The toll of privatization and the ideology of “there is no alternative”

No ideology lasts forever, and nothing of human creation lasts forever. Margaret Thatcher embodied the idea of stasis in thought and structure with her infamous statement that “there is no alternative,” which was given further form in her second most notorious utterance, “there is no such thing as society.”

There is no stasis, and five years and counting of economic crisis has chipped away at the idea that there is no alternative to present-day capitalism. It has perhaps also begun to undermine the former prime minister’s second quote, a stark encapsulation of the underlying ideology of everyone for themselves — that pitiless competition is the primary way that human beings relate to one another. Humans surely can be competitive. But they are at least as capable of cooperating, as the reactions to any natural disaster demonstrate.

Time plays its part as well. The bogeys of one generation fail to have the same effect on the next; now that two decades have passed since the disintegration of the Soviet Union, a powerful bogey is becoming less of a talisman for capitalists and the politicians who love them. Thus it is not surprising that polls show that young people are more open to socialism than their parents — the concrete realities of the debt-saturated, limited vistas that today’s economy offers them can not fail to grab their attention.

An often-cited April 2011 survey by the Pew Research Center found that the opinions of respondents in the United States ages 18 to 29 had virtually identical opinions of capitalism and socialism — both were viewed as favorable by 43 percent, while the unfavorable responses differed by one percentage point. An interesting aspect of this poll, much less noticed, is that among respondents who described themselves as Democrats, regardless of age, 44 percent had a positive response to the word “socialism” while 43 percent had a negative response. (Republicans and those who not identify with either major party responded strongly negatively.)

Opinions seem to be evolving, as a later poll, conducted in November 2012 by the conservative Gallup organization, found that 53 percent of “Democrats/Democratic leaners” were favorable to socialism (and 55 percent were favorable to capitalism). Perhaps most interestingly, 23 percent of “Republicans/Republican leaners” were favorable to socialism. Although three times as many of the Republican/Republican-leaning respondents answered positively to the word “capitalism,” nonetheless such a response would have been unimaginable a few years ago. Minds do seem on the move.

The toll from “shock therapy” is, well, shocking

If we are to believe “there is no alternative,” the result should be, if not paradise, then at least rapid improvement in countries in which capitalism was re-instated two decades ago, such as in Russia. But, alas, that has not been so.

Take, for example, a 2009 study published by The Lancet, one of the world’s leading medical journals and hardly a bastion of socialist boosterism. The study, conducted by a team of professors from institutions like Oxford and Cambridge universities, concluded that the mass privatization in the former Soviet bloc — a critical aspect of economic programs often referred to as “shock therapy” — resulted in one million deaths. If you haven’t heard of this study, that is not surprising as it received almost no attention in the corporate media after its issuance.

An Oxford University press release announcing the publication of the study (“The public health effect of economic crises and alternative policy responses in Europe: an empirical analysis”) said:

“The Oxford-led study measured the relationship between death rates and the pace and scale of privatisation in 25 countries in the former Soviet Union and Eastern Europe, dating back to the early 1990s. They found that mass privatisation came at a human cost: with an average surge in the number of deaths of 13 per cent or the equivalent of about one million lives.”

The study used World Health Organization mortality statistics corrected for a series of factors, including population aging, past mortality and employment trends, and country-specific differences in health-care infrastructure. The study found a definitive link between increased mortality and shock therapy:

“David Stuckler, from Oxford’s Department of Sociology, said: ‘Our study helps explain the striking differences in mortality in the post-communist world. Countries which pursued rapid privatisation, or ‘shock therapy’, had much greater rises in deaths than countries which followed a more gradual path. Not only did rapid privatisation lead to mass unemployment but also wiped out the social safety nets, which were critical for helping people survive during this turbulent period.’ ”

The whip was applied earlier than critics assert

Naturally, this sort of ideologically inconvenient research did not lack counter-studies. The Lancet, in January 2010, published “Did mass privatisation really increase post-communist mortality?,” which, this set of authors admit, was motived by an unwillingness to accept the study led by Professor Stuckler. The authors of the counter-study, led by Christopher J. Gerry, made, inter alia, the following complaints:

“[T]he data show that the health trends driving the association noted by Stuckler and colleagues pre-date the introduction of mass privatisation programmes in the post-communist world. … [T]he Russian privatisation programme, announced in December, 1992, and completed in June, 1994, cannot plausibly be claimed to have affected mortality rates at all in 1992 and at most weakly in 1993.”

