The Pin Factory Blog

Following the failure of George W Bush’s social reform – labeled the "ownership society" – there is one question that conservatives cannot escape in the run up to the presidential election. Is there any prospect of reclaiming limited government again? An interesting debate getting started.

Military spending is not the problem. Despite Iraq and Afghanistan, defense spending accounts for only 20 percent of the federal budget or 4 percent of GDP – lower than during Jimmy Carter's presidency. Driving big government has been the 65 percent of the federal budget (or 13.1 percent of GDP) spent in 2003 for "human resources" - the budget category including Social Security, Medicaid, Medicare, Veterans programs etc.

At least overall spending has slightly improved: from 22.2 percent of GDP in 1981 to 20.3 percent now. But despite two decades of the conservative think tanks churning out concepts for shrinking the welfare state, federal government is bigger and more influential now than in1980, when Reagan famously said: "government is not the solution to the problem, government is the problem".

Unfortunately it seems much harder for conservatives to dismantle the welfare state than for 'liberals' to build it. As the New Republic stated, celebrating the 10th anniversary of a rare conservative victory, the abolishing in 1996 of the Aid the Families with Dependant Children:

Welfare bashing has lost its political resonance…(and) welfare reform has expanded the constituency for activist government. Democrats now have more political room to fight Republican austerity – and to propose, in its place, a stronger safety net.

If American conservatives where not able to use the prosperous past decade in power as an opportunity to reduce the public sector, what can they possibly achieve in the more difficult years of retiring baby-boomers that lay ahead?

People working in the healthcare industry are beginning to understand that customer convenience, the top concern in other industries, should have its place in healthcare too. The reason for this is often overlooked. It’s driven by demographics. With ever-growing workforce participation in developed countries, time is becoming more precious – and so looking after your health is squeezed among other chores. That’s the principal reason why waiting lists for medical treatments are a medieval plague and absolutely counterproductive.

This is where Convenience Medicine kicks in. It’s also the story behind Wal-Mart's recent heavy engagement in healthcare. The world champion of retailers has prodded others to offer most common drugs so cheap that even the Medicare Pharmaceutical Benefit Scheme – introduced at huge cost by George W. Bush – is already looking rather obsolete. But it’s not only cheap drugs. Convenience care also offers a different approach to patients. Surveys show an extremely high rate of patient satisfaction with convenient care clinics.

Convenience care clinics provide reliable, immediate, low-cost healthcare to the general public, many of whom do not have access to traditional healthcare. With over 500 active clinics in the United States (projected to grow to 700 by the end of 2007), these clinics complement traditional medical services providers.

With the healthcare industry employing the biggest workforce in many countries and eating up increasingly vast chunks of government budgets, it is unsurprising that market forces are finally getting loose. It always struck me as hypocritical that those who insisted that healthcare was "morally different" were often the same people who shrugged off the industry's deplorable record of customer relations.

There is a new survey out there from the always-interesting National Center for Policy Analysis It covers the rapidly growing global market for medical tourism. We have already blogged about it here . But it is now becoming clearer what lies behind the success of the global high performance hospitals.

The market leader is Bumrungrad International Hospital in Bangkok, which served a stunning 1.2 million customers from 190 countries last year. It is American-managed and creates returns of 20-25 percent each year. Many other hospitals are managed, owned or affiliated with prestigious American hospitals:

• Cleveland Clinic in Ohio has satellites in Vienna, Canada and Abu Dhabi.
• The Indian hospital chain Wockhardt is linked to Harvard Medical School.
• Johns Hopkins has an affiliate in Panama and in Singapore.
• Dallas International Hospital operates hospitals in Mexico.

All these hospitals are escaping micromanagement by third parties – or otherwise highly regulated markets – at home. And that's how they achieve such competitive pricing. It is not simply a question of lower wages for doctors and lower overheads for hospitals. It is the absence of third party bureaucracies (which do so much to drive healthcare inflation) which allows these hospitals to provide such high-quality, low-cost services.

These hospitals are free-market laboratories serving cash-paying patients. That gives them the edge of performing at the frontier of medical and managerial innovation. Bill Gates just purchased the supreme management software, Global Care Solutions, from Bumrungrad hospital in order to market it worldwide. We should expect more innovation being created overseas and then re-imported to strangulated hospitals in the US and Europe.

As in the last campaign for a Clinton presidency, which Hillary nearly derailed with ill-advised health reform proposals, she has once again missed the point in her insults on private medicine.

On the campaign trail in New Hampshire she accused the US health insurance industry of spending $50 billion to avoid paying claims of their clients. But she has got the numbers wrong. Currently private health insurers are paying claims worth about $600 billion a year and spending $30 billion to adjudicate those claims, actually only denying claims worth $3 billion – not $50 billion. The cost of scrutinizing claims represents good value for money, because it keeps the premiums at bay by rejecting fraudulent and frivolous claims.

