What parts of the American state are Socialist?

After the American Century         

One often hears American commentators, especially on the Right, complain about socialism in the same hysterical tone that people once denounced communism.

So let us look at this question of socialism in a common-sense way. There are some well-functioning parts of American society like the public library system and the fire departments that are actually socialistic. In each case a service is provided to everyone in the community, using tax dollars to pay the costs. Garbage removal is another example of something that is often organized by the state and provided to all citizens. The reasons for this are not hard to understand. All benefit if fires are put out and garbage does not rot in the streets. All citizens benefit when libraries provide books and information to everyone.

There are other obvious examples. The public schools are socialistic, providing and requiring education for all citizens. This is good for society as a whole, because educated people are able to contribute more skills and ideas, and highly educated societies tend to be more prosperous than less educated ones, all other things (such as natural resources) being equal. Indeed, a well educated country with few natural resources such as Singapore, is often more prosperous and has a lower crime rate than a poorly educated nation awash in resources, such as Nigeria.

When one begins to think along these lines, it is obvious that the Founding Fathers of the United States wanted all citizens to be literate and numerate, and that they believed an educated citizenry would be better able to choose leaders and to propose good ideas to their legislatures. Benjamin Franklin helped to found a great public library in Philadelphia. Thomas Jefferson's enormous personal library became the basis for the US Library of Congress, which may be used by all citizens. During the nineteenth century cities and towns all over the nation created public libraries that today are bastions of education, freedom of thought, and competitiveness.

The question becomes that of where to draw the line. How many services have such a beneficial effect on society that they really should be provided to citizens out of national self-interest?  Here are some examples that seem to be obviously a good investment:

A national weather service. Why? Citizens will not be caught by surprise by a tornado or ice storm, agriculture will be better conducted, and the country will have more lead time for national disasters.

A national park system. Why? Preserves for all citizens sublime and beautiful landscapes and historically important sites, such as battlefields, Native American ruins, and buildings, such as the homes of former Presidents. Americans invented the idea of having national parks, and preserved such places as Yellowstone, Yosemite, and the Grand Canyon for future generations.

A good road system. In theory, major roads might be privately owned, with tolls imposed for using them. But the US rejected that practice, with most roads open to all with no fee. Interestingly, Adam Smith argued in The Wealth of Nations that infrastructure such as roads were best left in the hands of the state. So even the patron saint of Capitalism accepted a bit of socialism, in this restricted sense.

It is fair to say that most Americans agree that these and some other government institutions are worthwhile, even if, in many respects, they might be understood to be socialistic. It is just that few Americans think of them in this way, because they have been around for a century or more. They are part of a Normal Rockwell vision of America.

The question is not whether the US state, local, and federal governments should supply any services, but rather how many. Health care remains in private hands, for example, even under Obamacare. Private insurance companies and private health providers remain at the heart of it. The government's role is to regulate, not to provide, services. The care-givers remain the same as before Obamacare was passed. This system is by no stretch of the imagination a socialistic one. Rather, the state requires that people be covered, just as it requires drivers to have a car that has been inspected and insured. Neither of these things is socialistic. To see what a socialized medical system looks like, go to Scandinavia, Germany, or France.

The US medical system produces terrific doctors who continue to make important advances in diagnosis, treatment, and cure.  But while the individual care providers are excellent, the system is not. Per person, the US medical system costs almost double what Northern Europeans (Germans, Dutch, Swedes, etc.)  pay for medical care. Yet on average Europeans are living longer - years longer - than Americans. It is simply silly to say that the US has nothing to learn from other countries in this area.

Rather than pretend that "socialism" is foreign to the United States, it would be useful to have a dialogue about where the limits of socialism ought to be. Should university tuition be paid for by the state (perhaps to be paid back later by graduates, once they have a job?)  Norwegians, Danes, and Germans pay no tuition, which helps to level the playing field and gives all talent a chance to develop. The Scandinavians and the Germans may have a better chance than Americans to move up in the world. US economic mobility is not what is used to be, and that is because the nation is less, not more, socialistic than it was when the great land grant colleges like the Universities of Michigan, Minnesota, Ohio, Iowa, Texas, and the like were set up during the nineteenth century.