Unfortunately for this argument, privatization began well before December 1992. Elements of capitalism were introduced into the economy of the Soviet Union as early as 1987, following the uneven adoption of Mikhail Gorbachev’s Law on State Enterprises, the net result of which was to impose wage cuts and other measures of market discipline on workers but not on managements or bureaucracies. A series of liberalization measures in the following years, including a 1990 law that institutionalized privatization, caused more job insecurity and increased shortages, unraveled the dense network of threads that bound together the Soviet system and cut the social safety net.

Moreover, shock therapy was implemented on the second day following the end of the Soviet Union — January 2, 1992 — with complete liberation of prices (except for energy), the concomitant ending of all subsidies of consumer products and for industry, and allowing the ruble to float against international currencies instead of having a fixed exchange rate. This was a strategy to reduce demand significantly, a devastating hardship considering that most products were in short supply already, and it would also lead to hyper-inflation, wiping out savings.

Privatizations and takeovers had already begun; that the government’s formal program, in which enterprises would be sold off at minuscule fractions of their value, did not start until months later is no argument that shock therapy was not already well under way.

The counter-study authors led by Professor Gerry goes so far as to conclude:

“If anything, there may be some evidence of a positive link between market reforms and health outcomes.”

Poverty, alcoholism and sexism as health indicators

The preceding statement seems to be based more on ideology than facts. By the end of 1998, Russia’s economy had contracted by an astonishing 45 percent. The World Bank — a powerful institution of the advanced capitalist countries — estimated that 74 million Russians were living poverty by then, as opposed to two million in 1989. Russia’s murder rate become one of the world’s highest. During Soviet times, we were assured by Western commentators that high levels of alcoholism were a sign of despair, yet alcohol per-capita consumption rates in 2007 were three times that of 1990. The toll on health from these factors can’t be separated from “market reforms.”

The breakdown of a society under the sudden onslaught of unbridled capitalism, neoliberal style, is exemplified in a study by University of Rhode Island Professor Donna M. Hughes, “Supplying Women for the Sex Industry: Trafficking from the Russian Federation,” in which she demonstrated how unemployment, skyrocketing levels of violence at the hands of male partners, the elimination of the Soviet-era social safety net, the pervasiveness of organized crime, and ubiquitous television and other mass media images glamorizing prostitution and the consumption of the rich of the West resulted in hundreds of thousands of Russian women trafficked into prostitution. Professor Hughes also noted the dramatic social shifts unleashed:

“A much reported 1997 survey of 15-year-old schoolgirls found that 70 percent of schoolgirls said they wanted to be prostitutes. Ten years before, 70 percent said they wanted to be cosmonauts, doctors, or teachers. Some people have claimed this finding is an indication of the decline in moral standards or the social acceptability of prostitution. This finding is more likely an indication of how the media has glamorized and romanticized prostitution.” [page 14]

The point here isn’t to suggest that the Soviet Union was some sort of paradise. It was far from that. But it is necessary to challenge assumptions, particularly when when those assumptions rest on ideological foundations. How could the larger social disintegration documented in Professor Hughes’ study, and other indications, not be indicative of a decline in health and well-being?

If market forces improve health outcomes as Professor Gerry believes, then we need only compare the country in which market forces drive health care more than anywhere else, the United States, with other countries. In an average year, 22,000 people die and 700,000 go bankrupt as a result of inadequate, or no, health insurance, while the U.S. is well below average in life expectancy and infant mortality in comparison to other developed countries. And the U.S. spends, by far, the most money on health care of any country.

When “market forces” are allowed to govern health care, then the result is that the system will be geared toward maximizing corporate profit, not providing health care. When society — social bonds — break down, we are reduced to a scramble for survival.

Surely there is an alternative. Crises are overcome with cooperation, not competition. Future alternatives won’t be anything like the Soviet Union, but the number of people newly open to socialism is a sign of the open-mindedness, and strong societies, the world needs.

