Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Economics Page 46 of 97

Punishing People in Pain

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On March 30, 2017

40 Comments

So, now reliable pain relief is only available from illegal sources?

The Ohio governor unveiled a plan Thursday that targets the place where experts say many opioid addictions begin — the doctor’s office.

Gov. John Kasich’s order limits the amount of opiates primary care physicians and dentists can prescribe to no more than seven days for adults and five days for minors…

…The new limits, which have gotten the blessing of the Ohio Board of Pharmacy, the State Medical Board, and the state’s dental and nursing boards, do not apply to patients who take prescription painkillers for cancer treatment or to dying patients who are already receiving hospice care, Kasich said.

There are plenty of reasons other than cancer and hospice care. It’s a little unclear how strict this will be,

“Health care providers can prescribe opiates in excess of the new limits only if they provide a specific reason in the patient’s medical record,” the state said in a statement.

Nonetheless, I find this crazy and punitive to people who actually need pain medication. Many doctors are already reluctant to prescribe painkillers due to crackdowns, and this will drive people even further towards buying illegal drugs. You certainly want people on codeine or morphine in preference to various synthetic opioids, which can be far more dangerous.

Ohio doesn’t have an opioid addiction problem because of availability; it has one because of deep socioeconomic problems which manifest as personal despair and breakdown. Some people will always use drugs, but “epidemics” of drug use happen when people don’t have better options.

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Ideology Precedes Policy Which Determines Outcomes

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On March 23, 2017

27 Comments

Ok, so…

The results are rather worse than that, actually, and anyone who reads this blog regularly is aware that, for example, working class white male wages peaked in 1968, in real terms. It’s not as if every other demographic has gotten off, either. Slowly the scourge has worked its way thru the demographic and socioeconomic classes, till practically everyone but the top 5% or so is being hit to some extent or another, even if they haven’t lost lifespan—yet.

Marcy Wheeler asks:

Which got me wondering: to the extent this is driven by a failure in ideology — by the failure of the American dream — which comes first, the failed ideology or the rising mortality rates?

…

. But as we try to figure it out, we ought to be focusing at least as much on how to roll out life and meaning that can sustain Americans again as we are on blaming Putin for our recent failures to do that.

Ideology tells tells you how the world works, what to do, how to do it and why you’re doing it. For example, NeoLiberal ideology has an axiom that “jobs are created by those who have money.”  On the face of it, this seems obvious: nobody without the ability to pay you has ever given you a job, I’d bet.

The corollary of this is “the more money that rich people have, the more jobs there will be”. So, under Neoliberal ideology, you funnel money to the rich and corporations and they create jobs.

Doesn’t actually work, mind you, but that’s what the ideology says.

The ideology also says “money is earned by people because they fill the needs indicated by the market, which represent what people and society want.”

Which means “if you have a lot of money, you deserve to have it because you got it filling other people’s needs”.  It also then follows that people with a lot of money are the sort of people who are good at providing what other people want, so therefore they should have more money so they can provide even more.

Poor people, by this ideology, do not deserve to have much money, because if they were doing something that other people wanted a lot of they’d have a lot of money.

Etc, etc…

Ideology tells people what policies to pursue. Those policies then create results.  With different ideologies, you get very different results.  FDR’s New Deal and the Keynesian consensus after WWII had as its thesis “the more money ordinary people have, the more they will buy, creating demand for products, which will create more jobs.” It also had “money in the hands of rich people doesn’t create demand and does create political problems which damage markets, therefore we should keep them from having too much money.”

The result of those propositions was the best economy in American (and European history), with growth rates higher in the middle and lower classes than in the upper and the rich classes (rich is not upper class, it is beyond.)

Ideology Determines Policy.

Policy Determines Outcomes.

(One might ask “what determines ideology”. Part of the answer will be in the upcoming “Creation of Inequality booklet” I’m about three-quarters finished.)

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Brazil’s Economic Tumble

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On March 8, 2017

14 Comments

No surprise, but…

Brazil’s economy has fallen further into its worst ever recession, contracting by 3.6 percent in 2016…

…Brazil’s economy is now eight percent smaller than it was in December 2014.

