Wednesday, 14 March 2012

Newsnight's Blackhole

Last night's Newsnight, argued that, according to Treasury figures, even if the Government succeeded with its austerity measures, the UK would be bankrupt by around 2050. That would be because an ageing population, and shrinking number of young workers, would mean that it would be impossible to pay for all the additional costs of health and social care that this population would need. Of course its nonsense. Paul Mason should know better. Its nonsense for the same kinds of reasons that the Reverend Thomas Malthus was wrong when he put forward similar ideas at the beginning of the 19th Century.

It is wrong because it unjustifiably extrapolates from current data and trends into the distant future. Let's just look at a few of the reasons why that is wrong.

The main argument for these kind of scare stories is in relation to Health Spending. There are several reasons why the idea that Health spending will simply continue to spiral upwards is wrong.

One argument for putting forward this idea is that people are living longer. That is true, but does that necessarily mean that they will require more, and more expensive health care? Part of the reason that people are living longer, is because general levels of health have improved. If general levels of health improve further due to people quitting smoking, adopting healthier lifestyles, suffering less from physical industrial diseases and so on, then it is quite possible that demands on the Health Service could reduce rather than increase. They could live to a decent age, before dying quickly rather than their demise dragging out over a period of illness. It is often suggested that people are living longer, because of the introduction of the NHS, but numerous studies have shown that the main cause of improved health, and longer lifespans has in fact been general improvements in housing, food and other living and lifestyle changes. There is no reason that should not continue. In fact, one of the criticisms that Marxists have of the NHS is that it provides Health as a commodity, as something that is essentially sold to workers (even if it is paid for by a collective payment of taxes out of their wages and consumption), to repair their health, rather than that it addresses the causes of workers' ill health in the first place, whose origins lie in the nature of capitalist society. (See: Why The NHS Cannot Protect Our Health.) Once again, many studies show that a focus on “wellness”, on primary care and prevention are far more effective than the current focus on the provision of mega hospitals, with all of their very expensive equipment, specialists and so on. But, of course, the latter better meet the needs of Health bureaucrats seeking to develop their own empires, and of high paid Consultants, not to mention the Big Capitalists who make billions from providings medicines, medical equipment, computer systems and so on.

Moreover, as I have pointed out elsewhere, although there is now some talk of merging Health and Social Care, particularly in relation to Old People, very little currently exists in this respect. From my own experience, I know that very little is done, with elderly people in Residential and Care Homes, to ensure that they are kept physically and mentally active, which would be a good way of reducing their potential health problems. Still less is done in terms of preventive treatments through physiotherapy etc. to prevent problems arising. Some small steps are taking place in that regard in the joint ventures between the NHS and Local Authorities to create Retirement Villages, but the UK seems way behind even the US in such developments. In the US, a quite considerable number of people retire to places like Florida, where they can enjoy the health benefits of the climate. It would make sense, as part of the UK's membership of the EU, for elderly people here too, to be able to make similar arrangements, by moving to Spain, the South of France etc. Of course, many do, but here, unlike in the US, such a move is more likely to provoke the ire of the gutter press, complaining about people taking their benefit entitlements from the UK, whilst living elsewhere in the EU!

The other argument put forward is that because new discoveries and treatments are being developed all the time, not only can people be kept alive longer, but more things can be treated, and therefore, the demands for treatment keep expanding. But, this is no different from other parts of the economy. New commodities are being developed all the time, and new demand for these commodities is stimulated, but, at the same time, the time required, and the costs involved, in producing the older commodities, continues to fall. At any one time there will be far more existing commodities whose costs are falling than there are new commodities whose costs are high. In fact, it is because of these new discoveries that there is considerable hope that future costs will not continue to rise. Take genetics, and the possibilities it opens up for targeted treatment of a wide range of illnesses. Less than a decade ago, it looked like it would take decades to decode the human genome. But, the continued advances in computing power meant that, in fact it was accomplished in around 18 months, and now the genetic code of many viruses, cancers etc. is being unravelled on a daily basis. Not only has the cost of doing that tumbled, but the treatments it opens up, mean that the costs of these treatments is also likely to be slashed compared with the previous development of medicines whose effectiveness was not so great.

