Thoughts from a Canadian on the Canadian Socialized Medical System
Wednesday, April 13, 2011 at 11:50AM Ed Bugos here. Recently on our comments section a subscriber and friend, Laurence Hunt (who has his own blog here), who lives in Canada, as do I, made some comments to the effect that the Canadian socialized medical system is better than a free market medical system.
This is a very prevalent attitude in Canada. Here was the main thrust of his argument:
"The Canadian system delivers world class healthcare at half the cost due to disintermediation. The system is run like infrastructure, like the highways, and is more economical. I'm still an advocate of government running infrastructure, as there has to be a method of collective participation. I do think that without government, the bullies would be in charge (they are hard to restrain under any system). Nothing is perfect, including freedom."
The following is my response:
Laurence I respectfully disagree with your comment.
First, we would hope that healthcare is ultimately not run like “infrastructure”, especially not like the highway system. A warlock of Austrian Economics, Walter Block, who wrote a book lobbying for a return to private roads and highways, notes:
“If the highways were now commercial ventures, as once in our history they were, and upward of 40,000 people were killed on them annually, you can bet your bottom dollar that Ted Kennedy and his ilk would be holding Senate hearings on the matter. Blamed would be "capitalism," "markets," "greed," i.e., the usual suspects. But it is the public authorities who are responsible for this slaughter of the innocents.”
Aside from your comment on "infrastructure", if you are going to compare the Canadian system to the US system we need to first recognize the difference.
In Canada there is a state monopoly in the provision of medical care (though not in the provision of essential goods to the medical system monopoly).
In America they have had increasing state intervention into the medical industry starting with the AMA who in 1904 limited the number of doctors entering the field and closed down a bunch of schools. This was done in the name of protecting the consumer, but in reality the doctors got together and did it to raise their incomes.
They essentially created a labor monopoly within a private system. This is typical, by the way. In Canada the state likes to control the industry; in the US monopoly power is doled out by the state but usually vests in private hands - so up here you have state monopolies and crown corporations while down there you have antitrust and cronyism...or "state capitalism" (or corporatism) - in Russia you have oligarchs.
Progressively, over the years, the US government eventually forced employers to contribute, then granted the power of licensing to the states, and began to underwrite (subsidize) medical care demand a few decades ago.
Economics teaches us that when you restrict supply and subsidize demand you will get shortages and higher prices - and that's even before we throw the Fed into the mix. The so called free market medical system in the US has been progressively sabotaged over the past century. The universal coverage - Obamacare - is just a final straw.
So the high price of medical care has nothing to do with it being relatively more private in the US than in Canada - in fact economics teaches us also that prices would fall if the industry were free from government. So make sure to put the blame for the high cost where it belongs: on government regulation and subsidy, as usual.
As for Canada's healthcare system costing half as much, undoubtedly the figures do not account for the lower ‘quality’ and the greater shortages we get here. So in reality you are getting half as much too.
As the US system is more socialized you will find that our medical costs not only start to rise more, but also, their quality/availability will fall. Like it or not Canada has been a big beneficiary of the innovations of the relatively freer market down south in this industry. I can attest to that personally. If you slow down those innovations, because, say, the system is totally socialized, then our state monopoly system will suffer as well.
That is, costs will rise and quality will fall.
The soviets were the first to try out universal medical care. As one of Gorbachev's economists pointed out in the article at the link here (http://mises.org/daily/3650), the system basically deteriorated to the point where a black market developed based on bribery - outside of which the doctors would quip that their patients “pretend they are paying us and we pretend we are working”. And if you were dying, they pushed you out the door so that the hospital statistics wouldn't look bad.
The only reason this hasn't happened in countries like Canada that have adopted a similar system is that the rest of the economy here is not centrally planned. Thankfully, there is a relatively free market in the goods that supply the medical provider monopoly. And the state is loosening its grip on some provisions lately.
But the main point is that it is a matter of economic law that a private system in medical care would result in lower prices and better quality. After all, all we want is to allow competition. It's a ridiculous argument to say that we are better off because our government restricts competition. Effectively, that is what our system is.
In regard to your comment that "nothing is perfect, including freedom", of course you are correct.