Recently, there was a legislative coup in Brazil, but that was a symptom, not a cause, as are Venezuela’s problems, the electoral reversal in Argentina, and so on.

All that is required to understand what is happening is this chart of commodity prices.

Bloomberg 5 years commodity index March 8 2017


Bloomberg 5 years commodity index March 8 2017

We have a very foolish economy. The developed world has been in austerity since 2008, China does not have a rich enough middle class to take up demand. Without demand for goods and services in the developed world, commodity prices have crashed.

Our lords and masters don’t want growth they can’t capture, and they value low wages and debt-slavery more than they do a thriving economy. As a result, the economies which prospered by supplying commodities to China and other manufacturers have stumbled and crashed out. This simple fact is behind many headlines which seem unrelated to it, including virtually every change of government in South America.

A globalized economy is moronic. It makes countries dependent on policies over which they have no control. There is virtually nothing that Brazil’s government can do about this (though engaging in austerity of their own is stupid); nor was there a damn thing Venezuela could do about it (though, yes, the Bolivarian economy was mismanaged, something I said as far back as 2004).

This is by design. Our elites don’t want national elites to be able to make policy. As a result, there are only two nations which approach full sovereignty in the world: the United States and China. Only they are powerful enough and rich enough to make unilateral moves without suffering vast consequences (and maybe not even them). The EU could almost be sovereign, if it wasn’t run by ideological morons, but it isn’t, and Russia has enough resources and military power to have some sovereignty, and that’s basically it.

And so, the Brazilians will suffer what they must, because however large and rich they think they are, they are still a non-sovereign state in the ways that matter in our world.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Immigration and Wages

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On February 22, 2017

91 Comments

Wages are partially determined by supply and demand. The tighter the labor market, the higher the wages. There is a very direct relationship.

People who dislike immigrants for economic reasons think that if there are less immigrants, there will be less people competing for jobs, and therefore wages will be higher.

The alternative argument is that immigrants spend money. They are consumers. The more money being spent, the more demand there is for goods and services. Therefore, the more demand there is for workers, and therefore wages are higher.

Which of these is true varies by society and time period, but also depends on what jobs you’re talking about. Immigrants compete for low-end jobs, and they compete for some high-end jobs as well (in particular various tech jobs, especially in programming, engineering, and science). The latter tend to come in visas, often worker visas which give them limited rights. The former are often undocumented; these are the folks Trump wants to deport.

A lot of older programmers (coders) can’t get hired. If there were fewer work-visa immigrants, perhaps they could.  If there were fewer undocumented workers, perhaps there would be higher wages for low-paid manual labor jobs.

I support immigration, but I recognize that making immigration work means having policies which generate domestic work from domestic demand. If an immigrant makes money and spends most of it on Wal-mart goods made in China, it might well be that he or she is producing less local demand for workers than the job or jobs that immigrant has.

There are ways of making it so that immigrants produce more jobs than they consume, but this takes political will, and it hasn’t been a priority for most nations for decades. Heck, it hasn’t even been a consideration, much less a priority, because policy has been run to keep wages from increasing as fast as inflation, let alone as fast as productivity.

In this environment, it is not unreasonable for low-wage workers who are directly competing with undocumented workers to see them as competition. They are competition.

The right way to fix this, as with almost everything, is to make sure it’s a clear win/win, and not questionable which way it goes. Low-wage workers, and tech workers, need to see a tight labor market where there’s plenty of work and wages rising faster than inflation. In such an environment, they won’t care about immigration.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Market Failure, Epinephrine Injections, and Societal Failure

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On February 13, 2017

21 Comments

This is not a competitive market:

Pharmaceutical company Kaléo – already under fire for raising the price of an overdose antidote – now plans to put an alternative to the EpiPen on the market for more than seven times the cost of the leading $608 drug.

Kaléo’s epinephrine injector, used to stop severe allergic reactions, will go on sale for $4,500 for a pack of two beginning on February 14. The auto-injector’s innovative audio instructions walk caregivers through administering less than $5 worth of epinephrine.

