do with them when we cannot populate them with Petrol eating livestock ?

People of the future may even ask what were they for – surely not transport – the energy input costs must have been too gigantic to sustain transport to villages such as Adare.

Irish “planning” is even more absurd when you look at it from high altitude.
Its just not scaled right.

@ Paul Hunt

Your last paragraph hits the nail right on the head. The emigration safety valve has never allowed dissent to build up a sufficient head of steam to blow. One solution is to allow Irish emigrants to vote either by mail in, Internet sign in or in a Consulate or Embassy. Italians all over the world vote in national elections and where they have sufficient numbers 500,000 or so they appoint their own member of parliament from the diaspora. FF and FG have been extremely hostile to Irish born people abroad having the vote. The reasons are obvious in that FF and FG do not enjoy the admiration and support of the diaspora.

The entire tone & framework of this budget policey document is seriously flawed in my opinion.
•Infrastructure and Capital Investment 2012-16 (published November 10th, 2011) (PDF)

It states that 70 billion was spent on infrastructure & the productive sector over the last decade – fair enough , that great by itself………but what if they were the wrong investments ?
Are we tied to these just because we sunk money into them – much like NAMA land.
Its states its top medium term priority is to maintain the National road network in ORDER TO PROTECT THE VALUE OF PREVIOUS INVESTMENTS – this is very NAMAish in outlook – not to develop the country but to maintain the value of the capital stock -when has maintaining the value of obsolete capital stock been a goal in itself.
What if this capital stock is a drain on our resourses ? – what then ?

According to the document 1.676 billion will be directed towards the National road network & 1.255 billion to regional & national roads between the years 2012 & 2016 – thats fine & dandy.
A pitiful 715 million will be spent on public transport infrastructure during that time – I presume this covers vehicles ?

Fantastically – Nowhere in this document did they cover oil import costs & their dramatic rise.
(Major Caveat, 1300KTOE was burned in home heating during 2010 – the majority probally in rural houses , also another 500ishKTOE in public & commercial heating etc.)

In 2003 we imported 7994KTOE of oil (565 KTOE fuel oil for electricity)
In 2003 we spent 1.593 billion on petroleum and related product imports.(non taxed)

In 2010 we imported 7373KTOE of oil (103ktoe fuel oil for electricity)
In 2010 we spent 4.258 Billion on petroleum
So we imported 621KTOE less oil but paid nearly 2.7 times as much for the stuff.

Now -for those roads to pay off they need to at the very least run at 2007 levels of activity.
But we burned 9047KTOE of oil that year ( 364KTOE was fuel oil for electricity)

It would take perhaps 200 million to put tacks & signals on both the Foynes & Youghal line – these can be equipped with cheap to purchase and run DMUs.
This can be “paid” for by subtracting from the road budget.

These investments increase the potential traffic and therefore the effiecey of scale on our mainlines through the primary rail stations in Cork & Limerick and also Foynes has a big potential to take freight off our roads.

PS a major advertising campaign telling the public – especially the rural public the potential private investment rewards from wood & wood gas stoves would serve a major national goal.
Opps can we say national goal these days ?

@ Hugh Sheehy

I’m sure you’ll give some detailed examples of the applications of military R&D to mobile phone development. From the last 20 years. And their comparative weight in the technology development over the last decades. And how apple used military technology in the iphone. And how Samsung and LG are in receipt of huge military investment. And how HTC in Taiwan has benefited. And the huge investment that the Finnish military made in Nokia. And how military developments – using public money – were always immediately funneled through to make consumer products rather than being kept secret for as long as possible, and how Russian consumers benefited from all the USSR’s military investment…….oh, wait, they didn’t.

Y’know, I got halfway through a fairly long explanation of the commercialisation of technology specced and funded by the state (and especially military), with particular reference to the evolution of Silicon Valley… and then realised that, even if forced to admit the points made in it, you’ll just be back next week saying the same thing again as if I hadn’t bothered.

So no, wallow in your ignorance if you must. I’m sure the Free Market Fairy is a comforting deity.

@ Dork: “Fantastically – Nowhere in this document did they cover oil import costs & their dramatic rise.”

I read this with a sense of disbelief. I had assumed, perhaps most incorrectly, that the department wallahs were aware of the energy security predicament we are facing and had some cunning proposals available (apart from rationing, that is). Seems not. Dear God.

Just to make a public nuisance of myself, again. The Export-land Model of Liquid Fossil Fuel Production and Nett Available Global Exports (Brown and Fulcher)

Note: ‘Peak Oil’ is NOT about, “We have used up half”, its about the availability of the nett oil for importation by all consumers who have insufficient liquid resources themselves. And, do you know what?, it looks like we have arrived. The ‘peak’ is actually a plateau, a Mesa.

