TCS Daily


Pushme-Pullyu Socialism

By James Pinkerton - August 20, 2003 12:00 AM

LONDON -- Remember Pushme-Pullyu? That was the llama with a head at both ends, from the "Dr. Dolittle" stories by the British-born Hugh Lofting. The creature could get along just fine in the 1967 and 1998 movies starring Rex Harrison and Eddie Murphy, but in the real world, of course, such an absurd critter has never existed -- unless one counts the forward-backward creature known as socialism, in which things are free but are often not available.

 

Alas, the pushme-pullyu paradox of socialism is not confined to faraway areas. Practical-minded Americans, for example, might consider themselves to be immune to the absurdities of such collectivism; yet in fact, back in the U.S., even Republicans sometimes indulge in the temptation to use state power to distort the market and control prices. As the great economist Milton Friedman observes, most politicians and most people are lured to the idea of "a free lunch" -- the idea that the government is a means of getting something for nothing. The most relevant, as well as dangerous, instance of such free-lunch-thinking in America today is the effort to push down the price of pharmaceuticals. It's a tempting vision, to be sure; all socialism is based on the appealing promise of abundance for all and hard work for none. But as Friedman says, there's no such thing as a free lunch. And there's no such thing as free health care, either: one way or another, everybody pays. Indeed, as we shall see, people ultimately pay more for health care when it's "free."

 

So with stateside applications and implications in mind, maybe it's worth pausing for a moment to consider some of the lessons one learns on a visit Over Here, in the hopes that the bad precedents of British policy perversity will not be exported to the states.

 

By its very nature, the British National Health Service (NHS) is a pushme-pullyu critter. It supplies its services for free, and therefore demand is infinite; even socialists have figured that much out by now. And since socialists have also discovered, to their infinite chagrin, that they must live within a budget, the bureau-barons of the NHS have had to figure out a way to limit the care they provide. Yup, that's right: having created a system that gives away its product, the NHSers must now find a way to give away less of it. That's bureaucratic pushme pullyu in action: take all you want, but don't take much.

 

One way to limit consumption, of course, is to raise the price, but that violates the first law of socialism: everything must be free -- at least in theory.

 

With these yes-no points in mind, let's ponder three news-items, culled almost at random from the daily papers here.

 

The first item comes from The International Herald Tribune. Under the headline, "Britain's dental system taxed by high demand," the August 12 paper reports that the average NHS dentist sees 30 to 40 patients a day -- as noted, when the price is free, demand tends toward infinity -- compared to the 12 a day that an American dentist sees. There's nothing wrong with amping up productivity, but there's plenty wrong with assembly care that scrimps down on quality; that's what's happening, according to the government's own Audit Commission. And yet at the same time, the overwork of NHS dentists has caused a shortage of such dentists; in Wales, for example, would-be patients pitch tents overnight so that they can be first in the queue to see a dentist. And thus one of the eternal problems of socialized medicine: treatment may be free, but treatment isn't very good. And given the nature of health care, cheap treatment can ultimately be expensive indeed--at least for the patient.

 

The second item comes from the August 10 edition of News of the World, Britain's biggest-selling Sunday newspaper. The headline blares on the front page: "Warning: Health Tourists are seriously damaging our nation's wealth." "Health tourism," of course, is one of those unintended consequences of underpricing a product; in this case, the product is health care, priced at zero. The NHS care might not be so great for Britons, but the price is right for foreigners, who have even worse doctoring in their home countries. As the News reports, 100,000 foreigners turn up in the United Kingdom every year, which costs the NHS some £ two billion annually. For example, the NHS treats some 6,000 non-British AIDS patients, each one at rate of £15,000 per annum. Nor is it easy to for NHS providers to turn potential patients away; as the News notes, that's a path for getting into deep legal trouble.

 

Parenthetically, one might add that in these p.c. times, the embrace of socialism usually goes hand in hand with opposition to racism, in its real and imagined forms. So, by this advanced "ism"-ic logic, it's OK for a doctor to help bankrupt the system by providing costly care, but it's verboten for a government doctor to screen out ineligible patients, lest someone be victimized. So avoiding the possibility of racial victimization in a few cases leads to the fiscal victimization of the country on a systemic basis.

 

To students of such free-market economists as Friedman, or Friedrich Hayek or Ludwig Von Mises, these incidents of the pushme-pullyu absurdity are merely additional data points in the century-long historical folly of socialism in action. But defenders of socialism -- and its watered-down variant, which might be called bureaucratism -- still have a few cards to play. Public-sectorites argue that only the state can peer ahead into the murky future and ascertain "national needs." By contrast, these pro-governmentalists argue, capitalists are driven by their short-term obsession with quarterly earnings.

 

Yes, there is some truth in this statist argument. The U.S. government did, for example, come up with the original idea for the Internet -- although it was the market that transformed Darpanet from a military survival tool into the Internet, the engine of commerce and information in the 21st century.

 

But now public-sectorites must consider this article that appeared in the August 12 edition of the Guardian. Here's the header: "Quick-fix political culture distorts research, says NHS healthcare agency." Now it's worth remembering that for decades, the Manchester-based publication, now gone national, has been the premier lefty paper in Britain; for it to admit that there's something wrong with the NHS must mean that there's really something wrong with the NHS.

 

The article detailed a report from the NHS' own internal think tank, the Health Development Agency (HDA), which found that only 0.4 percent of studies looked into such long-term health issues as the prevention of cancer and heart disease. According to HDA's Mike Kelly, "Prevention is better than cure -- so a strong research base . . . is essential." But, the article continued, a major factor deterring prevention research is the government's interest in "short-term, politically high-profile 'quick hits' which could inhibit a focus on longer term health benefits." One such "quick hit" cited in the article is needle-exchange programs. These needle programs may reduce the prevalence of AIDS, but they contribute little or nothing to either the treatment of AIDS or the suppression of drug abuse. Yet as the Guardian concluded glumly, there are "few incentives" for universities to become involved in long-term research, given "the cost and complexity of the research."