Remarkably, because of a system of coupons and discounts, Kaléo’s epinephrine injector Auvi-Q may have the lowest out-of-pocket costs for patients, a strategy some critics say may help some customers, but leads insurance companies to redistribute the cost of the drug through insurance fees to remain profitable.

The materials in such epinephrine injectors are worth about $8.

This is market failure. In a free market without collusion, if something is this high-priced, the price drops to more closely match the cost of production as other producers move into the market. It does not radically increase. As it stands, if you need an epinephrine injector and don’t have one, you stand a good chance of dying.

The rational reaction to these sorts of market failures, increasingly common in pharma, would be: (1) to either restructure the market to prevent them, which would require breaking up big pharma companies, streamlining approval processes, and allowing reverse-engineered knock-offs, or; (2) more simply, for the government to just manufacture them itself and charge a fair price.

There are some government services which should be kept entirely in-house. (The military, for example. Mercenaries are failure mode for any government.) There are many other services for which the government should be one provider among a number. The government stays in the business, providing about a third of the service; because if you aren’t in the business yourself you can’t always know if you’re being rooked by private companies and if you are being rooked, it’s very difficult to do anything about it because you don’t have the expertise to provide the service yourself.

At the same time, you want private companies involved to keep the in-house providers honest. You have multiple contractors, and those who do the best for the least are rewarded, so they have incentives to improve. You swap out the lowest performing ones on a regular basis, especially allowing a few upstarts in at the lowest viable level, so that radical new ideas can be tried.

If those new ideas work, everyone, government and private, adopt them.

At any rate, the market failures in pharma, with price markups in the thousands to tens of thousands of percents, are now so common that it’s clear that a radical solution is needed. The simplest solutions are price control and government getting into the business. Ideally, both should be done at the same time.

Note that price control includes forcing companies to take a profit. Dumping is (theoretically) illegal for a reason. If the government was to get into epinephrine injectors, for example, the logical solution for private enterprise would be to undercut their prices until the government pulled out because, “The private sector is more efficient.” Then, once the government was out of the business, they would jack their prices back up.

So you mandate a healthy profit, and because you’re in the business, you have a decent idea what a healthy profit is, not just for manufacturing, but also for distribution, sales, and so on. “You will make inflation +X percent on this.”

None of this is particularly complicated to do, in theory or in practice, though that isn’t to say that the technical details of setting it up are easy. But pharma is full of scientists and engineers who hate their jobs, and there have been vast waves of lay-offs as well; there’s plenty of expertise lying around.

I should add that this is a solved problem. It is simple to fix. This sort of price-gouging simply wasn’t tolerated in the past, and it is now, and pharma executives know it. Stop tolerating it, and it will go away.

But private pharma is a stupid way to invent and produce drugs anyway. They spend more on advertising than on research, they sponge off publicly-funded research, and they have vast incentives towards palliatives because a pill a day for life is far more profitable than a cure.

Medicines in the public interest, such as new antibiotics, receive little research because they are not profitable, and medicines long out of patent are subject to horrific price-gouging, and so on.

If you’re sick, you’ll pay almost anything for a cure. Medicine, drugs, and medical devices are one of the last things which should be provided through the private sector. If they are, they must be very highly regulated or in an engineered market with careful oversight–one from which the profit motive is largely excised at any level where decisions of patient care are being made.

The fact that our societies can no longer manage something as simple as drug prices is yet another sign of deep social failure.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

Trump on Health Insurance, NATO, and the EU

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On January 15, 2017

44 Comments

Well, Trump keeps saying stuff, and people keep freaking out. He said a number of interesting things this weekend, let’s run through them.

The U.K. is smart to leave the bloc because the EU “is basically a means to an end for Germany.”