However, the ideological thrust of Clintons argument is targeting at gradual replacement of private with public insurance – in other words to expand Medicare for all Americans, with alleged administrative cost of only 3-6 percent. Her followers claim falsely that the administrative costs of private insurance (11-14 percent of premiums) alone would be enough to fund coverage for all presently uninsured Americans.

Fortunately, a meticulous actuary enquiry by the Manhattan Institute has recently dismantled this myth. Administrative costs for public insurance such as Medicare do not reflect the hidden cost of tax collection and other government functions for the administration. Under the "lowest plausible assumption about the excess burden engendered by the federal tax system" the total Medicare administrative costs would account to a minimum of 24-25 percent of all outlays. However:

A more realistic assumption raises the true cost of delivering Medicare benefits to about 52 percent of Medicare outlays, or about four to five times the net cost of private health.

Well, they are both on the minds of certain human rights activists and they are both sentinels of soviet-style denunciation because of anonymous bias-reporting systems in academia. These systems sprang from US universities (e.g. Virginia, Oregon State and Ohio State) and are spreading elsewhere. They are supposed to expose and punish people who make use of their free speech in a way the PC crowd regards as offensive and wants to be verboten. Their latest target is the well-known conservative publicist Mark Steyn.

The Canadian Islamic Congress has filed a "human rights complaint” against the prominent Canadian news magazine MacLean’s, because it published an excerpt of Steyn's book America Alone, considered by the plaintiff as "flagrantly Islamophobic". And at least two Human Rights Commissions are willing to hear those complaints. This is despite the fact that the book, which is published in the US, has already been best selling in Canada. Another way of looking at this attack on free speech is the worldwide rapidly growing list of Muslim Libel Cases.

In the meantime, many regard it as unfortunate that the erstwhile home country of individual liberty has become the "libel capital of the West" because in today's England the defendant in a libel case bears the burden of proof. The most notorious beneficiary of this is the Saudi Sheik K. S. bin Mahfouz, who has already filed 30 libel cases in the UK alone that usually result in banning books critical of Islam.

Steyn responds in the Weekly Standard:

The "progressive" left has grown accustomed to the regulation of speech, thinking it just a useful way of sticking it to Christian fundamentalist, rightwing columnists, and other despised groups. They don't know they're riding a tiger that in the end will devour them, too.

Global warming is allegedly coming faster than even the most alarmist campaigners expected. They have once again had a field day in bashing America, for its insistence that big emerging polluters should come on board the bus to mitigate climate change. This is a classical example of Alexis de Tocqueville's law: once the dynamics of an insurgency have been unleashed it is unlikely to be settled by compromise even if the reigning powers want to — instead they spoil it with escalating demands.

In any case, there is probably no need for all this fuss about short–term emission cuts. Just allow the market to do the job.

There is now evidence that the US approach, with prizes for the invention of low carbon technology, is actually working. Recently the Bush Administration announced that U.S. emissions of carbon dioxide fell by 1.8 percent with all greenhouse emissions down 1.5 percent from 2005 to 2006 even though the economy grew by 2.9 percent.

This reduction was accomplished through prizes and greater use of lower carbon energy sources. We know that most EU countries are failing to achieve their Kyoto commitments and yet even those who do manage to meet their Kyoto-set targets tend to do so for reasons other than climate change mitigation politics such as the breakdown of socialist economies.

The EU hasn't yet released figures for 2006. But from 2000 to 2005, the U.S outperformed Western Europe. Carbon emissions were up 3.8 percent in the so-called EU-15 during those years, versus 2.5 percent in the U.S.

The funny thing is: the same is true for Al Gore. It was during his time as Vice–President in the early 1990s that U.S. greenhouse emissions grew faster than Europe's. Bush, on the other hand, has managed to turn this around.

Some pundits guess America, long known for her unique exceptionalism, is roughly 50 years behind the French in realizing that Western security is jeopardized by the reliance on imported energy. Abandoned by her last ally in resistance to Kyoto carbon emission cuts - with Australia signing probably the most overrated and greatly dysfunctional treaty in human history - the US is expected to revive its nuclear industry after 30 years of stagnation.

Now, given that most of the Anglosphere looks set to be dominated by the secular left in years to come there is no guarantee that the nuclear renaissance will succeed. So let’s look at France, which as a country with no own energy resources to speak of, can serve as a role model for achieving energy independence.

It is the only country where the political left has not opposed civil nuclear energy. Over the last fifty years, that has enabled France to excel as a beacon of nuclear electricity generation worldwide – producing 80 percent of its electricity supply that way. Secondly, France has an exceptionally strong cultural appreciation of scientific progress - expressed in popular high-speed trains and the supersonic Concorde. Thirdly, the trust in French public service officials, who tend to be trained engineers - rather than lawyers as typical in the US – helped to maintain public confidence in the nuclear program. And finally, the excellent security record of the French nuclear industry - usually attributed to synergies from central management, reactor standardization, a better learning curve and better homogenous training facilities for personnel.