The high cost of private profit in health care

By Pete Dolack

The United States spends huge amounts of money on health care. But it is only in comparison to other countries that the magnitude of health care spending becomes clear. Because the U.S. health care system is designed for private profit rather than public health, the U.S. spends an extra $1.15 trillion per year beyond what it would otherwise.

If that total astounds you, you are not alone. When I first began making calculations to determine excess spending in health care, the figures were so large that I had difficultly believing them and performed the calculations over again. The result was the same.

The excess spending on health care is not only growing, it is growing much faster than the rate of inflation, in concert with overall health care spending. For instance, the annual average of excess spending for the period of 1990 to 2000 was $685 billion. For the period of 2001 to 2010, the annual average ballooned to $1.15 trillion.

And despite all that extra spending, U.S. residents have poor health results in many key indicators, in comparison to the world’s other advanced capitalist countries. Still more amazing, 51 million people in the U.S. are without health insurance, while all other peer countries have universal care. This is the system that millions of U.S. citizens believe is the best in the world thanks to the world’s most developed public relations and misinformation industries.

The rest of the world is quite in disagreement, to the point that even the harsh austerity-minded Conservative prime minister of the United Kingdom, David Cameron, has repeatedly had to deny (whether or not sincerely I will leave to others) any intention to emulate the U.S. system as he attempts to impose changes on the country’s National Health Service.

U.S. health care is by far the world’s highest

Let’s do a bit of digging under the surface of numbers. First off, an explanation of where the $1.15 trillion in annual excess spending comes from. I calculated the number by first obtaining total health care spending per capita* of the three largest economies within the European Union (France, Germany and the United Kingdom) and of Canada, the neighbor of the United States. I then averaged the numbers for the years 2001 to 2010 (the latest for which full statistics are available) as compiled by the Organisation for Economic Co-operation and Development (OECD), the club of the world’s advanced capitalist countries and the largest developing countries.

The composite average of Canada, France, Germany and the U.K. for 2001 to 2010 is US$3,479 per capita per year. That number is less than half of the U.S., which had by far the world’s highest health care spending at $7,325 per capita per year. The differential was then multiplied by 300 million, the approximate U.S. population during the past decade. If you prefer a different measure, the U.S. spent 17.4 percent of its 2009 gross domestic product on health care expenditures, again the world’s largest by a wide margin. The average of the 34 countries of the OECD is 9.6 percent.

And if that is not enough, here is one more astounding comparison: Not only are out-of-pocket expenses by U.S. health care consumers higher than in any of the four comparison countries (no surprise there) but per capita government spending in the U.S. is higher than in any of the four comparison countries. Those four have varying versions of what U.S. right-wing ideologues venomously denounce as “socialized medicine” — health care systems either run or closely regulated and supervised by a federal government paid for through taxation — and yet each government nonetheless spends less than does the U.S. government on a per capita basis.

Despite the massive transfer of money to private insurance companies by employers and employees, on a per-capita basis government health care spending by itself in the U.S. is higher than total health care spending in Canada.**

The authors of the paper “Why is health spending in the United States so high?” (a supplement to an OECD statistical report) attempted to draw conclusions from a mass of data on health care expenditures:

“It does not have many physicians relative to its population; it does not have a lot of doctor consultations; it does not have a lot of hospital beds, or hospitals stays, when compared with other countries, and when people go to hospital, they do not stay for long. All these data on health care activities suggest that U.S. health spending should be low compared with other countries.”

The reason that spending is anything but low is because of the high prices extracted throughout the system. The costs of a range of medical procedures or surgeries are much higher in the U.S. than elsewhere, as are pharmaceutical prices. The authors write:

“Overall, the evidence suggests that prices for health services and goods are substantially higher in the United States than elsewhere. This is an important cause of higher health spending in the United States.”

The OECD is an organization that is representative of the world’s most powerful capitalist countries, so the report does not inquire into underlying causes or in any way challenge the economic system that leads to such results; it merely reports facts and figures. Those facts and figures, however, give us a useful starting point. The wasteful spending on health care are subsidies for pharmaceutical manufacturers, hospital-chain operators, insurance companies, managed-care companies and medical-products manufacturers. Money flows to those corporate entities directly from your pocket and indirectly from you via government spending.

