The China Price in Healthcare

Tyler Cowen on healthcare cost control:

The politics of Medicare are such that Ryan’s idea, paying for care entirely through private plans, costs more. That’s not due to a market failure, but a political one. Congress likes to spend money; insurers, providers and beneficiaries like to receive it. Congress spends even more when it can satisfy those interests under the guise of a seemingly pro-market, pro-competitive program.

The way to turn the Ryan plan into genuine cost control is to offer people a choice of 5-10 “public options,” some of which involve converting future Medicare benefits into current or future cash.

A Modest Proposal: Turn New Orleans Into Mauritius

I’m a big fan of the small island of Mauritius off the coast of Madagascar. I have been writing about its role in China-Africa trade for several years now, and it has struck me as a place that will be increasingly important over the next few decades. So, naturally I was pleased to read Joseph Stiglitz’s praise of the island in a recent piece on Project Syndicate, though I disagree with him over the nature of Mauritius’s success and what our country can learn from the island.

First, the question is not whether we can afford to provide health care or education for all, or ensure widespread homeownership. If Mauritius can afford these things, America and Europe – which are several orders of magnitude richer – can, too. The question, rather, is how to organize society. Mauritians have chosen a path that leads to higher levels of social cohesion, welfare, and economic growth – and to a lower level of inequality.

Second, unlike many other small countries, Mauritius has decided that most military spending is a waste. The US need not go as far: just a fraction of the money that America spends on weapons that don’t work against enemies that don’t exist would go a long way toward creating a more humane society, including provision of health care and education to those who cannot afford them.

Third, Mauritius recognized that without natural resources, its people were its only asset.  Maybe that appreciation for its human resources is also what led Mauritius to realize that, particularly given the country’s potential religious, ethnic, and political differences – which some tried to exploit in order to induce it to remain a British colony – education for all was crucial to social unity. So was a strong commitment to democratic institutions and cooperation between workers, government, and employers – precisely the opposite of the kind of dissension and division being engendered by conservatives in the US today.

Outward Investment Flows and the Rise of Chinese Foreign Policy

The past 9 months may have been the most active ever for China’s foreign policy. Besides China’s recent support of an asset freeze, travel ban and arms embargo on the government of Muammar Qaddafi, and the country’s behind the scenes support for independence to South Sudan, China has recently taken steps to increase trade and investment along its most unstable borders, setting up a special economic zone in Kashgar, an economic trade zone along the border with North Korea, and a high speed rail corridor running through Myanmar and Laos.

Labor Markets: China and America

I’ve been only half following the hubbub over unionism in America, but it suddenly caught my attention today as a few of the defenders of unionism began attacking my prized belief in the value of outsourcing. Ezra Klein started the ruckus by arguing that unions provide a countervailing power to companies interested in outsourcing. Which Will Wilkinson pointed out is not really a good thing (starting with a quote from Gilles Saint-Paul):

Unions do not provide a countervailing force to the supposed power of big business. Whenever big business gets rents from monopoly power, unions often manage to share some of those rents (this explains why unions are more present in concentrated industries like automobiles, as opposed to, say, retail trade). This benefits the employees of big business, and it has indeed been shown that these employees enjoy higher wages and greater fringe benefits. But by raising labour costs it further adds to the harm done to consumers (and workers in the competitive sector) by the monopoly power of business. In addition to being too high because firms collude, the price is also too high because employees collude. Furthermore, the interests of the union and their employers are convergent whenever they deal with the outside world: both want to increase the revenue that the firm or the industry can extract through lobbying activities. To the extent that union leaders provide additional voices, unionisation adds to the lobbying power of an industry.

… this is why my brow furrowed when Mr Klein said unions “push back” on business models that aren’t environmentally sustainable. I think you’ll find that unionised coal miners are as unenthusiastic as the coal companies they work for about regulations that would restrict the growth of mining operations or reduce demand for coal.

However, Mr Klein is surely correct that unions are antagonists to businesses that seek to enlarge the cake in ways unlikely to be shared by domestic union workers. When unions successfully resist outsourcing, they hurt consumers, foreign workers, and the competitiveness of their firm, which eventually leads to domestic layoffs or reduced domestic job-creation.This is not the sort of countervailing we’re hoping for.

America Should Let Huawei Invest

Huawei has hit its second snag in an attempted M&A deal in America. In this case the US government aims to force them to divest their October purchase of server technology from a California firm called 3Leaf. The Committee on Foreign Investment did not comment on why the deal was rejected, but it is expected that, as in the case of Huawei’s attempted purchase of 3Com in 2008, that the committee was concerned about the Huawei founder’s membership in the People’s Liberation Army (PLA) 23 years ago.

China, Egypt and Democracy

Adam Minter, over on his blog, challenges journalists/columnists/bloggers, to not write about Chinese public opinion when discussing whether the country is at risk of an Egypt style uprising, but rather to discuss what institutions China has in place for “venting.” He makes a good point that discussions of what “most Chinese people want” are often completely subjective and heavily biased, but I think he too seems to misunderstand the problem.

It’s an interesting point that I think is relevant, and overlooked, in any discussion about Egypt and China: uprisings are what happens when people don’t have any other means of venting their dissatisfaction and anger. Now, I’m quite aware that uprisings sometimes happen in countries where there are elections, and I’m also aware that non-democratic societies have their own, sometimes effective, venting mechanisms. But I’m not going to argue that point. Instead, I’m going to suggest that instead of journalists/columnists/bloggers opining on whether the “average Chinese citizen” has an appetite for chaos and revolution, it might be better – if not more empirical – to step back and ask whether China has sufficient, robust institutions whereby average Chinese citizens can vent their frustrations, anger, and grievances. And I’m merely talking about the same kinds of grievances that might exist in a Democratic country: taxes, schools, roads, eminent domain. Feel free to take it further to, say, human rights. However you want to extend it, I think the answer – rigorously reported – might offer a more reasonable and empirical answer to whether or not China is at risk of an Egypt-style uprising.

Monetary Policy and Chinese Inflation

The discussion about inflation in China is getting a bit out of hand. Here’s Andy Xie’s most recent article where he describes 4.4% inflation in China as a prelude to hyper-inflation across the world:

I have argued before that the Fed’s QE will first stoke inflation in emerging economies and, via commodities and trade, back to the US.  Because the lag between the Fed’s QE and the US’s inflation is quite long, when the Fed sees inflation, it will be too late to stop.  The inflation in the pipeline will take years to work through.  The second decade of the 21st Century will look remarkably similar to the 1970s.

That’s Not How China Works

As the financial crisis has developed, a certain strand of China punditry has developed along with it. This punditry starts with the assumption that China runs an economic system called “state capitalism.” This economic system, recognizable from previous developing Asian states, pushes the economic structure in a certain direction through targeted subsidies, public works projects, and various macro-economic controls. The pundits usually go on to say why this means China will be the greatest country in the world or why China’s economy will collapse, and then draws parallels to America’s own debate over budget deficits, stimulus measures, state support for innovation, or general concerns over American power.

China: The 12th Five Year Plan Is Out and About

The 12th five-year plan was released last week for general review, and though its short on details there are a few specifics that we can pull out of it. Overall many of the goals look more likely to succeed than the 11th five-year plan, which saw consumption as a share of GDP decrease significantly despite the plan’s call for it to increase. Still, obstacles remain.