Yeah. Not so clear. BUT, there’s an element of truth here. Among the major European powers, Germany is the one who has benefited most from the EU, or rather the Euro (which England was not a part of). The Euro is not worth nearly as much as a German mark would be, making German exports far more affordable than they would be otherwise. Meanwhile, Germany has pushed hard for austerity policies, on the crazed moral point that countries which don’t run trade surpluses shouldn’t have good things. At this point, France, Italy, Spain, Portugal, and Greece would clearly all be better off outside the Euro–at the very least. Germany has acted monstrously over the past eight years, no more so than to Greece, but not only to them. About the only thing I agree with Merkel about was when she opened up Germany to immigrants (something Trump slams).

  • Trump said Bayerische Motoren Werke AG would face a 35 percent import duty for foreign-built BMW cars sold in the U.S. BMW should scrap plans to open a new plant in Mexico and build the factory in the U.S. instead, he was quoted as saying. BMW plans to start building 3 Series sedans at San Luis Potosí in 2019.

I have exactly zero problem with this. This is how much of the world economy was run prior to the rise of neoliberalism. If you wanted access to a market, you were expected to locate much of the production in the country, with foreign content rules in place. Often it was expected that, say, 60 percent of work and materials would be produced in the country to which you were selling.

  • NATO, he said, “has problems.” “It’s obsolete, first because it was designed many, many years ago,” Trump was quoted as saying about the trans-Atlantic military alliance. “Secondly, countries aren’t paying what they should” and NATO “didn’t deal with terrorism.”

I have believed, since the fall of the USSR and the release of the Warsaw Pact countries, that NATO should be dissolved. I have not changed my mind because Trump is now saying it. Let us be clear, the EU’s population is 508 million. When the UK leaves, it will be 447 million.

Russia’s population is 143 million.

The EU minus Britain has a GDP of 18.1 trillion (purchasing power parity), Russia has an economy of 3.5 trillion (ppp). Germany alone has a GDP (ppp) of four trillion.

Yeah, Europe can afford to pay for its own defense. It has a larger economy and a larger population than Russia. It isn’t even close. If Europe refuses to defend itself, I don’t see how that’s America’s problem, the only thing Europe really needs from America is a nuclear shield, and that need could easily be fulfilled another way (and France has nukes).

NATO is the main reason that Russia is a problem. The Russians were promised that NATO wouldn’t expand into the Warsaw Pact countries. That promise was broken, and when it became possible that the Ukraine would join NATO, Russia acted, because Russian generals believe that it is impossible to defend Moscow if troops start from the Ukraine.

  • On Russia, he suggested he might use economic sanctions imposed for Vladimir Putin’s encroachment on Ukraine as leverage in nuclear-arms reduction talks

This isn’t a bad thing. Good relations with the other massively nuclear armed state in the world are good, and America has zero interests of importance in the Ukraine. As for Europe, see above: They can defend themselves, and if they can’t be bothered, so be it.

Now, to be frank, I don’t believe it will be good insurance (I’ll be happy to be wrong), and I note that it is not healthcare for all, but insurance for all–insurance many may not be able to use. I also doubt it will be universal. But then Obamacare was insurance that many people can’t afford to use, so that alone doesn’t make it a worse plan than Obamacare was.

Still, the actual promise has potential to be better than Obamacare, because Obamacare was not actually insurance for everyone: Nine percent of Americas still lack insurance (this is down from about 14 percent before Obamacare).

If it’s better than Obamacare I will laugh like a hyena.

My read on Trump’s future is as follows: He either gets two terms, or he gets impeached in his first term. Most GOP Congress members would rather have Pence than Trump. BUT Trump’s followers are very faithful and as long as he remains popular, Congress would not dare to impeach him. They have to live in districts where he is popular, and not only their seats, but much more would be at risk if they were labelled traitors by Trump. Bear in mind that there’s no way Trump goes peacefully, or doesn’t call them out, he would fight to the end.

So Trump has to deliver to his base, or he’s done. Also, Trump wants to be adored. It is his deepest psychological need, as best I can see.

The risks with Trump remain high (especially in regards to his China policy); his tax cuts are deranged, the supreme court is going to be a disaster, but that doesn’t mean that his administration may not be successful enough for the people it needs to deliver for to get him his second term.