And, of course, that is not just true of medicines. The same rapid increases in productivity that have slashed the prices of many consumer goods mean that the prices of things such as CT and Body Scanners should be significantly reduced too, and used on a large scale, as part of a programme of preventative medicine, they could significantly reduce the instances of illness, and the costs of treating it. If workers themselves directly owned and controlled the Health Service it is likely that they would already be directing resources in this direction, rather than into the big vanity projects developed by the bureaucrats and top Consultants.

This ties into another idea of why Health costs do not, and should not, simply continue to rise. The Health Service, like the Education System, was developed to meet the needs of Capital, for the reproduction of Labour Power. To do that it was developed along the same lines as Fordist mass production. Hospitals and Schools were established as large factories. Schools took in children at one end, and passed them along a conveyor belt until they came out at the other end as Proletarians, produced to operate as a cog in the Capitalist machine. Hospitals helped to ensure that these young workers were brought into the world at least cost, reducing the costs to Capital that previously arose from Infant and Child Mortality, and then acted to repair those workers when they were damaged.

These kinds of mass production were efficient up to a point, but for the same reasons that Fordism came up against limits around 30 years ago, so its application to the provision of Health and other services has met similar limits. Capital searched around for solutions to its problem in relation to other aspects of consumer goods production, and came up with a series of answers. It reduced functions down to core operations, farming out other activities to a range of external suppliers; new technology and robotisation made it possible to replace the conveyor belt with more modular forms of production based around work groups, and flexible specialisation. The same “neo-fordist” solutions have been applied to other service industries, such as Banking, they are now, as Aglietta argued, likely to be introduced into the provision of Health, Social Care, Education etc. and as with its application elsewhere, it is likely to result in an explosion of increased choice, and reduction in costs.

Similarly, the kinds of processes that led to skilled jobs being replaced by machines elsewhere can be introduced. Computer Expert Systems, can for example, replace expensive Consultants diagnosis. In fact, a Computer system is likely to be able to have a database of possible illnesses far greater than any medical professional can store in their head, and be able to simply match symptoms with causes. The application of other technology is already allowing medical specialists to provide their services over long distances, via the Internet and teleconferencing. The development of computing power, and the advance in mobile technology means that everyone could now be monitored 24 hours a day via small implants, or by a mobile device embedded in a graphene strip used as a multi-functional device on the wrist, picking up signs of any problems - in the same way that computer chips in cars now monitor for any defects and report them - and notifying the appropriate medical services instantly.  In the same way that robots are able to replace skilled workers in many areas of manufacture, so surgical robots will be able to undertake many surgical tasks to a far greater degree of precision and consistency than any human.

Finally, we are only just beginning to see the revolutionary transformation of healthcare that the combination of computing power with biology, chemistry and genetics is about to bring about. That applies over a huge range of areas, from the ability to generate replacement organs via stem cells, to the use of new materials being made possible through nanotechnology, to the introduction of new drug delivery systems. In effect, Healthcare is still at the stage of the Model T Ford, and as happened with motor car production, the period ahead is likely to see not just a vast and rapid transformation of quantity and quality of what is available, but a massive reduction in the costs of what is provided.

But, in part these same factors are the other side of what is wrong with the argument put forward by Newsnight. As I've argued in the past, The Big Pensions Lie, the argument that workers have to work longer because they are living longer is a myth, because workers' productivity has increased hugely since the time that Pensions were first introduced, and in fact, even just since WWII. That means that fewer workers are needed to produce the goods and services consumed by those who have retired. We can easily allow people to retire earlier, and enjoy a higher living standard, even with a smaller working population to support them. The reason Capital seeks to make people work longer is because a smaller working population, means it has to pay higher wages, and, therefore, accept lower profits.

But, although productivity has risen sharply, the truth is that the UK economy, even during the period of the Post War Boom has not performed as well as it could have done. Rather like the US, during the 1980's, when much manufacturing went to China and other parts of Asia, Capital, instead of moving into high value areas of production, went into retailing, and into other forms of services. As a consequence productivity did not rise as much as it could have done. But, with the Financial Meltdown, and its aftermath, that model of the economy based around continually expanding retail outlets is no longer possible. Capital will be forced to restructure in these economies, or be destroyed. Assuming the latter is avoided, then the UK economy could see rises in productivity far in excess of what it has experienced since WWII, and that will finance the costs of the Welfare State, and a rising old population.