Undoubtedly nothing is perfect. Let’s not put that stick man up. The socialists are always criticizing the imperfections of the market but the idea is not to achieve perfection. Neither Jeff nor I nor Mises would claim the market is perfect. Far from it.
It is a matter of what is better – a state monopoly service or free market competition.
The socialists will decry the quality of movies produced by Hollywood or the books written in a capitalistic society. No doubt that in many cases they can produce better quality stuff – even better quality goods – if it were planned. But the market may not want the “best” quality goods. In a free system it gets what it wants.
People get what they want.
I hate what Hollywood produces personally, and it does show that the majority of people (the market) has bad taste, etc. That doesn’t mean that I would favor a centrally planned movie industry. It would produce movies no one would want to watch even if by someone’s standards they would be considered perfect.
I’m sure that a centrally planned body could build better cars than we have on the road –but would everyone get one? Would it be as cost effective without any competition? In a market economy you would have goods that are near perfect that only a few millionaires could afford – like the Lamborghini – and you would have goods like the Hyundai that everyone could afford. You would have a full range for everyone. This is just not possible through a state monopoly.
We’d all either be driving the Yugo or only the despots would be driving their perfect autos.
But one thing is for sure – apodictic – competition ensures that the costs of providing goods is lower than it would be otherwise.
In regard to your comment about the Government needing to intervene or we'd all be taken over by bullies. How ironic to say that bullies would take advantage in a voluntary society so let’s replace voluntarism with a coercive apparatus that prevents free competition. Whenever the state controls an industry it is the coercive apparatus that is used instead of voluntary decisions that are being made.
This stuff about a “bully” is another socialist tactic. They’ve been using it on essential services since time immemorial. It’s almost as bad as the first stick man you used above! But it’s okay. We’re indoctrinated that way up here in Canada. Unless you have read Mises and Rothbard you're defenseless against the socialists.
In order to discredit the myth about bullies in a free market system one of my favorite authors, Frederic Bastiat, used to say: "In war, the stronger overcomes the weaker. In business, the stronger imparts strength to the weaker". This is 100% true. It is pure irony to say that the state protects the weak from bullies.
The state is the biggest bully of all.
It’s this simple. If you would not put the state in charge of providing electronics goods why put them in charge of providing ESSENTIAL goods? Explain to me how anyone is “bullied” in any other industry that we’d agree was a free market industry. I don’t see it. I see that businesses are accountable to consumers. I also see that government is not. I pay FEDEX for any important mail. The post office is a great example of how government does things.
Sure, it all looks great as long as there is no free market alternative.
Free market medical care would be cheaper and it would be better. It would be better all around. I don’t expect anyone to agree. No one agrees, after all, that we could eliminate recessions altogether by going to a real gold standard. They don’t buy it because we’ve had a gold standard but we still had recessions. For the same reason, people won’t buy that a true free market would be 100 times better than what they call free medical care!
They don’t buy it because they see the so-called private system in the US costing more. But they fail to credit the state with that problem, just like they failed to acknowledge that the gold standard of old was rigged too.
For every story about a private doctor not treating someone, say, because the customer has no money, there are a dozen such stories under universal medical care systems where patients in dire need are either shoved out the hospital door or discharged by a death committee or otherwise mistreated. There are many stories. I can tell you from experience with markets in general that if I had a heart attack and no money I’m confident that the doctor in a free market system would still help me even if he wasn’t going to get paid.
Charity is something only a free market system can afford.
Reader Comments (12)
Ed, great post. The trap of socialism is that it always seems like the best way to go when you only think 1 (or 0) step(s) ahead. With such a backwards education system, the state insures that the majority of those in school are not actually being educated, and so nobody learns to think for themselves, which, of course, would be the only way you could possibly think more than 1 step ahead... generally by the second step (ie. unintended consequence) socialism starts to show cracks, and by the 3rd or 4th step, it's well on its way to collapsing like a cheap tent.
Very well stated.
Ed, It's hard to argue when I agree with most of what you say.