These are the lessons to learn for the US, which will need 35 new reactors to meet surging energy demand by 2050. It’s time to forget about Freedom Fries and just say ‘oui’.

The US has sustained a series of energy bills with the intention to foster energy efficiency. But they have caused lots of headaches for consumers and are likely to cost a lot of money. Rent seeking special interests from the burgeoning eco business are rolling their pork barrels all over the place. Just look at the 1992 US Energy Policy Act.

Implemented in 1994 it forced millions of Americans to install water-saving toilets. But they performed so badly that people mostly had to flush twice, actually increasing water usage. Or the 2005 energy law that prescribed that agricultural-based ethanol must be mixed into the gasoline supply. Since then we learned that the energy and water needed to produce ethanol is huge, and also that biofuel production has driven up food prices. On top of that, ethanol generates less energy during combustion because unlike fossil petrol it is already partly oxygenated.

Despite these well documented shortcomings the latest US energy bill, which just passed Congress, includes a fivefold increase of ethanol in the gasoline mix. Other provisions likely to backfire are for new, supposedly energy efficient devices such as new light bulbs, boilers, refrigerators, dishwashers, cloth washers and air conditioners. Ben Lieberman, a senior policy analyst at the Heritage Foundation, got it right when he said the following:

There shouldn’t be any mystery why these laws fail. They all involve Congress trying to force the public into using something the market place has rejected. If newfangled toilets or increased ethanol usage actually made sense, they would catch on without heavy-handed government mandates. Ditto the required modifications to appliances. More often than not, this kind of government interference with the free market works to the detriment of consumers. Washington may think it is passing energy bills, but all it’s really doing is proving the law of unintended consequences.

America seems to be drifting back in history in a sort of time machine. The backlash against admittedly rather limited free market reforms by George W. Bush, exerted by the status quo left, is gaining momentum. If the polls in the run up for the presidential elections are correct, the 'ownership society' could soon be hit by a severe blow. If one of the Democratic hopefuls gets elected, Santayana’s rule is unlikely to be escaped: those who ignore historic failures are prone to repeat them. Such is the case with the old whore of universal health coverage, favoured vigorously by Hillary Clinton, John Edwards and only haphazardly rejected by Barack Obama.

Remember, this is a policy introduced in Britain in 1908 at a time when socialist movements were surging through Europe. Leading Democrats are advocating this concept hundred years late. Is this what Americans get from the collapse of the Soviet Union? The current concept seems even more collectivist than the collapsed HillaryCare of 1993, which nearly derailed her husband's presidency.

Compulsory and comprehensive health insurance for everyone is expensive and would likely deepen the financial crisis in health care even further. It is also inadequate in times when Americans are in perfect control of up to 50% of their health risks, which renders comprehensive insurance obsolete. What is really needed is catastrophic, no-frills health insurance for everyone. That's the kind of safety net the late 19th century European reformers had in mind. And it would be much cheaper and therefore more affordable for consumers.

However, in the freest country in the world compulsion is unlikely to work. Look at car insurance: Despite being compulsory up to 15% of drivers in the US – depending of the state, but higher in the West – don’t care about car insurance. Ironically that is about the same percentage of 'free riders' in the yet not compulsory US health system!

A comprehensive new scientific study comparing 22 climate change models with recent actual measurements of the troposphere highlight the clear failure of their predictive accuracy. The group of climate scientists, among them IPCC member John Christy, found new evidence that the computer models are failing because they do not reflect actual causes of climate change.

This is only the latest in a series of studies that have cast systematic doubts on the efficacy of climate modelling. These models form the basis for future global warming predictions and have projected significantly more warming in recent years than has actually occurred. Their main weakness seems to be that they are unable to deal with confounding factors such as cloud cover and water vapour, which is the dominant green house gas.

Satellite data and independent balloon data agree that atmospheric warming trends do not exceed those of the surface. Greenhouse models, on the other hand demand that atmospheric trend values be 2-3 times greater. Satellite observations suggest the greenhouse models ignore negative feedbacks, produced by clouds and by water vapour, that diminish the warming effects of carbon dioxide.

This is a devastating message given that the whole global warming alarmism is almost entirely based on computer climate models. And put simply, the models are completely unable to account for the facts on the ground – like the observed cooling periods in recorded temperatures between 1940 and 1975. The models falsely project fast warming in the middle atmosphere compared to the earth surface - whereas in fact the opposite is happening. And they cannot explain the present cooling of the Antarctic, which forces me to put an extra pullover on when sitting on the balcony of my 30th floor Melbourne apartment with south westerly winds.