1. Total Global Supply [TGS] of liquid (crude + condensates + other bits) was projected, for 2010, to be 99 mb/d (million barrells per day). In 2005 was (actual) 85 mb/d. In 2010 was (actual) 87 mb/d. That’s a miss.

2. Global Nett Exports [GNE] is what is actually exported from top 33 major producers (they have taken some of thier own production for their domestic use). The projected value for 2010 was 59 mb/d. In 2010 was 43 mb/d. In 2005 was 46 mb/d. That’s a decline.

3. Available Nett Exports [ANE] is what is actually available to all importers (that’s us) after Chindia have taken their cut. Projected value for 2010 50 mb/d. In 2010 was 35 mb/d. In 2005 was 40 mb/d. That’s a decline.

(Source: Jeffrey Brown at http://www.oildrum.com)

So, for all you ‘growth’ wallahs. Pay very, very close attention to these values. If oil importation costs increase (and they will) its ungrowth time.

Mr China is visting the mid-East. Now, I wonder why? India imports a lot of Iranian. If they start hurling grenades about in mid-East and Iran. Guess who will lose out?

Brian.

@EWI & others

Am I reading from the above that military spending is a good thing? Really? Wow. New insights from reading this board. Never thought I’d see (apparently) socialists advocating military spending as a route to human happiness, but hey – you learn something new every day.

If I’m being accused of believing in the Free Market Fairy then I don’t feel too bad wondering how much faith people want to put in the military industrial complex.

Is €482bn parked with the ECB overnight an indication that capitalism may well be in crisis? Or is a credit crunch no longer regarded as a crisis in the grand scheme of things these days… more the ‘new normal’?

@ Shay Begorrah

It has taken three decades of public support for the development of fracking techniques to have had commercial impact.

As regards university research, please surprise me with evidence from the US or Europe on significant returns from commercialisation.

@Hugh
You miss my point – military spending went parallel to the objectives of that time.
I never said military spending was a good or bad thing by itself.
However the objectives changed and R& D was cut over time.

Its never talked about in politie circles but much of silicon valley work in the 60s was related to the conflict in Vietnam.
However very few successful direct swords into ploughshares programmes went the full distance during that time.
It was more of a follow through exercise – a critical mass of military scientists & engineers in one area at one time created a cascade of new & old ideas in 1970s private companies.

Very few direct swords to ploughshares programmes were dramatically successful – the only one that I can think of offhand is the French rejecting their / British design reactor and going for a offshoot of Admiral Rickover submarine PWR – and then mass producing it.

On fracking.. Septic tanks are now so dangerous they need inspection yet directly injecting massive quantities of chemicals into the gound and ground water, to hopefully get a positive EROEI is considered an advancement?

PS – correction
Imports of oil by KTOE – should be net inputs I guess.
The gross imports of all Petroleum products is.
2003 : 8431 KTOE

Peaking in 2005 : 9198 KTOE

2007 : 8960 KTOE

2010 : 7464 KTOE

this is back to 1998 like levels : 7505KTOE

Yet we are paying far more for the stuff.

@Ernie

Also, if you look, titanium isn’t particularly stiff (specific stiffness) and it’s quite tough, so it’ll dent pretty nicely.

Now, if you could get back to the point of why some industries have low productivity growth and whether or not there’s anything we can do about it, that’d be nice.

Does anyone think that state provision of services in anything like the current form will be the best way of driving productivity growth in health, education, etc? Do we want higher productivity in health,education, etc?

@avatar

I disagree. I see a whole lot of unfulfilled demand for health and education services (just to take two examples) that is currently served pretty badly because productivity is low and effectively (whether on an individual or societal level) prices are prohibitively high.

People are waiting on hospital trollies because there are too few doctors or because processes are bad. People are not visiting GPs because it’s too expensive and it takes half a day, pretty much. People are not taking up higher education because it’s long and slow and expensive. Meantime there is little or no incentive to improve service provision because the funding and provision are state run and/or public sector union dominated. Either the “customer” or the provider are your priority. For me, the customer is the key….not the provider.

Someone on this thread asked (pretty derisively) whether people wanted to get to a real doctor or to use the latest diagnostic software. You know, I would not be surprised if there was a lot of opportunity for remote medical diagnostics to take the place of GP visits. An increase in productivity that could make everyone better off.

Do improved services always have to be provided in the free market? No. Can productivity be improved in state-provided services? Yes. Does this generally happen? Not often enough. Does the comparison make state provided services look pretty bad? Yes. Do people, whenever they can afford to, chose private schools and hospitals and universities? With notable but few exceptions, almost always. Will a vested interest department of health and vested interest public sector union drive to transform health care for the benefit of patients? Unlikely. Vanishingly unlikely.

@Hugh Sheehy

Does anyone think that state provision of services in anything like the current form will be the best way of driving productivity growth in health, education, etc? Do we want higher productivity in health,education, etc?

Not just anybody but almost everyone. What would higher productivity in health or education even mean?