However, I am unable to access the existing free market side of health care in Canada, as I have been successfully treated for potentially serious health problems in the past. My present health is probably superior to that of 90% of Canadians my age, yet Blue Cross and other insurers refuse to provide services to me, based on their actuarially-defined risk rules. Thus if there were not a publicly-funded health care system in Canada, I would either have no health care, or be paying inordinate prices to get it. So the present system works very well for me, personally. If I get sick, I'll be sharing a ward room with a crowd of others, but I'll get the same quality health care as everyone else, and so far, that has been not just acceptable, but of top quality.
As to the comparison of the Canadian and US systems, Wikipedia has a handy entry on that here: http://en.wikipedia.org/wiki/Comparison_of_the_health_care_systems_in_Canada_and_the_United_States
You will see that the US system is literally almost twice as costly as the Canadian system (I've seen updated figures elsewhere, which are similar). I attribute part of this differential to better quality at the high end of the user-pay system. But the US has produced a Byzantine system of layered public and private bureaucracies for the very purpose of preventing health care from being universal. Now about 1/3 of the cost is to maintain that top-heavy system. What does this 1/3 of the system do? Determine eligibility, length and quantity of health services, etc. Canada dispenses with that needless 1/3, and simply provides good quality healthcare (most of the time) to everyone.
My personal observation (not theoretically-based) is that government does infrastructure pretty well. On the upside, government is accountable to most cross-sections of society, as was argued in such documents as "The Federalist Papers."
In Canada., the CBC has a mandate of promoting a shared national identity. I would argue that the CBC has succeeded in this mandate, and thus deserves some of the credit for Canada's being a more harmonious and less fractious society than the United States.
Finally, in my part of the world (rural Northwest Ontario), we transitioned from government-provided to privately-contracted highway maintenance about a decade ago. What was the consequence? People started dying, as it was not always economically advantageous to plough the roads in some weather conditions. It was widely remarked that our once well-maintained highways had become ice-covered and treacherous. I witnessed personally several of the fatal accidents, which mostly involved transport trucks and other vehicles sliding off the road and careening into rock cuts.
Despite the above, I agree with 90% of your argument. I guess my response is that what government does best (in a democracy) is respond to competing factions. As you know, there are few regions of the world that permit citizens title to their property and that protect the operation of free enterprise. Most areas of the world that are unencumbered by governments are places that I would not want to love, for example, Somalia, the Congo, etc. Not only are you likely to be killed in such places whether you do or do not join one of the local gangs, there will be no protection of commerce, so free enterprise is impossible, and there are also no protections of quality of life – environmental regulation, etc.
Now, I am making this argument as an unabashed advocate of private property and free enterprise. I would side with Hernando DeSoto in maintaining that the primary role of government is to establish title registration and to protect title holders' rights. I argue that the wealth which funds government infrastructure provision is created only in the free market. I thus also advocate low taxation rates and keeping the government out of the business of commerce generally.
But I continue to subscribe to the Canadian (and Asian) notion of collective identity, and argue that the extremes of individualism to our south are part of the problem, rather than the solution....
If Canadian health care is so much superior why are international insurance premiums higher in Canada (and US), than anywhere else in the World??
As for democracy, it is merely the rule of the top 51% over the bottom 49% (mob rule). The bottom 49% are victimized by special interest groups. Taxation is called theft for a reason. I can't wait to move out of Ontario permanently.
Thanks for your reply Laurence. You know I have all the respect for you in the world so please don't take this personally. Kudos to you for putting your thoughts out there. This is an important topic.
I have a rebuttal to your comments though.
First, your personal situation, granted, that makes you biased. Yes? You are right; you are the net beneficiary of a system like ours...for now. Until they find that there are too many like you and they can't afford to ration.
Second, yes, CBC does a good job at manipulating you into submission. Government would get nowhere if it weren't for its apologists and court intellectuals as Rothbard calls them. CBC fulfills this role wonderfully.
The idea of a national identity equates with nationalism, which is an antiquated concept and the cause of much friction outside of the harmonious sphere of believers...i.e. between opposing spheres, or nation states.
Third, in your example of going to private road building in your neck of the woods, are you saying that you are allowed to own a road there now? Because that is critical to the concept. If people are dying on those roads because they are not cared for then the owner is liable. that's the whole point of privatizing them.