Too often American politicians talk about socialism as if it were some terrible foreign disease. It is not. Socialism is as American as Thomas Jefferson and Benjamin Franklin. Whether it is a good idea has to be evaluated on a case by case basis. It is a good idea to have a national center for disease control, for example, but it might not be a good idea pay for cosmetic surgery with tax dollars. It is a good socialistic idea to make knowledge widely and freely available on the Internet, for example from the Library of Congress. But it is almost surely not a good idea to give every citizen their own automobile. National Public Radio seems to me a good idea, but here there is room for debate about whether its rather modest costs ought to be paid for through taxes or individual contributions. Case by case, the United States needs to consider how best to remain healthy, educated, and competitive. In some cases, socialism is a good idea. In others, not. Think about that the next time you see the firemen rushing by to put out a blaze.

Victory for a Compromise: Obama Care

After the American Century

It costs four times more more money to have a baby in the United States than it does in Germany or in Canada. 

Seen from outside the United States, the Supreme Court decision, which found the new American health system to be constitutional, is only a partial victory. For the law is a compromise that keeps competition and profit-making at the center of American health care. This means that the US will continue to spend billions of dollars supporting a vast health insurance industry and a huge number of tort lawyers. All those white-collar workers and all those buildings could be put to much better uses than making money out of human suffering and human need.

Doubtless there are some areas in which competition can improve medical care, but I doubt these benefits are worth all costs associated with a medical industry that is organized for profit, with all the legal fees, court battles over malpractice, and endless form-filling and record-keeping involved. 

It is much better, surely, to have a system like that in Scandinavia where all patient costs are automatically covered through taxation, and where hospitals compete to provide the best care, researchers compete for funds, and doctor's compete to be the best in their field.  This costs little more than half as much as the US system. Yet Scandinavians compare quite well with Americans when it comes to life expectancy, child morality rates, and other measures of well-being.

According to the 2012 Statistical Abstract of the United States. health expenditures rose as a percentage of American gross national product from 9% in 1990 to 16% in 2008. They do not give statistics for after that year, but surely no one is going to argue that medical costs have dropped since then. By comparison, in Denmark medical costs were 8.9% of GDP in 1990, almost exactly the same as in the US then, but since have only risen to 9.7% of GDP.  In Germany the corresponding figures are a rise for 8.4 to 10.5%, in the Netherlands from 7.4 to 9.9%, in Japan 6.5 to 8.1%.

In short, by 2008 Americans were spending one dollar in every six for medical care, while the Danes were only spending one out of every ten kroner, and Japanese were spending only one yen of every twelve.

How about the rest of the English-speaking world? In 2008 New Zealand used 9.9% of its GDP on health care, compared to 8.6% in Australia, 10.4% in Canada and 8.7% in Britain. In short, no nation on earth except the United States uses anywhere near 16% of its GDP on health care. The closest "competitor" was France, at 11.2%.

Americans have made progress with their new health system, which requires all citizens to carry medical insurance and makes certain that they can buy affordable coverage. But it is still an expensive and inefficient system compared to what already exists in the rest of the developed world. 

Health costs for the typical American family doubled from 2011 to 2011. President Obama was right to see that such galloping growth is unsustainable, and the new system he has put into place should stop costs from rising so fast. But Americans need to develop a medical system that can reduce costs to levels common in other advanced industrial nations.Even with Obamacare, the US system is behind the competition.

