tag:blogger.com,1999:blog-7820485130017459619.post419035508734121293..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: Reforming the Benefits SystemUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7820485130017459619.post-53400974210556505882008-08-19T03:32:00.000-07:002008-08-19T03:32:00.000-07:00Have you ever wondered why market fundamentalists ...Have you ever wondered why market fundamentalists are almost universally in favour of "open borders"? One answer is given by Milton Friedman, when he said that it is impossible to have both open borders and a welfare state. In what follows I will talk about the "welfare state" as encompassing child support, unemployment benefits and health care together, for reasons which I hope will be made clear.<BR/><BR/>The Chinese health care system is probably the most brutal I have ever come across anywhere in the world, and would make M.Friedman proud. Basically there is **no** guaranteed access to medical care. Literally. If you are involved in, say, a traffic accident, you will be left to die on the street, unless you are, or someone else (in case you are unconscious) is willing to guarantee payment for an ambulance to come and pick you up and take you to an A&E ward in hospital. Even if you manage to crawl to a hospital, you will not be allowed inside unless you pay a deposit toward the costs of your treatment. Same goes for any other form of medical service.<BR/><BR/>There are some mechanisms which mitigate the brutality of the system. Members of the government, police, army, fire brigade etc. have their own network of medical facilities which provide health care for them and their extended families. Employees of state-owned enterprises also have insurance coverage. Private enterprises often insure their employees. For permanent residents of cities such as Shanghai there are various voluntary municipal insurance schemes, which can cover a large part of the costs of treatment.<BR/><BR/>But what really prevents this from becoming some horrible Darwinian dystopia is the structure of Chinese society. To put it briefly, every Chinese individual operates within extremely complex and extended networks of family and friends. Membership in such networks carries with it very specific rights as well as duties. This structure is probably hundreds if not thousands of years old, and is totally internalized in the Chinese psyche. There is no analogue to such structures in modern Western societies. In times of crisis, an individual can draw upon the resources of his networks. The traditionally extremely high savings rate of the Chinese also contributes to the effectiveness of their networks. The networks can also be utilized for other purposes. I've seen a couple of cases in which a very large extended family put up a lot of money to finance the foreign education of one of its more promising children. Of course, the sacrifice of the group for that child is expected to be paid back in the future in some way (not necessarily in money). It is a group investment.<BR/><BR/>As Mark noted in one of his posts, this "structural" feature is a major contributor to the competitiveness of the Chinese economy. It is not just low labour costs. But to a sentimental Westerner like me, enough people visibly "fall through the cracks" to make the system really unsympathetic. The Chinese are immune to it - in their culture there are no universalist superstitions about the "brotherhood of man"; what counts is family and people within your network - everyone else is just a competitor for scarce resources. The people at the bottom of the pile (and believe me, their plight is often absolutely heart wrenching)are too weak to do anything about it (if they were, they wouldn't be at the bottom). This confers a measure of stability to the entire structure - enough people are covered in one way or another to prevent massive discontent.<BR/><BR/>Another feature of the Chinese system worth noting is that it is "self policing". Because all the links in the informal networks are personal, "free loaders" are immediately punished. This makes the networks efficient (in an economic sense).<BR/><BR/>For reasons which are obvious, the Chinese model is not transposable to western societies. My hunch (and it is only that) is that no welfare scheme is sustainable without some mechanisms for self policing to prevent abuse, and this self policing must come from society itself. In the past, things such as the social stigma associated with having children out of wedlock would prevent the massive abuse of welfare benefits for unwed mothers. In some societies, such as Japan, being unemployed is (or has been) an object of shame for the individual and his family. Some years ago, I saw ex-bankers working as taxi drivers in Tokyo, after the Japanese banking crash (they made terrible taxi drivers). I doubt whether I shall ever see a similar situation in London.<BR/><BR/>The other condition for a sustainable welfare system is what may be called "national solidarity", i.e. a willingness on the part of the more affluent parts of society to support the less affluent. This is something which is quite apparent in countries such as Germany.<BR/><BR/>Unfortunately, the trends in the development of Western societies lead us away, rather than toward conditions which would support a sustainable welfare system. Our societies are consistently atomized into selfish, pleasure-seeking "consumers". Traditional and moral restraints are dismantled, community bonds are eroded, any sense of communal or national responsibility is disappearing and so on. The situation is particularly bad in the UK, where traditional class divisions are augmented by the dogmas of "multiculturalism" and massive foreign immigration. But let us not go there...<BR/><BR/>P.S. Sorry for the recent volume of comments from me. I'm taking advantage of the fact that during the Olympics, the PRC has relaxed its internet censorship. In the past I found that blogger.com was often blocked, and posting comments via a proxy server was iffy at bestAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-56825032044391814732008-08-18T05:29:00.000-07:002008-08-18T05:29:00.000-07:00Hi Mark, A very interesting post which I find it h...Hi Mark, <BR/><BR/>A very interesting post which I find it hard to disagree with. But I do have one question: do you think that the UK's population is too high or too low?<BR/><BR/>I understood that until a few years ago in the UK, the population was actually falling, but this was reversed by encouraging immigration from central Europe. The situation is supposedly similar across Europe.<BR/><BR/>http://news.bbc.co.uk/1/hi/world/europe/4768644.stm<BR/><BR/>I can see that there would be a difference in the 'economic productivity' of children brought up by responsible, educated parents, and those of drug-addicted teenagers on run down estates, but most people seem to think that a falling population is a bad thing, economically.<BR/><BR/>I imagine that in a country with no perceived absolute safety net, and no apparent state encouragement to have children, it would be the most educated and responsible 'middle class' who would forego having a family.<BR/><BR/>Could it be that nature has been bypassed by the increasing availability of contraception, so we are in a relatively new situation for which many of the traditional economic theories might not apply?<BR/><BR/>So do you think your scheme might suffer from a tendency to reduce the size of the 'middle class' population? Could it be modified slightly to offer incentives to have children, but only if the parents were demonstrably unlikely to become unemployed, or is that, again, tampering with 'the market'?Anonymousnoreply@blogger.com