And, although I have argued that there is no need for workers to have to retire later, the chances are that as people live longer, they may CHOOSE to undertake work of some form or another. Many of the people I worked with, who took early retirement, from the Council, during the 1990's, topped up their pensions by working a few hours a week at B&Q, and other such jobs. Provided, employers are prepared to make it worth their while, and provided Governments do not tax away the benefits of doing so, many workers are likely to adopt such a strategy. And, of course, many retired workers already do work that is not counted in the economic data, because they work in the domestic sector, providing childcare etc. looking after grandchildren and so on.

Malthus made the mistake that he believed that the population would grow geometrically (2,4,8,16) whilst production would only expand arithmetically (2,4,6,8), and so population growth would outstrip the capacity to meet its needs, leading to starvation and so on. The same catastrophist ideas are put forward today by the environmentalists, who not only make the same warnings about resources running out, but who continually talk about the damage to the environment, but who do not seem to have noticed that in many old industrial countries the environment has been substantially improved in the last 50 years! Newsnight make the same mistake.

Malthus was wrong, as Marx pointed out, because like Ricardo, he assumed that agricultural production was already being conducted on the most fertile land, and because he failed to understand that the productiveness of the land itself could be transformed by the application of Capital to it. As I wrote some time ago, The Great Food Flim Flam, all of these ideas are false. As I set out in my blog Food, Population and development, back in 1953, Colin Clark showed that even with the technology available then it was possible to provide a standard of food consumption equal to that of the Netherlands for a global population of 12 billion. As I write there, that figure is likely to be around 30 billion today. The same argument applies in relation to providing for the needs of an ageing population.

1 comment:

Dave Timoney said...

Excellent analysis. I experienced the same utter incredulity watching the programme. I'd add a few points.

The source for the programme was the OBR Fiscal Sustainability Report that was published last July. Why wait till now to tell us we're doomed? Some might say it's preparation for the budget, but I suspect it's no coincidence this comes at a time (post Lib Dem conference weasel vote) when the Health and Social Care bill now looks certain to become law.

The OBR "assumes that projected increases in life expectancy will be spent in poor health – an expansion of morbidity" (pgs 77-78). As you note, increased longevity is due to better health, not mechnical means to artifically extend our natural lives, so this is counter-intuitive. In fact, it can be shown that increased longevity has the opposite effect.

Morbidity (i.e. instances of illness that impact on the NHS) will typically include a terminal illness. But you can only have one terminal illness. If (for argument sake), we assume the average current life has 6 major instances of illness, a 10% increase in longevity does not result in a 0.6 increase in illnesses even if morbidity increases proportionately. In fact, it must be (6-1)*0.1 = 0.5.

You can therefore state as a rule that the rate of increase in morbidity must be less than the rate of increase in longevity, ceteris paribus.

It's also worth noting that the "bust by 2050" (200% debt to GDP ratio) scenario Newsnight presented was the OBR "worse case", which assumed health wages increasing ahead of productivity every year. Their central projection was for a par increase, which resulted in a much lower 90% debt to GDP ratio by 2060. As you note, the extrapolation of past productivity is unreliable as the old Fordist model of general hospitals was labour-intensive with less scope for constant capital investment.

The modern NHS has huge scope for productivity gains through investment in new technology and preventative care. It is this prospect, plus demographic growth, that makes it attractive to capital.

Finally, the OBR expects future expenditure to be unsustainable not because it increases alone but because tax revenue stays largely flat. This highlights a major flaw in their analysis, which is that their brief allows them to extrapolate current tax policies but does not allow them to speculate on additional taxes or the implications of existing taxes declining. This is part of their Malthusian fallacy.

For example, they note that there will be less duty from alcohol and tobacco, but they don't allow that to feedback into better health and thus lower morbidity. They project an increase in inheritance tax, because there will be more old people, but they do not consider what impact a new mansion tax (let alone a land value tax) would have. They note that the cost of technology declines in absolute terms, so this will mean lower VAT on many goods, but they fail to consider that this in turn means more money to spend on other stuff that also attracts VAT.

I published more on this here.