Danish and American Medical Systems, a Basic Comparison

After the American Century 

Americans often hear that the Obama medical plan is socialistic. It is not, as anyone living in France, Germany, England, Holland, or the Nordic countries knows. The fundamental difference can be stated quickly and easily. In Europe, taxes pay for medical care, and you do not need to buy insurance. All residents have a card that they show when visiting a hospital or doctor, and they do not pay anything for their treatment. Furthermore, Europeans live longer than Americans.

Americans have to pay for insurance to avoid paying medical bills. Even so most  policies have rather large "deductables." Often the pateint must pay the first $500 or $1000 or more before the coverage kicks in. There are situations where the insurance company refuses to pay, for whatever reason. And of course there are lots of forms to fill out.

Having experienced the Danish and the British systems first hand, I can say that one of the great things about them is that the patient does not have to fill out forms, save receipts, make copies, or anything like that. You show up, get cared for, and go home. The only administration fromteh patient's point of view  is a simple swipe of a card. That is a socialist system.

What Americans now have is not socialism, but a hybrid system. The health care is still often private, private insurance companies get their hands on a lot of the money that flows through the system, and patients still have to pay quite a bit, by European standards. The Americans have largely private delivery of service, mostly private insurance, and the whole thing costs almost twice as much per person as in Europe.  Europeans have largely public delivery of service and only supplemental private insurance, but not so many people have that. I do not have private insurance for example, and even if I did have such a policy it would not cover the really big operations, which are almost all done in the public hospitals, which alone have the facilities and the research-based expertise. 

Which system is better? In terms of cost, the Americans pay a great deal more, overall, and yet millions of people have not had coverage until recently, and all must buy health insurance.  In the Nordic countries, everyone is covered and the total cost per capita is much lower. In Denmark, Sweden, Germany and France the annual costs (2008) were in each case close to about $3750 per capita. In the same year, according to the Kaiser Family Foundation, the US was spending twice as much, or $7500 per person. Partly this is because in Europe malpractice suits are relatively rare and pay infinitely less than in the US. Tthis in turn means that there is none of that expensive malpractice insurance. I do not mean to say Danish doctors never make mistakes, but the system automatically covers the costs of mistakes that can be rectified, so no one sues to get back extra medical costs, though they may sue for mistakes that cannot be corrected and fatal errors.

In terms of life expectancy, Danes live on average about four months longer than Americans (78.8 vs. 78.5 years). The results are even better in Germany (80.2), France (81.5), and England (80.2). Perhaps Americans should look more closely at Canada, where life expectancy is 81.5, fully three years longer than in the US. (All of these statistics come from the CIA World Factbook.) Putting this another way, because care is universal in Canada and Europe, the poor are generally healthier than in the US, where they often have to go to emergency rooms for treatment and do not have a regular doctor.

In both the UK and Denmark I know from personal experience that I can choose my own doctor, and I also have the right to change doctors if I want a different one. 

I am not going to say that the Nordic system is perfect, but it works well, and I have a bit of extra information, as my wife works in quality control at one of the Danish hospitals. 

For Americans who hate the Obama plan because it seems to rob them of their freedom, think of how free from worry you would be if medical care was a certainty, regardless of your wealth or whether you had a job or not. From Europe, the problem with the Obama plan is that it does not go far enough, leaving so much in private hands and building so much profit-making into the system. Think how much less expensive it would be without all those insurance company salaries, lawyer fees, accountants, court cases, malpractice payments, etc.

So, where do I stand on the Obama plan? It is probably the best that Americans can do at this time, as a compromise between the warring factions. I see nothing wrong with compelling all drivers to have a license to drive, and by the same token see no reason why people should not be compelled to have at least basic health insurance. Yet, if entire states want to opt out of the system, I think that ought to be allowed, with the understanding that then ALL the citizens of that state would have to go over to the local alternative programs or lack thereof. Opting out would create expensive complexity, I fear, but the federal system could and perhaps should allow that choice. Many companies have employees in several states, and administering such variety will be a headache. Moreover, some families have breadwinners in more than one state, creating further possible complexities,

The bottom line: the European system is preferable, supplying care to all citizens and eliminating individual economic ruin for those who have severe illness or who are victims of nasty accidents. No doubt the best care is often the most expensive care, which only wealthy people can afford, in exclusive private hospitals. But very good care is possible at much lower cost than Americans have been accustomed to paying.