More than that, Trump is saying the things that no one else in power would say. I mean, he called out pharma as protected and said that’s over. He’s mostly right about NATO. He said in this interview that Iraq was the biggest foreign policy disaster in American history (that’s overstating it, but it’s the biggest since Vietnam).

It’s going to be an interesting few years. Strap in.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

The Continued Collision Between Trump and the Fed

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On January 10, 2017

56 Comments

As I noted before, the Fed and the Trump admin are on a collision course. More evidence:

The Fed’s argument is that the unemployment rate is low enough that it is at the natural rate of employment which doesn’t cause wage-push inflation. As of December, that was 4.7 percent. (There are tons of problems with this, but we’ll ignore most of them, what matters here is what the Fed thinks.)

I am old enough to remember when an unemployment rate of five percent was considered a scandal, but no matter.

The fact is that the people who elected Trump aren’t feeling good. To make them feel good, Trump is going to have get the official unemployment rate lower than it is now, at least under four percent, and hopefully to three percent or lower and hold it there for some time, at least two or three years.

This stuff takes time to ripple through the economy, and it takes time for a tight labor market to push employers to both raise wages and to hire people who they consider marginal.

If the Federal Reserve raises rates if/when Trump’s policies (“fiscal,” in the above) start to work, they will be making sure he can’t deliver to his constituency.

This is a direct collision course.

Now let me say something simple. The Federal Reserve, for over 30 years, has deliberately crushed wages. This was policy. Policy.

The idea that the Federal Reserve should be able to sandbag the policy (“fiscal”) of elected representatives has always been anti-democratic and bogus. They work fastidiously to make sure the rich get richer, to bail out banks, and ensure their profits. Despite “full employment” supposedly being part of their charter, they have defined full employment to mean “employment pressure which doesn’t lead to general increases in wages faster than inflation.”

That is, they have deliberately set out to create stagnation and decline of general wages, while deliberately also ensuring that the rich get richer.

That’s what the Federal Reserve does in practice, and has done since the early 80s.

And that’s why, as with many of Trump’s other targets, I have no intention of defending the Federal Reserve. Yes, Trump is bad, etc. But the Federal Reserve needs to be broken to the will of government, and thus to democracy.

Since none of the “non-bad” or “not so bad” presidents did it, it will fall to Trump to do it. This will probably be the worst way to do something necessary, but so be it; none of the so-called “reasonable” people will do it, so it will be done by someone unreasonable (if Trump does it, this is not a fait accompli.)

Along with breaking the intelligence community (which could lead the world into an even worse situation, but a task that also falls into “needs to be done” category), Trump may well wind up being the most transformative President since Reagan, or even FDR.

This is what happens when the necessary actions which are not taken by “reasonable” people. They wind up being done by unreasonable people, and those unreasonable people may not be “unreasonable” in the way you like.

Keep an eye on this: If the Fed doesn’t blink and Trump doesn’t break them, he’s probably a one-termer.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

The Course of Empire by Thomas Cole

Cyclical vs. End-Time Thinking

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On January 5, 2017

35 Comments

Eras come and go.

Civilizations come and go too.

There have been ecological collapses in the past. For example, one took out the Mayans, and it was self-inflicted. The same is true, on a lesser scale, for Mesopotamia.

Human history is cyclical. It’s only “up trend” in a very long view of things.

In the normal course of events, I would expect that Western civilization would fall. It’s, well, inevitable. I don’t even think it’s that far away in historical time. Might be this cycle, might be a couple hundred years, but we’re clearly coming to the end of our rope.

A civilization ends when it can’t handle problems that are totally obvious, because its ideology won’t allow it to deal with them. In our case, the ideology is economics and capitalism, which insists that decisions must be made based on what maximizes profit. Our ideology doesn’t recognize that profit is a social construction, and doesn’t take into account all the upsides or downsides of doing anything. This, combined with our moral belief that money is “good,” and that the more money you have the better you are, is killing our civilization. (These categories, expanded slightly, cover state capitalist societies like the USSR well enough.)

These problems are acknowledged; just as most of the problems which led to the fall of the Roman Empire were acknowledged, but we refuse to fix them. Every once in a while, an FDR will roll around and patch up one part of the problem, but, eventually, we go back to doing the same thing.