Each U.S. citizen’s annual share of wasteful, excess spending on health care — excess spending that goes into the coffers of some of the country’s largest corporations among the many industry profiteers — amounts to $3,846. Business leaders, their lavishly funded think tanks and pressure groups, and the public-office officials who represent them continually assert that private enterprise is always more efficient. It would seem that the efficiency lies in extracting money and wealth.

Government more efficient because goal isn’t private profit

Noting that “high administrative costs and lower quality have also characterized for-profit HMOs” (health maintenance organizations funded by insurance premiums that supervise health care), a Journal of the Canadian Medical Association article provides the following figures for the percentage of revenue that is diverted to overhead:**

  • For-profit HMOs: 19 percent
  • Non-profit plans: 13 percent
  • U.S. Medicare program: 3 percent
  • Canadian Medicare: 1 percent

In contrast to the rhetoric so often employed, government is far more efficient at delivering health care than the private sector. (This is also true in retirement plans, where the U.S. Social Security program’s overhead is much lower than mutual-fund managers or other financial-industry enterprises.) An important reason is that the government does not skim off massive amounts of money for bloated executive pay nor does it need to generate large profits to enrich financiers.

Such large expenditures also flow from a lack of competition. Few people in the U.S. have a choice of insurance provider, which is dictated by their employer, and insurance companies and HMOs frequently limit choice of doctors, and often deny coverage so as to maximize profits. A company that has stock traded on exchanges is legally required to maximize profits above any other consideration; it is no different because health care happens to be the product.

A few summers ago, I found myself in a debate with a Canadian woman who was critical of her country’s health care system. I acknowledged that Canadian health care is not perfect, but then gave the example of a friend who had recently died in his 50s of a heart attack because his insurer decreed that he did not require medication for his weak heart and he could not afford it on his own. Does that happen in Canada?, I asked. She replied with silence.

As in any other mature industry, most market share has consolidated into a few hands, a condition that is known as an “oligarchy.” Although competition in younger or more fractured industries does result in price reductions, when an industry is reduced to a small number of dominant corporations, price competition is usually a casualty.

Health care constitutes several industries — insurance, pharmaceuticals, hospitals and medical equipment, among others — and each adds to the cost. Giant pots of government money are involved, always a lucrative source of private enrichment. And insurers have people over a barrel because health insurance comes through their employer, who make deals with a single insurer, take it or leave it.

Health care provision also has unique attributes that further inflate costs. In “The high costs of for-profit care,” by Steffie Woolhandler and David U. Himmelstein (the Journal of the Canadian Medical Association article quoted above), the authors write:

“Why do for-profit firms that offer inferior products at inflated prices survive in the market? Several prerequisites for the competitive free market described in textbooks are absent in health care. First, it is absurd to think that frail elderly and seriously ill patients, who consume most health care, can act as informed consumers (i.e., comparison-shop, reduce demand when suppliers raise prices or accurately appraise quality). …

“Second, the “product” of health care is notoriously difficult to evaluate, even for sophisticated buyers like government. … By labeling minor chest discomfort “angina” rather than “chest pain,” a U.S. hospital can garner both higher Medicare payments and a factitiously improved track record for angina treatment. It is easier and more profitable to exploit such loopholes than to improve efficiency or quality.

“Even for honest firms, the careful selection of lucrative patients and services is the key to success, whereas meeting community needs often threatens profitability. … [For-profit] hospitals duplicate services available at nearby not-for-profit general hospitals, but the newcomers avoid money-losing programs such as geriatric care and emergency departments (a common entry point for uninsured patients). The profits accrue to the investors, the losses to the not-for-profit hospitals, and the total costs to society rise through the unnecessary duplication of expensive facilities.”

U.S. fares very poorly in a comparison of national systems

In the spirit of comparison-shopping, here is a brief examination of the five countries under discussion, the United States and the four comparison countries.