Final thought. Japan's average medical costs per person are fully $1000 less than in Europe, but its citizens live longer than in any other large industrial country: 83.9 years. That is more than 5 years longer than in the US. There is no correlation between how much money a nation spends on health care and how long its citizens live.

The REA and Obama's Health Care Plan

After the American Century


As debate rages in Washington about how to reform the health care system, it might be useful to look at another government program that stepped in to help people who were not being served by the private sector. The program I have in mind was created 75 years ago and has been a great success. Roosevelt called it the REA, or Rural Electrification Administration.

How is this like heath care? Back in c. 1935 roughly 90% of rural people lacked electricity. Private power companies said it cost too much to build lines out into sparsely settled areas, and farmers often did not use that much electricity even if they had it. As with health care, 25% or more of the population lacked an essential service.

Whenever a politician suggested that government step in to provide this service instead, however, he or she was immediately denounced as a socialist or a communist or an unrealistic dreamer. But the REA was created, providing power to rural people, which had important health implications. With electricity, dairy farms could become more hygienic, for example, and all farms could have refrigerators, washing machines, and hot running water. Farmers also had fewer accidents, because they did not have to manoeuvre in the dark with a lantern in one hand. But to keep the focus on the fiscal bottom line, the rural electrical cooperatives as a group proved to be a good investment. The loans need to start them up were paid back, and the rural coops have not become a permanent burden on the federal government, not least because farmers gradually used more electricity.

The analogy with health care admittedly is not perfect, but note that the Obama idea of creating a public health care option is not so different from the idea of creating a public electricity option. In each case the plan is that people will pay their own way, but without unnecessary costs. Indeed, one reason that President Franklin Roosevelt wanted the REA (and also the Tennessee Valley Authority) was to find out what electricity really ought to cost. The public programs became a yardstick, measuring real costs for service, disciplining the private companies.

One more important point. When the REA was created, the Republican Party denounced it as socialistic, and predicted the demise of private power companies. In fact, the private power companies continued to grow all through the Great Depression, and today they still control the vast majority of US power generation and transmission. The REA has also prospered, and there really is not much debate about this any more.

Similarly, if Obama convinces Congress to create a basic health plan that any American can choose to have, private health care will continue to flourish. There will always be people who want to buy more elaborate care in fancier waiting rooms with less waiting time. But the point is that, as with the REA, everyone will have access to an essential service.

Just as the REA made farmers healthier and more productive, universal health care in the United States will make the nation healthier and more productive. The Obama plan could also save a good deal of money. The US consumer pays far more per capita for health care than the Dane or or the Dutch or the Norwegian or the German consumer. Almost twice as much, actually.

The Nurse's Strike and The Hypocritical Danish State

After the American Century
[The murses strike ended shortly after I wrote this column. I doubt there was any cause and effect! The nurses scracely got any more than the original offer.]

The nurses in Denmark have now been on strike for 8 weeks. That is a long time for a nation's health care to be cut to the bone. During this time a skeleton crew of nurses have always been on duty to deal with acute cases, but more than 325,000 treatments and operations have not taken place. The waiting list grows every day.

Why has no agreement been possible? The difference between the two parties is not so large: 2.2%, spread over three years. The Danish regions, who fund hospitals, have just saved one sixth of a year's wages, because they have not been paying the nurses all this time. Saving 16% of the wages already this year ought to make it possible, with ease, to give the nurses an 0.75% addition during each of the following three years. In fact, the regional governments would seem to be coming out so far ahead after not paying wages for two months, that the millions saved could be put into an account at 5% interest that would perpetually generate more than 0.75%. In other words, the strike itself has created a fund that can pay for one third of the funds required to meet the nurses demands. The real difference left, then, is only 1.5%. If the nurses stay on strike for four more months, then they will have saved the state so much money that their salary increase would cost nothing at all. Ah, but the patients would suffer.

