Tag: trust

• Free lunch does not exist.

  What is exactly the problem of universal health care systems? Why cannot economies maintain free health care for consecutive generations without struggling too much?

  To the non-economist audience, it might sound reasonable for every country to execute and maintain a sustainable system that manages pensions, healthcare and other welfare payments uniquely and in one account, under ethical and practical standards that match their financing plans perfectly. Politicians bring this matter up during the debates before all the elections and according to the stage the country is in, voters decide whether the health care system must be empowered or weakened. But why a heavenly, ethical and sustainable public healthcare system does not exist for every country? In this article, I will try to avoid technical matters and focus on the outcomes of studies on the issue. In the first paragraph, I will attempt to go over some very basic economics, as known as Econ 101 and then, I will discuss the issue.

  Specifically, we must consider the feasibility of welfare in every country. Well, some nations are wealthy, and some are not. Among wealthier nations, some of them are even wealthier and by some standards, they are getting more and more prosperous. To understand what I mean by wealth and being wealthy and getting wealthier, think of a simple quantified amount of wealth that each citizen holds. This wealth includes his/her financial assets, future income flows, savings, real estate and even knowledge. Taking an average of this value in dollars will easily help us rule out countries like China, India and Russia from wealthy countries and focus on the countries that have higher levels of what we refer to as “wealth per capita”. Without demonstrating many technical issues, the statistics of wealth show that a Chinese individual is not wealthier than an Eastern European citizen, of course on average.

  

  These wealthy nations in Western Europe, North America, Eastern Asia and Oceania are not easily capable of increasing welfare using a high marginal propensity of consumption rate. Instead, their idea has been to increase the number of years that each citizen lives. In simple words, people are getting enough from their normal life and giving them more does not satisfy them enough. Therefore, the allocation of the market tells the policymaker that it is tangible to invest in the length of life, rather than increasing welfare by increasing consumption at any point in time.

  To conclude the previous paragraph that provided a simple overview, I refer back to the word feasibility: is the nation that is discussing a free healthcare system for everyone, “wealthy enough” to do so? I doubt that many nations are at this stage. Maybe few Northern European economies were capable of maintaining such healthcare systems for decades, but even in those countries, the natural ageing tendency of the society and higher life expectancy has brought an end to the infinite willingness to give everything to everyone for a relatively cheap price. Reconsiderations have started, and charging people for what they get is the most reasonable answer, just like the banana market. Pay 1 unit and get 1 banana, pay 2 and get two. In such markets, there are offers to receive more than you pay, when you pay more than average. Take the case of private retirement investment portfolios that insurance companies and banks offer to their clients.

  Rather than feasibility, there is philosophical reasoning behind a private healthcare system, and it raises from a sort of moral hazard. Imagine healthy people start paying very high taxes for people that consume cigarettes or alcohol on a daily basis. What I mean is a public healthcare system, in which there is an annual fee paid as taxes or fees, and everyone pays the same amount! You may want to point out to almost every country that subsidizes negatively the consumer of smoking products by additional taxes. Simple algebra shows that the average amount a smoker pays through taxes does not cover the costs of one case of lung cancer in a public hospital.

  Furthermore, some may mention that health is not an economic good that we shall consider like an ordinary product and therefore, the nature and characteristics of such “ethical” market must be different. So what is an economic good? Why isn’t lime or avocado subsidised to become available for the poorer classes in the society? This logic is misleading and calls for free education in universities, subsidised public transportation, subsidised fuel markets and at the end of the day, subsidises having children because it is “nice” and “ethical” to have children. This system is inefficient, works against its own standards by penalising citizens for every action in their daily lives and ends up in an inflationary economy that might even face a permanent stagnation.

  Eventually, we have to think of COVID crisis as a heavy shock that hit our economies. The world will not be the same, welfare will decrease for some time and we have to pay for what we have not initiated, and it is far from being fair. The problem is there does not seem to be any other solution for such hard times. Calls for increasing public expenditures are nonsense and even dangerous. Take a look at the public debt crisis in Southern Europe and you will see what a true long-term disaster it can become.

  2020.12.18

• The matter of Trust: Social Capital

  As we have learned through the humanity history, tribes and nations that lacked trust among themselves as human beings have failed in their development winding road. Not unexpectedly, many attempts to rebuild trust within these failed groups of individuals were made, and again they mostly did not succeed. Trust is spread and built difficultly and breaks down in a matter of seconds of domestic war, country-wide natural disaster or extreme economic conditions, such as hyperinflation or famine. There are steps that prosperous nations have taken, and others can still take before it is too late. For least developed regions that have been affected continuously with religious or racial conflicts, it could take up to a century to build trust after the permanent ceasefire (if there will be any).

  

  The very first step a single nation can take is to forget about its past, as using it to be proud or to blame anyone. Consider the countries that we know as developed: many of the people there do not share a common history among themselves. Many under developed countries are now facing not so glorious times. Take the case of Iraq, Afghanistan, Tajikistan and many other Asian countries that are a sort of heritage for humanity, but are facing daily troubles in providing their nations with basic matters of prosperity. In the writer’s opinion, it is crucial to forget about the past and only look at it as the things that happened and we only must know and learn from, nothing more.

  To achieve a higher level of trust among the individuals, the government must guarantee the protection of property rights and regulations to protect people and their businesses, jobs and health. All the threats to individuals’ assets, health and the basic matters of daily living must be prevented and punished in case. It can help the economy build around a growth path that in long-term keeps the people stick together as respected individuals. It also helps to save, invest and make the growth more sustainable.

  One last step is to define a common goal and the necessary framework to achieve via democracy. This goal can be “to become the greatest country in the world, or the most sustainable one or even simply become the happiest nation”. An excellent example of such a goal is what the Swiss government established a few decades ago, when people were asked if they wanted to live in a sustainable growth environment. The nation will have one valuable goal in common, and the diversity among individuals must be accepted. No religious or political movement should be able to limit the people to think and act in a particular direction.

  As history has shown us, the nations that did not grow trust and the relative institutions, have not achieved any of the sustainable growth goals. Physical capital and machinery is not all: human and social capital are crucial elements in reaching a good level of economic and social development. Countries must invest in the humans and their education, as well as investing in natural resources and machinery.

  2020.04.04