Normally this would amount to reactions like, “Oh well, sucks to live in such times.” Nations, societies, and civilizations come and go and it’s very sad, but it’s just how the world works.

The question is, “Is this time different?’

The argument is scale. We’re a global society, and we’re causing an environmental disaster that is magnitudes larger than any humans have caused before.

One argument is that, “Hey, people predict the end of the world all the time and they’ve always been wrong.”

Which is true, and that argument will be usable until humanity does go extinct (which, inevitably, it will, the question is only when) because it is a one-time event. That it has not happened to humans in the past does not mean it cannot happen. We’re currently driving many species to extinction. Each species goes extinct only once; species extinction due to environmental problems is dead common, and often due to environmental problems the to which the animal in question contributed.

My best guess is that this time is not the human extinction event, but I make that a matter of probability, not probability based on, “It’s never happened before,” (because it has, just not to us), but simply because I expect the climate and ecology will stabilize at a new norm and that the norm will likely be livable for humans.

I regard the loss of all coastal cities and lands as inevitable. We are going to lose the Antarctic ice shelf, and it is going to flood coastal lands. Due to the self-reinforcing part of the cycle, especially with relation to methane gas, that’s just going to happen–and probably sooner than we think.

Before then, we’re going to see widespread disruption of weather, which, combined with our overuse and poisoning of aquifers, will mean widespread food shortages, starvation, and mass migration of hundreds of millions of people in one go. There is no question in my mind that we will see wars for water, and they will be major wars.

There are a myriad of knock-on events which will occur, most of them bad. It will be particularly amusing (in, yes, a sick and sad but appropriate way) if Europe is plunged into an Ice Age. This seems quite likely, as the warm water current which keeps Europe much hotter than it should be could be cut off.

But there are reasons to believe that we’ll stabilize, and those humans who remain will go on. This isn’t a 100 percent thing. I believe there is a non-trivial chance we will drive ourselves into extinction, but I judge it as less likely.

On the other hand, I’ve rolled a lot of dice in my life, and I can tell you that the one, ten, or 30 percent probability you discounted can bloody well come up.

More to the point, while catastrophe is now inevitable, the scale of that catastrophe is not fixed and we can still do quite a bit to mitigate and prepare.

Clearly, we aren’t going to be doing any mitigating or preparing for the next four to eight years. The current generation of leadership needs to be replaced, either by youngsters or the last of the post-war liberals with integrity (Sanders and Corbyn are the representatives of that cohort; Sanders lost, Corbyn is polling badly, though I haven’t written him off).

This is where we are. Our civilization is heading into one of the periodic crises that civilizations go through AND, not coincidentally, we have an ecological disaster of unprecedented scale barreling down on us.  The first has so far made it impossible to deal with the second, but it is also our best chance, because it promises the possibility of new leadership with new priorities on the other side.

But we must find a replacement for our current economic ideology, as it has served us very badly. We are also going to need to take a hard look at our political ideologies, whether “democratic” or authoritarian, because they have performed no better, being unable to even so much as slow the onrushing night.

Life, in general terms, is going to spend a long time getting worse for a lot of people. There’s a lot of triumphalism about how great our world is, and stats to back it up (stats I don’t trust, but that’s another post), but even if it’s 100 percent true, this “greatness” is time-limited. It has already reversed for many people in the core hegemonic power, where we have had an absolute decline in years lived, as well as huge shocks rolling through the birthplace of our civilization, Europe.

Expect this. Bake this into your plans. Things are going to get worse, and you should be prepared for that, not just physically, if you can, but psychologically. Periods which are shit for decades or even centuries are common in human history, and people keep on keeping on.

Trump isn’t the end of the world, if the end of the world is coming. He isn’t even the start of the end of the world. He and various other events which will occur soon, are at most, the beginning of the end of this period of history.

At the other side of this crisis point, we will either have a society which can deal with these problems well enough to save hundreds of millions to a billion or two lives, or we won’t.

And that’s a set of issues far larger than Trump.

The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

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