There is one other demand that the nurses have, which seems obviously fair and reasonable. This is that a commission be set up by the state to investigate whether nurses (most of them women) are being discriminated against in their salaries. Do men with the same level of education, who have jobs with the same level of responsibility, receive the same pay? The state's refusal to grant this demand is tantamount to an admission that such a commission will "discover" what most people already know: women are being discriminated against. Of course, the state certainly would not want to find that out, officially, because then they would have to do something about it.

Watching this strike is like seeing a car crash in slow motion. It is painful, it will end badly for most of the citizens, and it is an accident that is not inevitable but due to bad driving. The economic road conditions are excellent, as Denmark has a budget surplus, low unemployment, and a strongly positive balance of payments. There is an acute shortage of nurses in Denmark, however, because the largely female nursing staff leave for other jobs, notably in private hospitals, but also in completely different sectors of employment. They leave because the level of stress is high and the wages are not competitive. They leave because of the pressure to do extra work, to cover for the unfilled positions. And at least some leave because they do not like the way hospitals are run.

The Danish government is hypocritical in this matter, and responsible for putting the health system in peril in at least four ways.

First, the Danish government is rhetorically committed to giving women equal pay for equal work. They are also legally obligated to end discrimination. Refusing to set up a commission to study the matter is at the least immoral. Economic justice delayed is justice denied.

Second, they are strongly in favor of limiting immigration into Denmark, but nevertheless actively recruit foreign doctors and nurses to move to Denmark. Entire groups of people have been flown in from India to work in hospitals in Jutland, and last week the Danish Embassy held a special event to recruit German health professionals. There is money for expensive recruitment campaigns abroad, but not for trying to hold on to the nurses at home.

Third. One of chief claims of the current government (once) was that that they were actively reducing the waiting lists for operations. In fact, even before the strike these lists were not all being reduced enough to reach the government's proclaimed goals. This was not surprising, since there were thousands of unfilled jobs. There are not enough doctors and nurses. Now, however, the failure to get a grip on the waiting list problem can be blamed on the nurses, because they have been on strike. But the root of the problem is that there are not enough health care professionals. And that is the government's own fault.

Fourth. This is a liberal/conservative government that trumpets free markets. It is hypocritical to pretend that free markets do not affect wage levels. There are not enough nurses because the wages are too low. An honest and ideologically consistent liberal government would recognize that hospital workers exist in a labor market. Instead, they are pretending that the market can be ignored, and they have now angered what nurses they do have. In the next few years they can expect more of them to leave for other employment. Denying that free markets govern the health sector will lead to more severe problems in the future. The population is aging and the demand for care will increase, even as nurses flee the hospitals.

In short, the current Danish government, both at the regional and the national level, has shown itself to be discriminatory against women, unwilling to create a commission to deal with that problem, hypocritical about immigration, dishonest about its intentions to reduce waiting lists, and disloyal to its own liberal principles. Until they recognize that health care is not a budget line they can play with but rather a service that must be paid for in the marketplace, just so long will the Danish people suffer.

It seems that gender discrimination is so deeply ingrained in this government that its representatives are willing to violate their free market principles and literally let the citizenry die, rather than pay nurses what the market demonstrates they deserve.

The only thing more painful than the government's behavior is the spineless inactivity of the opposition. The Danish parliament is about to go on vacation, without solving this problem. effectively leaving the population unprotected. The vaunted safety net is all but gone, and they waste time and try the nation's patience with idiotic discussions of whether Muslim women can wear head scarves. Some of these women wearing scarves are nurses, but apparently they should be fired to make the hypocritical pseudo-liberal government happy.