The US, the great lab for privatization, is not a good advertisement for the provision of accessible health care or education through market mechanisms, the Dutch are trying an experiment in universal privately funded healthcare but they had a functioning public system beforehand and the framework in which the private firms operate is very far from a free market.

An interesting question is that if socialists can manage not to continue asking for the mass collectivization of farms why can free market capitalists not join the evidence based world and stop trying to turn human civilization into a profit centre? (hint: The word “psychopathology” is involved in the answer.)

Wow -getting a sick kick out of this depletion of the commons
Net energy imports of NG , the above oil is net imports also…sorry
(Destruction can be exciting as long as armies & militia don’t come knocking on your door )
1994 : 3 KTOE
2003 : 3140 KTOE
2010 : 4393 KTOE

Natural gas is the simplest of Irish imports to examine as unlike oil, refined products are not reexported much now that NET is no more.
Imports in Euros
2003 : 225 miilion
2010 : 1134 million.

so we spend 909 million more on Gas imports then in 2003
If this price and rate of consumption remains flat over 5 years then this sum is : 4.545 billion over and above 2003 expenditure !
Energy import costs work much like debt repayment in this regard – the money is not used on buying more real products , more money is spent on using existing stock.
The 2.931 billion directed towards investment & maintenance of our road network during the next 5 years is dwarfed by this one energy input cost into our economy although it is not directly related to car use , it serves as a good template.

As for oil imports ……….
Well we import 2.665 billion euros more oil for less KTOE which contrasts dramatically with our increased NG usage.
So we will spend 13.325 billion euros extra on oil imports relative to 2003 if the price and our consumption remains static over the next 5 years………..
Good luck with that.

@Shay

I must say, I love the idea that “socialists” are restraining themselves – that they’d love to call for the collectivization of farms but that they are holding back out of politeness. That’s brilliant.

As for US health care, one reason (among others) that US health care isn’t accessible is because many people can’t afford to access health care and there’s no universal funding or insurance. It’s an entirely different issue to whether or not health care is best provided by state provision and whether there are productivity improvements available in general. On education, MITs recent initiative to open up their course material free for online study illustrates what improved productivity might look like. Of course, if you believe that there should be professors of everything in every university you probably won’t like the idea of vastly increased educational productivity.

One quick aside to Brian Woods Snr. Fracking is nothing like “the most destructive industrial process loose on the planet”. Your description is fairly representative of much of the commentary, but it’s just not true.

Meantime, @Paul Hunt, sorry, I’m probably FTT-ing

Speaking of raising productivity in education, a very efficient way to get into the literature on many aspects of economics is to check what Krugman has to say about it:

Readers familiar with health care economics may have noticed that today’s column was largely a translation into English of part of Kenneth Arrow’s seminal article on the economics of medical care (pdf), especially part IIB — the article that explained, half a century ago, why health care can’t be treated as an ordinary market. It’s amazing that we’re still fighting to get people to understand the same lesson.

Links are provided to Krugman’s NYT column and to Arrow’s 1963 AER paper (much of which actually is in English):

http://krugman.blogs.nytimes.com/2011/04/22/channeling-kenneth-arrow/

@Hugh Sheehy,

My comment was not directed at you. Perhaps, you are enjoying it, but you appear to be engaged in seeking to persuade the unpersuadable. There are quite a few who comment here of the left-wing persuasion who are frustrated, angry and puzzled that this latest bout of havoc wreaked by capitalism has not had the vast majority of voters rejecting capitalism totally and flocking to the banner of the left. If they were, perhaps, to look in the mirror and view the ideological baggage they carry and the vested interests they represent they might see what repels so many voters.

I fear government failure much more than I fear market failure. And the ultimate cause of the current crisis is government failure – or, more precisely, a failure of democratic governance. That is why so much of the ‘economic debate’ is so surreal and why the participants often seem as if they are on another planet. Not much point fine-tuning the engine and borrowing from all and sundry to fill up the tank if the chassis is kaput.

@Paul H

I am indeed “seeking to persuade”. It sometimes works and I tend to optimism. I would not say I enjoy it. One thing that’s interesting is that people with entrenched views usually assume that anyone who doesn’t agree with them has similarly entrenched views (like Ernie, for instance).

I share your fear of government failure more than market failure for a couple of reasons. One is that government failure can be terribly well organized and determined, whereas market failures tend to be chaotic and easily stopped. Unless, of course, as in this case, we have a dreadful symbiosis of market and government failure.

@K_vin Donoghu_ shows m_ th_ futur_ of privatiz_d h_alth car_ and _ducation

Automat_d autopsi_s and comput_ris_d multipl_ choic_ _xams

(5.1) Th_ pati_nt, a for_ign mal_ in his _arly forti_s, pr_s_nt_d with shortn_ss of br_ath and _xhibit_d signs of confusion and r_duc_d blood pr_ssur_ b_for_ appar_ntly r_cov_ring fully. Pl_as_ s_l_ct from th_ following list th_ b_st way you can ch_ck wh_th_r h_ is abl_ to afford furth_r inv_stigation.

