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Tuesday, March 16, 2010

The Compassionate State - Part 2

We concluded the first part of this two part series by summarizing the claims of socialized health care's defenders. While this post is written with the Canadian system in mind, and the author is aware that defenders of socialized care are not homogenous in outlook and approach, the goal is to provide a basic philosophic summary of the system's defenders. Their argument being, briefly, that socialized health care is morally superior system to an essentially market based system. This second part seeks to analyze this claim of moral superiority. 

I have omitted arguments as to the efficiency and efficacy of socialized health care. There are certainly those who put forward the claims that socialized care is more economically efficient that a market system, and that its outcomes are superior. I have not dealt with these claims for reasons of practicality. Aside from die hard socialists, and victims of Canadian public education, few now take seriously the claim that a government system is more efficient, or efficacious, that a market based system. The reams of historical data, from the Eastern Bloc command economies, to the nationalized industries of Britain, have borne out the material failings of non-market based systems of resource allocation. The degree of aversion to market principles is the degree of those systems failure to materially provide for their participants. 

While their failure was predicted by market economists, notably Mises as early as the 1920s, the proof has been borne out in the history of the last ninety years. To those who object to my characterizations, I can only direct them to the economic and historical literature on the topic. My contention, therefore, is that socialized health care is ultimately a moral proposition. Solely as a matter of practical efficiency, providing quality care to the overwhelming majority of the population, the weight of evidence goes to supporting a market approach. Even the current American system, a hodgepodge of highly regulate private companies, and three large state services (Medicare, Medicaid and provisions for serving and veteran military personnel), still provides quality care to the overwhelming majority of Americans. Whatever the validity of the claim that forty-five million Americans do not have health care insurance - this figure includes the very rich, illegal aliens, those between jobs and those in their twenties who choose not to purchase health care - it must be evaluated within the context of a nation of over three-hundred million. 

The repeated legislative failures of the current American administration, whose party controls both houses of the Congress, suggests there is no crying desire for a socialized system. Instead the proposed expansions of government interference in the health care market have provoked a fierce backlash, notably in the form of the Tea Party. The proponents of health care "reform" claim a desperate need for their type of reform, yet despite every political advantage they have failed to convince the critical mass of the American electorate of their plans. The alleged victims of the current system are not reaching for the lifesaver of socialized, or quasi-socialized, health care. It is something defenders of Canadian Medicare should have the honesty of conceding, rather than dismissing resistance as the product of mysterious "corporate lobbyists" and all powerful radio talk show hosts.


The moral proposition underpinning socialized health care is one of altruism. It is rarely described by this term, instead terms such as compassion and social justice are more frequently employed by its advocates. Compassion, however, is a voluntary expression of benevolence. It is motivated not by guilt but by goodwill, by the desire to alleviate human suffering. There is, strictly speaking here, no such thing as coercive compassion. Altruism, as I am defining it here, is a moral duty placed upon the individual to serve and aid others. In its purest form the duty is unlimited. The individual has no moral right to resist claims of assistance, even to the point of self immolation. Of course very few practice so extreme a course, it would be suicidal to do so. In common practice most people practice a mixture of the two, they both genuinely wish to relieve the suffering of others from good will, and they regard it as a moral duty to do so. The distinction may seem an artificial one to some. What's wrong with both duty and compassion? Surely there is enough suffering in the world that the more motivation to relive it the better. The danger is that you cannot say no to duty, not at least without feeling guilt and remorse (if you genuinely regard something as a duty). 

That is the moral underpinning of socialized health care. It is the duty of doctors, nurses and taxpayers to provide their services and wealth to sustain the moral claims of others. They cannot morally say no. If a critical mass of the electorate regard it as their moral duty to help others, it is a small quibble whether they do so by private means or via the state. Moral collectivism leads to political collectivism. I know many Christian libertarians who object to my making this point, they argue altruism is a moral duty best fulfilled outside of government. I don't doubt that private charities, whatever their motivations, would in the main do better than the state. But it is a weak objection, just like defending free market health care on the basis of efficiency alone. Perhaps private charity would be more efficient, but it does not guarantee that all people will fulfill their altruistic duty, or fulfil it to the required level. The state can make that guarantee through the tax system.