  • German health care system: Everybody is covered. Workers pay eight percent of their gross income into a “sickness fund,” a nonprofit insurance company; employers pay the same amount. These contributions account for almost all money in the system. Workers choose among 240 sickness funds. There are no deductibles. Everything, including drugs, is free for children younger than eighteen. The government regulates all insurance companies closely.
  • French health care system: Everybody is covered. Workers pay 21 percent of their income into a combined retirement and national health care system; employers pay about half that amount. Payroll and income taxes largely fund health care. There are no waiting lists for elective surgery or to see a specialist. Doctors’ fees are negotiated with medical unions, while hospital fees are regulated. Patients with one of 30 long-term and expensive illnesses pay nothing for care.
  • British health care system: Everybody is covered. The National Health Service is funded by income taxes, employs physicians and nurses, and owns most of the hospitals and clinics. The service also pays directly for all health care expenses, with prescriptions and dentistry being the two exceptions. There are sometimes long waiting lists, which are commonly attributed to there being no restrictions on services, particularly hospitalization.
  • Canadian health care system: Everybody is covered. The federal government sets standards; provincial and territorial governments administer the system. Medically necessary hospital, physician and diagnostic services are free, although most dental care and prescription drugs are not covered. Services are primarily through private providers. Long waiting times for specialists are a problem, with reduced government payments cited as an underlying cause.
  • U.S. health care system: 51 million are not covered. Coverage is through an employer (of which the employee pays a portion), or through own purchase of private insurance, but most can’t afford to do so. Insurance companies frequently dictate what, or if, services will be provided. Coverage generally requires out-of-pocket expenses and includes a “deductible” before payments begin. Patient bankruptcies due to inability to pay bills are common.

Another weakness of the U.S. health care system is that is based on the concept of a “family wage” instead of a “social wage.” That is both cause and effect — unlike other countries where health care is a right, in the U.S. health care is a privilege, and the large disparities in the ability to obtain it reflects the canyon-like inequality there and also aggravates social inequities. Not only because health care is tied to an employer, giving a boss more power over employees, but because a family’s health care coverage is tied to the person who has the job that provides it — usually the man in a traditional family. But it could be any one person in a non-traditional family or within a gay or lesbian household.

Universal health care systems are gains of movements

Feminist pioneer and theorist Kathie Sarachild of the influential group Redstockings, in a July 4 interview on the Joy of Resistance: Multi-cultural Feminist Radio program, summarized this concept. She said:

“The family wage is another way of saying this old idea that men should support the family. [U.S.] society is built on the idea that men should get higher pay than women because men would support the family and women would stay home and take care of the children. … Even though there were always women who worked, they received less pay than men did because of this family-wage concept. …

“A lot of [the European social wage] came out of socialist and communist theory. … The labor movement and the feminist movement in [Europe] have been able to win a social-wage system, which pays to raise the next generation [through universal health care and paid leave when a child is born instead of being dependent on an employer to pay a ‘family wage’ to the man].”

Nationalized health care becomes part of a basket of social benefits, including more vacation time, life-long education and elder care that liberates working people from dependence on an employer. A shorter work week would also bring benefits, Ms. Sarachild said:

“If the work week were shorter … there would be more jobs. There’d be less unemployment because the work week is shorter so there are more paid jobs. There would be more time at home for the father and mother to be with the child. …. [With the introduction of a] social wage, the unfair family wage would not be necessary. … [Women] are not as dependent on the man, and both of you are not so dependent on the employer.”

The lower wages of women in the “family wage” system boost corporate profits on the backs of women, Joy of Resistance host Fran Luck points out, and many women are forced to stay in bad relationships because they would lose their health care.

For men and women, the price of private profit is enormously high: 22,000 people die and 700,000 go bankrupt per year as a result of inadequate, or no, health insurance in the United States.*** The U.S. ranks among the bottom five of the 34 OECD countries in per capita doctor consultations, hospital beds and average length of stay in hospitals,**** and is well below average in life expectancy and infant mortality.

The country’s people pay more than $1.15 trillion per year on top of what they should pay to swell corporate profits and executive and Wall Street wallets — in return, we receive worse coverage. That is the price of capitalism.

* OCED figures. Spending per capita in U.S. dollars adjusted to create purchasing power parity.
** Steffie Woolhandler and David U. Himmelstein, “The high costs of for-profit care,” Journal of the Canadian Medical Association, June 8, 2004, pages 1814, 1815.
*** T.R. Reid, “No Country For Sick Men,” Newsweek, Sept. 21, 2009, pages 43-44.
**** “Why is health spending in the United States so high?,” OECD report, page 5.