Th_ mor_ you think about Larry Summ_rs comparison of th_ costs of highly automatabl_ hom_ _nt_rtainm_nt _quipm_nt manufactur_ to hospital car_ th_ mor_ you r_aliz_ what a dang_rous hack h_ is. Th_r_ is no r_turn to manufactur_r availabl_ for a misdiagnos_d coronary thrombosis.

It is also int_r_sting that though h_ m_ntions wag_ incr_as_s h_ do_s not _xt_nd his longitudinal cost analysis to th_ r_mun_ration of _x_cutiv_s in th_ financial or l_gal s_ctor. What a lous_.

@ Hugh Sheehy: re: Fracking.

“One quick aside to Brian Woods Snr. Fracking is nothing like “the most destructive industrial process loose on the planet”. Your description is fairly representative of much of the commentary, but it’s just not true. ”

Really? An highly destructive industrial process which will release long residence-time toxic chemicals into a fresh-water acquifer, whence these toxicants percolate away, completely unchecked, in all directions, is not manically destructive? Really? I hope you do not try that explanation on the owners of land which has experienced fracking and now find it is unfit for purpose. They are likely to run you out of town on a pole.

Hugh, you can breath polluted air for a while. You can plant your crops in polluted soils – for a while. But, polluting your groundwater? Its utterly insane.

And may “be representative of much of the commentary”. Really? Whom might you have in mind?

Its of no especial consequence which particular industrial process is the worstest (sic) environmental polluter. If we can avoid this one, and we can, then we do not do it.

@MH-ff: Michael, our environment is our life-support capsule. Folk get kinda attached to something which keeps them alive and reproductive, and get a tad narky when some dopey critters mess around with that life-support capsule by conducting un-controlled experiments with it. I’m firmly a median type (or at least I like to think so): except, when it comes to messing with my life-support capsule.

Cheers, Brian.

@Brian Woods Snr.

Really.

Formatting error.

@Hugh Sheehy meets minds with Paul Hunt

I share your fear of government failure more than market failure for a couple of reasons. One is that government failure can be terribly well organized and determined, whereas market failures tend to be chaotic and easily stopped.

Is it possible that you are posting from an alternate universe or have you been roused, Austin Powers like, from a slumber than began in 1972 to fight the rampant evils of inflation, state ownership and union activism?

We are still trying and failing to stop the four year economic fall out from the global financial crisis, a crisis entirely caused by unrestrained markets, so called financial innovation and the pursuit of profit with no regard to risks.

I will be paying taxes to bailout unrepentant, deluded and incompetent capitalist wasters for twenty years and my patience is worn down.

@Shay

The government’s decision to indemnify the Anglo creditors with your (and my) money was not a market failure, it was a government failure. Similarly, the years of borrowing and fraud in Greece and Italy was primarily a failure of government. The way that governments and regulators allowed themselves to be taken over by bankers was a failure of government….and yes, many parts of the financial industry need to be regulated. Were there market failures? Yes. Many people mispriced risk for a long time or loaned money to chancers in places like Anglo. However, it was primarily government failure that imposed their error on me and you.

Also, remember that we’ll both be paying taxes to pay for Kevin Cardiff’s pension (and many others, Neary, for instance) for years too.

@Hugh
The financial industry took oil from the future and spent it today or now more accuretly yesterday on immediate consumption and /or consumer durables pretending to be capital and capital which carried these consumer durables (roads)
This was / is a massive leverage crisis.
Goverment can only tax the money supply – which was / is primarily credit , which is now declining.
Goverment is tertiary to governance.
The Banks dictate all activities due to their credit monopoly.

@Hugh Sheehy

The government’s decision to indemnify the Anglo creditors with your (and my) money was not a market failure, it was a government failure.

<Sighs…>

This is the kind of thing many books have been written about and I would be obliged if someone with a background in psychology, philosophy or sociology could help me out here if I make a total haims of it.

You are both keen to allow market players to take whatever actions they need to (to be free) and yet unable to grant them “agency” when they fail, in an almost complete reversal you are keen to restrict the role of government but willing to blame them for being unable to deal with the consequences of others’ actions (the markets, financial capitalism and so on).

So the global financial crisis was an act of God but the initially botched Irish government response to it (one that was made when the banks held back much information) is an act of man.

Many of the arguments deployed by people who see the European component of the global financial crisis as a failure in social democracy rather than a crisis in capitalism have the same logical (or perhaps psychological) flaw.

@seafoid

I don’t understand how – as an appointee of govt and as head of the ECB – you can claim that Trichet is not a part of government.

Many people would claim that a central bank is practically the most powerful arm of government after the army….maybe even more powerful.