Morality trumps politics. You cannot preach one way and vote another. I would submit as an example for this the descent of American conservatism from the comparative free marketing of Ronald Reagan, to the statist fiasco of "compassionate conservatism" under the George W Bush. The "compassion," in the latter instance, shown by massive budget deficits and near complete intellectual surrender to the advocates of socialized health care. Without Bush there would be no Obama, in more than the narrow sense of the unpopularity of the former having helped elect the latter. To defend a free market in health care requires rejecting altruism as a standard of evaluation. Socialized health care is sold as insurance to the public, as something you pay into, but it is not run along proper actuarial lines. Taxes are not charged based on risk, which would undermine the principle of "universality," i.e. that access to health care is a moral right. It is altruism with a fig-leaf of insurance. The fig-leaf is provided because most people would feel uncomfortable with openly receiving what is, in essence, a welfare benefit. 

In the previous post I summarized the position of socialized health care's defenders. A state "insurance" system would be more compassionate - i.e. altruistic - because it was subject to the mechanism of democratic, rather than market accountability. Since I have rejected altruism as a standard of evaluation, it would seem redundant to attempt to refute the efficacy of democratic accountability to that end. It is, however, important to conclude by contrasting the methods of market and democratic accountability. I will seek to demonstrate, perhaps at the obvious risk of being tedious, the failures of the democratic mechanism versus its market based alternative. A neutral observer to North American health care would note that bureaucratic short-sightedness is an element of both systems. As noted previously, the American system is a far cry from a free market, even when compared to the typical level of government controls in the modern mixed-economy. Here is a very brief list of some of the more pernicious government interventions in the health care insurance market. Each is a crucial short-circuit in the market mechanism, it is with these factors in mind that the performance of the American health system must be judged.

- The cost of health care insurance is tax deductible for employers, but not employees (it is usually deductible for the self-employed). This provision in the IRC dates from the late 1940s. It was part of the Truman administration's program of gradually implementing socialized health care by first getting people into employer programs, and then having the government take over these plans. The second element was never completed.

- It is, in most cases, illegal to buy health insurance out of state. A resident of New York, where health insurance is quite expensive, cannot buy insurance issued in Florida, where it is cheaper for someone with the same demographic profile. A single insurance firm can be active in many states, but residents of each state can only buy insurance approved for that state. Insurance companies are mostly regulated at the state level.

- Each state imposes coverage requirements, called mandates. This means that most insurance policies issued in that state must cover certain ailments, regardless of whether people wish to be insured against that risk. This in turn drives up the price of insurance, in some cases beyond the reach of many middle class Americans. Since mandates are politically determined, and cost the government practically nothing to impose, it is quite popular for state-level politicians to appease certain interest groups by advocating for niche mandates. For example, in recent years a handful of states have mandated infertility coverage, this means that all purchasers of health insurance must pay for this coverage. Other mandates limit co-payments, which has the same effect on health insurance premiums as reducing your deductible does on car insurance premiums.

Despite these remarkable handicaps, about 58% of Americans have private insurance. The rest are covered by Medicaid - for the poor - and Medicare - for those over 65. The comparative success of the American system, whose innovative treatments and medications the rest of the world depends upon, is a product of the remaining elements of a market system. At the beginning of this two part series I cited the common characterization of the market as being driven by narrow self interest. This is true as far as it goes, yet the market system is no more driven by narrow self interest than the democratic system. In a market system, however, self interest also entails personal responsibility. You get what you pay for. You cannot shift the burden of responsibility onto others, without their consent. The market mechanism of accountability pivots on the principle of consent. 

Individual participants in a market can withdraw their consent, something which is impossible under the democratic mechanism, except partially every few years if enough people agree on the same issue. The democratic system is where majority, sometimes only plurality, rules. The majority may bind the minority. For some state functions there can be little alternative to this rule. 49% of a country cannot refuse to go to war. It would be absurd, however, to argue this as a necessity in products or services that are personally consumed. 