If you just mean the government is backing off its corrupt contracting system and not doing any public works while keeping the ownership of those roads public then we are not talking about the same thing.
Undoubtedly, there are people even under the current system that take stupid risks and in a free society they would drive on unowned roads and get killed. But you don't think we can protect those people by preventing the private ownership of roadways do you? Certainly there has to be individual responsibility in any 'society.'
Finally, in many of the places you are talking about where there is no government - like Somalia - for example, and where you would not like to live...I agree but the reason is that the chaos is due to various power factions (future states) fighting over who gets to control the place. You can't put the blame for that on freedom either.
Respectfully,
Ed Bugos
I watched in the mid 80's as United Healthcare gathered doctors together and set their rates to keep costs down for the consumer. Once set into motion, the program gathered momentum until now total costs for insurance are $24,000 a year. For the past number of years our insurance costs have increased 20 per cent annually while United Healthcare's annual profits seemed to increase the same. Interesting how that works.
To add further to Ed's remarks, I would state that many of the problems in places like Somalia all have their origins with government interference. Many of the 'nation states' in Africa have their beginnings from some English government bureaucrat who was initially put in charge of drawing lines on a map and creating countries... of course, this interfered with the free market and separated tribes that otherwise would have been together and has created, amongst other things, decades and decades of problems. So, once again, the problem came from Government/Empire and is being blamed on the 'free market'.
Notice how straight many of the borders of countries are? http://maps.google.com/?ie=UTF8&ll=16.467695,18.369141&spn=53.719757,78.310547&t=h&z=4
Yep, some bureaucrat with a pencil and a ruler created many of these countries... and it is still a major source of the problems of this region... the other major source is 'charity' which in this case is the act of taking money from poor people in rich countries and giving it to rich people (usually the dictators or puppets) in poor countries. It only serves to make the govt's there more powerful and more oppressive.
Could someone offer a definition for the term "Free Market"? Somewhere in L Hunts comments and Ed's response combined I get a glimpse of what that term is intended to represent but I think a clearly stated definition woiuld be helpful.
i love socialized medicine. it has served me well in Canada. i received good treatment when i needed it.
@ Matt
I think the best definition of a 'free market'' in todays society would be the ''Black Market'' The black market operates outside ggubberment interference. I consider the term 'black market'' no more then propaganda to get people to think its a bad thing.I don't think there is any other more true or free market.
Matt,
The definition of an absolutely free market is no government intervention whatsoever.
That doesn't exist anywhere. Instead we have varying levels of government intervention everywhere.
Ed Bugos
I appreciate your response. I'd like to comment on both definitions because it seems like the whole world is now focused on "the market". And unlike the "environment" the political econ is going to change and it matters.
The Black Market both pre civil war and in current terms re contraband is probably the most government intensive market on the planet. The DEA is a self fundiing "enforcer" that creates its own demand out of thin air and propaganda. It is the defining symbol for the current age of the Narrative where the truth and truthfullness along with reciprocity are disregarded to the extent the are not attacked.
A market without govenrment interference has never existed but there is the possibility theoretically with a short window of opportunity. The issue is "enforcement", our unique system in the US combined with chance is the most efficient power maximizing society and thus dominant. As the whole system collapses its not in anyone's interest to cling to the capitalist narrative, the Ayn Rand sillyness or the Austrian anti-government programs.
A constitutional ammendment excluding all laws of enforcement of contracts from which one derives revenue from ownership is a real and theoretical possibiity. The marginal convedrgence for equiliib turns out to be subjective and aggregate marginal effort per austrian methods of analysis.
But I think the plan is as I guessed back in aug 2001 for the US to control the process, blame the fed, and try to expand its power militarily to acquire the oil supply and re-instate a US centric quasi gold or bretton woods type system.
But it doesn't matter at least not for me. But Ed, I know this sounds crazy but I can't help but wonder if you called me ten years ago regarding my "theory" rather than about Ayn Rand. Basso-Neel also comed to mind. anyway this always happens when I try to reach my daughters unsuccessfully...my mind has to focus on the events that resulted in doctor and state mediated loss of family.
Matt