Thursday, September 24, 2009

Waste or Economic Engine

Newt Gingrich (not usually my favorite guy) had a piece in the WSJ last week that caught my attention. I like outside the box thinking, arguments that challenge pre-conceived notions of reality and Gingrich raises a good point--- namely, why do we automatically assume that spending 17% of our GDP is too much? The standard interpretation is that this repesents an ungodly waste of resources and money. No other country spends so much on health care. What can we do to reduce such exorbitance, the thinking goes.

But there's another way to look at it. Maybe in America, we don't have so much a health care system as a health care industry. And this industry is an economic lifeforce for many Midwestern cities in this post-industrial, post-manufacturing era of American hegemony. In Cleveland, Ohio, if it weren't for the Cleveland Clinic and University Hospitals, unemployment would be over 20% easily. Blue collar America doesn't have the steel mills and the automotive factories to send its men and women off to every morning. Those jobs are gone, never to return. And the healthcare industry has stepped in to bridge the gap. Whether this is a sustainable long term economic model is difficult to say. But for now, all those expensive pharmaceutical drugs and outpatient radiology centers and the titanium hip components and fancy new hospital atrium construction also provide jobs and a means of existence for Joe the ex-plumber.

We need to ask ourselves whether this is all a mirage. Is it reasonable to assume that the jobs created and capital raised from the health care/innovation sector can replace the factory-based way of life that has been the foundation of blue collar America for half a century? And if it isn't, then what the hell is the alternative? People need to work. Green jobs? High tech digital? Biomed? Transitioning from an industrial economy to whatever else is next is America's next great challenge. But before we demonize the healthcare sector as just an expensive, bloated monstrosity, perhaps we ought to make sure there's a safety net to catch those end up losing jobs when we start shutting down surgicenters and outpatient radiology clinics and making it more difficult for the pharm industry to get new drugs approved....

Cal Coolidge once said, "the business of America is business". But what happens when that business is also burdened with heavy moral baggage (fair and equitable distribution of health care to all) which can compromise the pure profit driven motives of most industries?


shadowfax said...

The other problem with this idea, though I'm no economist, is that healthcare is not a productive industry. It's a service industry. Service industries rely on an industrial base - be it manufacturing/resource extraction/high-tech/etc - to support them. so, if I understand the argument correctly, when service industries become too much of a country's economy, the overwhelm the productive base's ability to support them.

Another way to look at it is this: there are a fixed number of people in the US. As the total amount of healthcare spending grows, each individual's proportion of that expense grows. Unless something boosts the income of the average consumer in lockstep with the increase in healthcare costs, this will erode the consuming power of the nation in general. And as we all know,consumer activity is the engine that drives our economy.

Newt is a great one for innovative ideas. Unfortunately they are usually wrong. But always interesting.

Andrew_M_Garland said...

No U.S. Manufacturing Decline

The percentage of people employed in manufacturing has declined in the U.S., but the value of goods manufactured has steadily gone up. More goods are produced by a smaller percentage of people.

This is a "manufacturing decline" in the same way that agriculture has "declined". 3% of the U.S. population produces our food, compared to more than 50% in the 1800's.

Doctors produce medical services. Automobile manufacturers produce cars, which deliver transportation services. Classifying something as a service or a product is not a hard-edged distinction.

No industry produces the wealth that "drives our economy". Each industry produces about enough to contribute to a good life. The overall well being of people is determined by efficiency and productivity.

When you can produce food and housing with 1/3rd of national effort (high efficiency) then time remains to produce other things like entertainment and healthcare in large amounts.

Engine Parts said...

I agree with Shadowfax. Healthcare is a service industry. You pay for treatment and not for cures. It seems they are going to do almost anything to get another dollar in their pocket and the swine flu is one really big example. Forced vaccinations in the US creates millions of dollars in revenue for companies like Baxter. Most medical studies are flawed and the mainstream medical knowledge is outdated. When they stop thinking about profits and start thinking about people and their health, then they will see a change for the better. Until then, we are stuck with independant doctors and research for the most intelligent and uncorrupted information on personal health.