@Shay

Sighing does sometimes seem appropriate.

However, since much of the debate on the role of markets is pointlessly complicated, perhaps we should back up and understand that for almost any free and fair market to exist, competent government is required.

Markets need at least the following things
– Permission to exist at all
– (e.g. no market in edible children in Ireland)
– Protection from interference
– (e.g. protection from criminal theft, manipulation, etc)
– Enforcement
– (e.g. if you promise to pay, you pay. If you promise to give, you give.)
– Regulation
– e.g. that any externality or difficult-to-assess aspect is allowed for

There are more issues, obviously, but provision of a free and fair marketplace is historically one of the first and most important roles of a state, alongside defense and irrigation, probably, and one of the best ways it can enrich its people.

So, if there’s a market where a long recognized externality risk is a liquidity and/or solvency issue that can impact others and it’s historically a role of government to ensure that this doesn’t happen (central banks and financial regulators) then surely if that regulator becomes a Stockholm Syndrome victim of the financial industry it’s a failure of government. The market participants should, under market rules, lose their shirts. They haven’t, but this is because of government action bailing out the banks, not the markets. The shareholders of Anglo lost all their money. Most of the staff lost their jobs. The market – in many ways – finally did its job right. People figured out that Anglo was bust. It was. The government didn’t seem to believe this and bailed the taxpayer in and the creditors out. That’s not a market activity.

You could, of course, prohibit the risky market entirely, but for a lot of the time it has benefits for everyone.

@ avatar

Ireland’s R&D spend of about 1.7% of GDP is half that of Finland but the official internatioanl target of 3% shouldn’t be relevant for Ireland as the tardeable sector is domanted by foreign firms who do not do their main research in Ireland.

As regards the State science budget, it doubled to €2.5bn in the ten years from 1999.

€1.5bn should do.

@Hugh Sheehy

So, if there’s a market where a long recognized externality risk is a liquidity and/or solvency issue that can impact others and it’s historically a role of government to ensure that this doesn’t happen (central banks and financial regulators) then surely if that regulator becomes a Stockholm Syndrome victim of the financial industry it’s a failure of government.

You do not think that perhaps your belief in free markets as an engine of human progress is making you blame the victim (the state, you and I, children both in ten years time) rather than the villain (financial capitalism and its handmaiden market liberalism)? Probably unconsciously it is what you wrote. It is the victims fault that it was attacked.

Once again there is the issue of agency – it would be a brave man who said that the deregulation of the financial industry was not chiefly caused the the financial sector using its power and influence to lobby for less regulation, aided in part by a political right increasing in thrall to market fundamentalism.

I say again that the global financial crisis was and is a crisis of capitalism, the crisis of social democracy is a result of it and indeed partially represents the forces of capitalism trying to make the state pick up the tab for their losses at the casino.

@Shay

I don’t doubt that financial types, many of whom should be locked up as criminals, lobbied governments to let them do what they did. No doubt. There are probably 5 times as many financial lobbyists in Washington as there are members of the houses of congress. The same story held in Dublin, with Seanie being feted as a hero and party coffers being stuffed full of bank and developer money.

Unfortunately, it doesn’t change the fact that it is the responsibility of government to govern and when it is seduced or corrupted by lobbies it has failed.

Much like it fails when it enters benchmarking deals with the public sector unions.

Even in the Irish context and even with Anglo, the second type of failure may actually turn out to be more expensive than the first type.

Hugh Sheehy Doctrine: if a tycoon bribes a politician, government is to blame.

@Hugh

Evidently I misread you. I missed the bit about accountants, auditors, compliance officers and directors having ethical obligations. Clearly they also ‘failed’ — it wasn’t just government — but in my haste I overlooked the part where you scrupulously pointed that out. My bad.

@Kevin D

Those people do have ethical obligations. Niall Fitz tore a strip off the Irish bank directors a couple of years ago in a most heartwarming speech. I’ve had a go at (if I recall the name correctly) Jim O’Leary of AIB, who wrote a column in the Irish times that basically said “Yeah, you know, we didn’t do our jobs”.

Sadly, whatever ethical obligations you or I both believe they should have, in Ireland at least, they do not seem to suffer under terribly burdensome legal obligations. Ethics – as we have seen from the Catholic Church – is a most elastic and rather unenforceable concept.

Most of the people in the groups you mention have done what’s called “getting away with it”. They took money for providing services that they did not actually provide. Most of them are keeping the money or even getting paid extra to sort out the mess. Is this failure? Meantime, ethics has gone on holiday or lost his job.

These directors and auditors have not failed in any consequential way. The state, tragically, has failed. It has allowed itself to be damaged, or has even damaged itself, in a terrible way.

Again, this is not a question of blame. It is a question of failure.