The nurses will also soon go on vacation. But patients cannot send their endangered hearts, weak lungs, and weakened bones on vacation. They will continue to suffer and increasingly to die because the hypocritical Danish government is deeply sexist and without moral principles.

What Can Denmark Learn from the United States?

In my last blog I pointed to some areas where the United States might learn from Denmark. Now it is only fair to do the reverse: what can Denmark learn from the US? Quite a lot, actually. I want to point to four areas.

First, Danes have only a generation of recent experience in living with minorities from other cultures, and they have not done a good job of integrating them into their society. Refugees and immigrants have come to Denmark from more than 100 nations, but Danes speak of them as if they were a singe group, with few nuances. They speak of them collectively as "new Danes," which is code phrase that signals that these are people that are not really accepted as full members of society, even if they were born in the country and speak Danish as their first language. Politicians on the Danish right angrily demand that foreigners give up their own cultures and assimilate. They talk much like the anti-immigration leaders in the United States c. 1910. I personally know a lovely young women whose parents came to Denmark from Sri Lanka. She got an engineering education and speaks the language like a native - and Denmark is screaming for engineers - but nevertheless she never got a decent job offer inside the country. Instead, she has a terrific position in London. That is crazy, of course, but there are all too many examples of such discrimination and failed integration. The unemployment rate for "new Danes" is much higher than for the rest of the population. So, Danes should go to school to Canada and the US to see better models of how to welcome and integrate new citizens. The need is great, because Denmark has an unemployment rate that is now under 3%. Not only do they need to retain their own minorities, but they desperately want to recruit and then retain skilled people from abroad.

Second, Danes are losing some of their cultural heritage every year, particularly books and paintings, but also other important cultural objects. This is because of tax laws that do not encourage donations. In the United States, of course, donations are a tax write-off, so someone with a valuable painting can both be benevolent and also get full value for philanthropy. Another example is close to my heart. When a university professor retires in the US, he or she might well donate valuable books and collections to the library, again in exchange for a tax write-off. But in Denmark, no such rules apply. I know of one case of a man who had a valuable personal library, which almost was broken up and sold. Finally, the family did agree to sell it to the university for a fraction of its total worth. But in most cases, nothing of the sort happens. This would not matter so much if Danish libraries were well stocked. However, there is little tradition of building up good research libraries in Denmark, because this sort of thing is left to the State. But national governments, in my observation, are irregular in supporting libraries and museums. So, the Danish nation could benefit from changing the tax laws, because for a pittance they could preserve far more of their cultural heritage. The United States has some amazing libraries and museum collections built up by knowledgeable collectors. There is little monetary incentive for Danes to do the same.

Third, while I praised the Danish socialized medical system in my last Blog because it is free and works pretty well, it could be improved if it adopted a more proactive approach. In the US doctors give their patients an annual medical exam, and so can track their weight, blood pressure, and other vital indicators. Danish doctors only see a patient when something goes wrong. In other words, they wait, often until it is a bit late in the game. Preventive medicine would raise life expectancy, which currently is a bit lower than the US, and quite a bit lower than next door Sweden. I mention Sweden to indicate that this is not a problem with socialized medicine per se, but rather a specifically Danish problem.

Fourth, and finally for today, the Danes could learn from Americans how to meet new people. They are a rather shy lot, hanging back in the corner of the room if they find themselves in a group of strangers. In the US people are quite ready to mix it up at a cocktail party, the more the merrier. Danes feel most comfortable at a smaller gathering, preferably where they know everyone else in advance, and ideally where there is a seating plan. Spontaneity is not the Danish strong point, in other words. Most of my Danish students who take a term in the US are able to make this adjustment, so there is a chance that the country can and will open up a little.

If both nations have something to learn from the other, however, I am not advocating cultural homogeneity. Fortunately, in my view, the Danes are not becoming Americanized, but that is a subject for another blog.