The limitations of the democratic mechanism can be summarized as follows. With one vote, cast at periodic intervals, the citizen is asked to express his or her satisfaction (or the opposite) on the government of the day. Yet it is an up and down vote. If the citizen is impressed with the efficiency of the state run transit system, but not the state run schools, how can he express these divergent opinions with one vote? The citizen can certainly complain and seek to embarrass the government for their failings in one area, yet the ultimate sanction is a crude one. The shrewd politician understands this. He does not have to do an excellent job in all issues, which would be impossible anyway given the scope of modern government, he has only to look like he has been successful enough in certain areas of voter concern. Certain elections are dominated by particular issues, free trade in 1988 for instances. Voters will ignore a candidate's many failings over one perceived strength, they will buy a political package deal. 

Jack Layton might legalize marijuana, but he might also nationalize the Royal Bank. Stephen Harper will definitely not do the former, but is unlikely to do the latter. When, in 1885, John A Macdonald was pondering whether to grant Louis Riel a pardon, he is said to have estimated that the votes he would lose in Quebec - by letting Riel hang - would be more than offset by the votes he would gain in Ontario. As it turned out Quebec remained loyal to Macdonald, and he won two more majority governments before his death in office six years later. They hated him for allowing Riel to hang, but feared the Liberal opposition getting into power and attacking the privileges of the Catholic Church. Macdonald, in any case, could always hide behind the court ruling. Every dog in Quebec barked, and it didn't matter. 

The politician can also evade genuine accomplishment. He has only to seem more palatable than the alternative. The weakness of the democratic mechanism is also shown in the value assigned by the voter to the vote. It costs him nothing but his time to vote. He requires no knowledge of the issues or the principles involved, the costs of choosing unwisely are diffused over millions of others like him. This compares sharply with the citizen in his capacity as consumer, as opposed to voter. His economic votes, his money, is typically earned. If he chooses unwisely he must bear the consequences of his actions. If he is unfortunate he must convince others to help him, to show that he will use the money wisely for desperate needs. Those who help him have every incentive to get the unfortunate back to self-sufficiency. A democratic mechanism of resource allocation does none of these things. With his vote, combined with others like him, he disdains gifts and demands money and services as rights. The politician who gains power advocating a redistribution of other people's money has an easy case to make. The politico has little incentive to tell his voters that they need return to self-sufficiency, or that they should take only what they genuinely need. The benefits accrue to certain individuals, but the responsibilities and costs are collectivized. Should anyone question the unfairness of the process, he is reminded that he is his brother's keeper, no matter what a louse the brother might be. No matter than the brother is a perfect stranger, even an enemy.

The failings of the selection of the executive, election of the political class, are manifest. The implementation of their decisions is perhaps worse. You can throw the bums out at election time, but the next set of bums must face the same cast of almost impossible to fire bureaucrats. There are not three branches of government, there are four. The fourth is the public sector bureaucracy. It's private sector counterparts might go bankrupt if they fail in their task, the Ottawa and Queen's Park Mandarins face no such worries. Their source of revenue is guaranteed through taxation. Their nominal political masters in cabinet hold their portfolios for an average of eighteen months. Their supervision is at best light. The politician is crudely accountable through the democratic mechanism, the public sector is essentially not accountable. Save for the wrath of the most iron willed of politicians, such as Thatcher and Harris, the public bureaucrat may conduct himself with an impunity that would have impressed the aristocrats of old. Even the most public spirited of Mandarins must navigate through a never ending stream of political directives. This week's issue of the month must be played up, says the minister. The Mandarin may know perfectly well that more pressing concerns are being ignored. What can he do? To resist would be career suicide. Being proven right can help ones career in the private sector, it can be the mark of cain in the cubicles of the state. A private employee who disagrees with his superiors' approach can go elsewhere, or strike out on his own. What are the alternatives for the bureaucrat?

The popular image of democratic government compassion, and cold hearted capitalism, belie a more complex reality. The compassionate state is a false bill of goods. Crude stereotypes of markets ignore the variety of approaches that are possible. The state is ultimately a mechanism of force, however necessary force is at times, it is a last resort with limited applicability. In Shakespeare's Henry V the hero is seen touring his camp the night before the Battle of Agincourt. While alone he ponders the nature of power and its limitations:

Canst thou, when thou command'st the beggar's knee,

Command the health of it? No, thou proud dream,

A humility that is missing in modern government, and its defenders.

Posted by Richard Anderson on March 16, 2010 | Permalink


Well said. Thanks Publius.

Posted by: Liberty | 2010-03-16 1:36:12 PM

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