@Hugh,

I suspect I’m going to have to leave it to the philosophers to handle your case. If the servants of the state don’t live up to their responsibilities you call it failure. But if it’s bank directors you call it getting away with it. It seems that in your system of ideas only the state can fail. Oddly enough, that would seem to imply that there’s no such thing as failure in a thoroughly failed state like Somalia, since there’s no entity left which is capable of failure. There are only warlords, getting away with it.

@seafoid
The fault and the blame for wiping out the shareholders lies at the door of the directors, many of whom were either negligent or fraudulent. The fault for letting most of them get away with both that and the damage done to the state is the state’s.

The fault and the blame for wiping out the innocent citizen and the resident and the taxpayer lies at the door of the state.

Unlike shareholders, the citizen and resident and taxpayer never had the option to exit before and many do not have the practical option to exit now. In any case, selling some shares and leaving the country are hardly comparable exits.

Kevin D can slice it however he likes, but if we are to apply the same “agency” problem that Shay mentions to state institutions as to corporate governance then we really do need a whole new model of citizenship and democracy. I can avoid a corporate governance problem by not owning shares of the company. Tell me how to avoid state malfeasance and incompetence.

Meantime, Grey’s anatomy.

@ Paul Hunt
You are like the dog with the bone. And you are right. Without root and branch reform of our state, all the rest will come to nought. We need a functioning parliament.

Your stance complements the lively centre-right v centre-left debate on this thread. Some wish to strengthen and protect the state, which is seen as the guarantor of employment and social security. Others wish to make the state functionaries more accountable, and to free the state from parasitical rent-seeking elements. Both approaches are absolutely valid and necessary. The important thing, as @veronica said, on another thread, is that we finally take ownership of our state, with all its historical flaws, distortions and lacunae.

The energy issues and the ecology issues won’t go away. Extracting capital, as the Dork says, simply stores up problems for the next generation. DOCM reminds us that we our future is inextricably bound up with European institutional and political realities. Although the democratic process has been captured by vested interests, the fact that the FT should have a series on the crisis of capitalism shows that old allegiances and belief systems are breaking up.
As the saying goes, the bankers have torn the ass out of it. How not to do governance, and then some. This is a true systemic crisis, in which many ‘reasonable’ people have come to doubt beliefs that were once self-evident.

http://press.princeton.edu/titles/5996.html

Has capitalism really triumphed ? If not capitalism then what ? It’s all to play for.

There was a great comment over at the FT re Hildebrand

“In UK & US this is the dealing of the day since forever. Might do right and every law has to be just followed to the letter and the intent safely circumvented.”

Until the Brideshead treatment.

But obviously the corruption of money is all the fault of the government.

One other thing for people to think about. The financial crisis that started in 2008 has been widely viewed as a) an example of what happens when you allow unfettered capitalism in the financial markets and b) an example of what happens when you don’t adequately/properly/sufficiently regulate financial intermediaries and speculators.
It’s worth noting that although all countries regulate their banks quite tightly, there is a financial/speculation sector that is pure, raw, unregulated 19th Century laissez-faire capitalism: the hedge funds. And where did the catastrophe happen? It happened in the regulated banks, not the (largely) unregulated hedge funds. Despite all the pre-crisis fears about the dangers of these “unregulated speculators”, it turned out to be the regulated sector that caused almost all the problems. Laissez-faire worked (this time); regulation didn’t.
There are two proposed reasons for this. The obvious one is “moral hazard”, the belief by bank investors that the banks would be bailed out by stealing from taxpayers, which was not an assumption hedge fund investors shared. The less obvious one is that regulation created uniform strategies, a loss of diversity in business models at the banks. Some hedge funds failed, and many did poorly, but they had diverse strategies and so it was less likely that any single scenario would bring the whole hedge fund universe down. The banks, optimizing around detailed regulations, were all steered into very much the same strategy, making them all vulnerable to a single (unlikely) scenario – a scenario that actually happened.
I subscribe to both explanations. Even now, hedge funds have diverse strategies toward European sovereign debt, but the banks are largely buying it, increasing their exposure to sovereign default at a time when they might be more prudent to reduce it. Why? Because of the regulations, which treat sovereign debt as if it were risk free, and because bank investors still believe in “too big to fail”.
Of course, in retrospect one can argue that the hedge funds weren’t regulated because everyone realised they wouldn’t create systemic risk. The problem is, that’s not what was argued before, and even during the crisis, when there were widespread, urgent calls for more regulation of hedge funds. We were lucky that didn’t happen. Unfortunately, it may yet. The better lesson would be that too much homogenizing regulation led to catastrophe; but I don’t expect to hear any regulator admit it.

apologies..had to split comment…

The conflict arises because the governance dysfunction in the PIIGS prevents them aligning with Germany’s strategic external objective for the EU and wage repression continues to generate destabilising current account imbalances in the EU. This is forcing Germany to look inwards rather than outwards and its tactic is to drive uniform fiscal austerity so that the penny might eventually drop with the PIIGS that thorough-going internal structural reforms are required. Both – fiscal austerity and structural reforms (not only in the PIIGS, but also in some of the better-governed economies) – are required to persuade international bond market participants with ‘good money’ to invest to get out of the funk they are in about Europe. And, running alongside this, is a pressing requirement to restore many EZ banks to financial health. This is the big gamble. The hope is that fiscal discipline and structural reform will provide the economic conditions to allow banks to trade their way out of difficulty – and strengthen sovereigns to provide any back-stopping required. Unfortunately solvent liquid banks are a sine qua non for increased economic activity. Like Waterloo, it will be a damned close run thing.