 

Thus we see the true dead end of the system, laid out in three parts. First, by underpricing its product, the NHS undercuts quality of service for its customers. Second, because those same lousy services are, on a relative basis, very attractive to non-Britons, and because the system is scandalously open to foreigners, the NHS has become, in effect, the default health system for the world. And by adding yet another tranche of customers, the pressures on the system to control costs by controlling access to its services grows all the more intense. In other words, as the fawlty-towers logic of the NHS plays out, the system must ration its product all the more severely--by longer and longer lines.

 

So now to the third part, which is the enormous pressure on the British system to produce good data. Note: that's "data," as opposed to actual results. The standard rap on corporate America is that CEOs lie and cheat to "hit their number," defined as whatever earnings amount is demanded by Wall Street. This is not a small problem, as recent corporate scandals reveal. However, it is ultimately a self-correcting problem, because investors eventually wise up to accounting shenanigans. But now, as we see, in the Guardian, the government also is busy jacking around its numbers.


But the difference between mendacities in the private sector and those in the public sector is that the latter can get away with fibs by laundering them through politics. That is, if politicians can persuade voters to believe their bureaucrat-generated numbers, then the fiction of governmental efficacy can go on forever. And history shows, alas, that some countries keep falling for the same scam; the NHS has been politically untouchable since its creation.

 

Meanwhile, the realization that the same thing could happen in the U.S. -- that a health-care contraption could prove popular, even as it also proved incompetent -- should keep American free-marketeers on their toes. On their toes against, for example, those Americans who still push for a British-style system in the U.S.

 

And that means swatting down each and every pro-socialized medicine argument as it pops up. For example, The Physicians' Working Group for Single-Payer National Health Insurance is mostly content to recycle neo-socialist arguments in its advocacy of a "single payer" system in the U.S. But the leftish docs are on to something, at least a little bit, when they argues that "adverse selection" -- defined as shooing needy, and therefore costly, customers away -- as practiced by insurance companies and hospitals, is a serious problem. As the Working Group asserts in the August 13 issue of the Journal of the American Medical Association, the status quo in the U.S. "creates the paradox of a health care system based on avoiding the sick."

 

Yet as we have seen, "adverse selection" is a problem everywhere. To put it bluntly, rational actors in both the private sector and the public sector are inclined to skim the cream of health care -- that is, treat "easy" cases that help the bottom line, by either pumping up profits to report to shareholders, or pumping up numbers to report to voters.

 

All of which underscores the reality that health care is a difficult issue everywhere. Yes, normal supply-and-demand is the most efficient way to allocate any kind of good or service, but health care is so important to people that it's hard to express utilitarian cost/benefit calculus in the public square.

 

Yet it's worth noting one group of health care players that actively seeks out "hard cases." And who are those guys who perform in it? The pharmaceutical companies, that's who. The drug makers, it could be said, offer "inverse selection." That is, they don't want to drive away sick patients; they want to cure them, or at least treat them.

 

As an aside, one might add that in a monopoly environment, drug companies might be inclined to offer drugs that allow only for maintenance in cases of chronic illness, not actual remedies. But history shows that in a competitive environment, at least one firm always finds it advantageous to offer a superior product when possible, i.e. an outright cure.

 

Of course, there's a catch: the drug manufacturers don't want to give away their product for free. They are willing to tackle any disease, spending billions of dollars in the process, but only if they can see the solid chance of a profitable return on their investment, however many years in the future.

 

Yet government bureaucracies, as the Guardian article reminds us -- even those bureaucracies within something called a "health service" -- don't display such lengthy time horizons about public health.

 

But now comes the crunch -- and it's biting down, even now, on potential treatments and cures. Advocates of an NHS for America are scarce, but advocates of expanding the government's role in health care are abundant. For a long time now, both federal and state governments have been muscling down drug prices. The argument is always the same: drugs cost too much, so make them cheaper. There's no way to know how much past government action has served to restrain drug R&D; that's one of the problems of government regulation. What's never seen is what never was created.

 

The next phrase in what can be called, in deference to Friedman, "a free lunch of drugs," is the effort to legalize the importation of drugs from countries that have British-style systems of their own, such as Canada. More detailed examinations of the legislation can be found here. But in this survey of lessons to be learned from foreign health care systems, suffice it to say that the Canadian system is another example of pushme-pullyu. That is, health care is cheap, unless one counts waiting for a year or two as a cost.

 

Meanwhile, in the U.S., all these negative exemplars notwithstanding, the domestic political system is grinding toward Pharma-geddon. The Republican-controlled House voted on an importation provision in July; now it awaits action in the Republican-controlled Senate. And then, of course, it would need to be signed into law by a Republican president. Which is to say, there's a decent possibility that even the ostensibly principled free-market party might sell out its beliefs for a mess of votes.

 

A cynic would say that in the long run, national health planners have an interest in suppressing new drugs. After all, pharmaceuticals that cost billions to develop in the lab tend to be expensive at the pharmacy. So arguments as to why the drug companies should be allowed to continue to develop expensive, efficacious treatments are destined to fall on deaf bureaucratic ears.

 

In which case, that's all the more reason for ordinary Americans to speak up on behalf of their own healthy future. Because otherwise, one way or another, by political hook or bureaucratic hook, Americans are going to end up with a system like the one here. That is, a pushme-pullyu system that's a delight to fantasize about, but horrible to inhabit.

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Nothing is free in this world,the socialist doctrine is never populist, never a free lunch. Socialism is a lead for nepotism and the most relentless corruption of the political class.

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