In Ireland, much popular sentiment is focused on blaming every external party that may be identified (capitalism, markets, the European Central Bank and Germans are prime suspects) and selected internal parties. The penny hasn’t dropped that major internal structural reforms are required – and, to the extent it has, narrow sectional economic interests exercise so much power and influence that they can prevent any meaningful reform. A decade, or more, of stagnation is unfolding before us. But Ireland is good at that; it has no end of historical experience.

Thomas Boyle, would you mind me asking if you are involved in the selling or promoting of private health care or are you a representative of a private health care corporation?

A simple google for ‘”Thomas Boyle” healthcare’ makes me wonder whether you might not be a completely disinterested participant in the discussion about the provision of private health care.

@Shay,

I hope I’ll be able to hold myself together before I hit the floor and start rolling around laughing. We have a pseudonymous commenter challenging a commenter using his own name to declare his interests…

x

Test
Apologies. Trouble uploading comment.

Mr Sheehy and Mr Hunt.

Given that we are in the middle (or possibly just at the start) of cleaning up after a global financial crisis significantly caused by relentless (and in hindsight dishonest) commercial lobbying for deregulation of the financial sector do you not find yourselves feeling a little bit uneasy to be leaping to defence of someone doing just that but for the health care industry?

Do you think that there is a possibility that Thomas Boyle (who I wish the best to in his career and to his customers – he is in an entirely legitimate profession) might stand to benefit financially from the kind of deregulation he is in favour of?

Whatever happened to learning from our mistakes? (except of course they are not really my sides mistakes….)

@Shay

Are you saying that Thomas Boyle is engaging in relentless and dishonest commercial lobbying? By posting on here under a real name (or what seems to be a real name)? When you are a regular yet anonymous contributor on any number of internet fora?

As for “your side”, whatever that is, the banks are not my side either.

Google informs me that there are over 600 people called Thomas Boyle in the U.S.
I can assure those who asked (and anyone who wondered) that I have no professional connection to the healthcare industry, nor to political advocacy. I am a consumer of healthcare, and often a fairly dissatisfied one. I have, in the past, encountered the problem of trying to buy health “insurance” when I was working as an independent professional, and the difficulty and expense of that (I had a pre-existing condition) drove me back into the ranks of those who are employed (rather than becoming someone who creates employment, as I had hoped).
During the debates of “Obamacare” here, we heard a lot from the right about the dysfunctionality of healthcare in Canada and the UK, both countries whose healthcare systems are internally quite popular. I wondered whether something similar might be going on when people on the left in Europe and Canada bash U.S. health care. It took me about an hour to get up to date on how health insurance in Ireland works these days, and to find a plan comparable to what’s required in the U.S. (helpfully, the FAQ actually described it as something like “US-style”). It cost about what it would cost in the U.S., although I probably wasn’t getting a precise comparison.
My own view is that there is a role for the state in providing a healthcare safety net, and ithat in many ways the US has the worst of both worlds: healthcare that is highly centrally controlled via regulation, paid for by a third party (which would also be a problem if the government paid for it, which for most people it does not), in a litigious society, and with an inadequate safety net. The incentives are completely misaligned, and the “fixes” that have been layered on each other only make matters worse. It’s also byzantine in its complexity: most people, myself included, can’t even read our doctors’ bills. It’s a mess. But it’s not a market.

@Thomas Boyle

My sincere apologies Mr Boyle, not that the other Thomas Boyle need feel insulted.

@Brian
( Example A ) Private Utility company builds &/or operates Jet engines powered by NG , these have a low capital cost relative to Nuclear & Hydro.
Because these have a lower capital / money cost the bank credit ecosystem apparently registers it has more resourses for credit production / fois gras activities
The amount of consumption and consumption of consumer durables (houses , cars etc) increases……….relative to core capital.

The glut of gas soon ends as consumption races ahead.
Gas price rises as shortages appear – utility externalises its low capital investment by increasing charges.
It makes extreme Profits
Economy begins to contract as more & more resourses go into operating consumer durables already bought , number of new consumer durables decreases , general consumption decreases.
Entire Economy crashes.
Utility company goes bankrupt.
State bails out Utility company.

(example B)
State Utility company invests in capital intensive Nuclear or Hydro where suitable locations exist.
The banking system registers this big capital / money investment as a subtraction of demand from the credit ecosystem as more resourses go into the production of core capital wealth relative to consumption.

Consumption of consumer durables and general consumption declines.
As supply comes on line there is a energy glut – this registers as a loss on the state utilities books as it cannot sell energy at a profitable price.
Its losses are subsidised by its parent state – which takes more demand from the economy
After lets say 10 years demand rises enough so that it begins to sell energy at a profit.
Meanwhile it has entered a privatisation process.
It would be breaking its fiduciary duty to its new shareholders if it invests in further capital intensive projects as although they increase the long term wealth of the commons this will subtract from profits for a decade or more.

It decides to build cheap jet engines instead and hope the price of Gas will rise so that it has the excuse to charge more to customers…………………………….

In the very long run however all Gas is depleted , wealth is depleted.

Nothing that complex really.
With Nuclear construction the consumption part of the economy is restrained during the initial phases.
Gas is the opposite.
Consumption crashes at the end of the process.
If enough resourses is depleted not enough may be available to build capital intensive operations without starving the populace.
You may get a long decline into a dark age.

Fission is thee most effective conservation measure in this modern fossil fuel capitalist society rather then capitalist slave based economy of ancient times that many people believe we are still in -although they now use a global slave arbitrage system that depends also on fossil fuels – a nice touch really.
They however just concentrate their remedies on the wrong problem ……….. making things even worse…….. via austerity & the like.
Completly missing the central problem.

Both were the motive power for capitalism but the dynamics have changed since the days of Galleys.
http://www.youtube.com/watch?v=rfA371zhfHo

The high capital cost of Nuclear is a advantage and turns these nuclear units into monetory batteries.
It defers expenditure on consumer durables via a more stunted bank / consumer credit ecosystem and / or prevents higher extraction rates of fossil fuels if mining resourses are diverted towards nuclear build.
But when it does this it gets a false signal from the new market transformed by capital intensive but abundant energy…….. lowering demand , thus creating surplus energy and paper losses as the electricity cannot be sold at a profit until demand can be created again.

Which is why most bankers hate this energy – when something is capital intensive but effective their leverage and thus profits is reduced.

@seafoid
Ha
Must get one of those.

“The revised Christo-Fascist Sermon On The Mount. And Jesus said ‘Your poverty disgusts me. Get a job, you losers.”

Headbangers church of the surplus workers me thinks.

@ Paul Hunt

Maybe the pathetic bleating of the left-wing sects has subsided

I’m guessing this is meant as an insult to someone, however it’s more than a little… incoherent. Maybe you’d like to try again?

Healthcare spending in the USA is now approaching 20% GDP (it was 17.6% in 2009 and is growing), by far the highest in the world. Of this only 32% is from private insurance payments. About 12% is out-of-pocket payments by consumers, and the rest is from an array of federal, state and local programs. Lots of facts can be found here .

The two biggest programs (Medicare and Medicaid) by themselves are larger that all private insurance spending, and then there are other programs such as the federal veterans administration, state programs for children and mental health; local/county hospitals; insurance coverage for government employees etc. etc. Government healthcare spending per capita is, by one league table I’ve seen, the third highest in the world.

The average cost for an employer to provide health insurance for an employee is now approaching $10,000 per year, with roughly an 80/20 split between employer and employee cost. This is a huge overhead for companies.

Of course the main problem is the insanely high costs involved, mainly due to the incentive structure that is in place, which most of the time sees everybody spending other people’s money. ‘Defensive’ medicine is also a culprit, with huge incentives for doctors and patients to use lots of extra check-ups and tests, at minimal extra direct cost to patients. While the new Walmart retail clinics and the like are a good development, they are still relatively few in number and they are not staffed by doctors. Much of their use is by insured people for simple treatments, due to the convenience. They cannot be seen by themselves as an adequate solution for those who are uninsured.

The fact that the USA trails developed countries in infant mortality and life expectancy is well known, as is the fact that it is the only developed country in the world not to provide a universal health care program. However the amount of taxpayer money that the system draws in is probably less well known, as is the impact on employer costs.

It is a prime example of an industry that has grown out of control, consuming large amounts of public money in an inefficient manner and making many insiders rich (if not quite up to Wall St. compensation standards). The regulatory capture is wide and deep, and the system is one that has so far easily seen off all challenges to the wide and deep reform that is really needed. Despite having the highest expenditures in the world, the USA only ranks 37th in the world in health care efficiency according the WHO.

Mick Costigan wrote,

The Summers article is his usual guff. The John Plender article which formally kicks off the FT series is much better. Read that instead

Thanks for that. BOH.

@Mickey
Interestingly, I heard only recently about the size of the Hungarian “medical tourism” business. This isn’t just health tourism for Spas and such, it’s true medical tourism – as you suggest. People going to Hungary for serious medical procedures.

Free trade, eh?