Friday, January 26, 2018

Massive Violence, Widespread Death, and the History of Inexorable Inequality

Walter Scheidel has an impressive list of titles.  At Stanford University he is the Dickason Professor in the Humanities, Professor of Classics and History, and a Kennedy-Grossman Fellow in Human Biology.  With his book, The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, he has produced a scholarly work consistent with expectations for someone so highly regarded.  Acknowledging inspiration from the work of the economists Branco Milanovic and Tomas Piketty and their collaborators, he wished to apply the perspective of an historian to the lessons to be learned from studying economic inequality from humanity’s earliest times up to the present.  The conclusions Scheidel draws from his study are not very encouraging, and he suggests that the future is likely to be rather bleak as well.

Scheidel tells us the evidence suggests that as soon as it was possible to acquire more sustenance than was necessary for daily needs, the unequal accumulation of that surplus would begin.  Further, the larger the surplus, the greater the degree of inequality.  That should surprise no one.  The disturbing part is his conclusion that only massive levels of violence and widespread death were capable of leveling that inequality significantly.  Peace and stability only served to increase inequality.

Scheidel finds four types of events throughout history that have proved capable of leveling inequality, at least for a time.  These would be rare occurrences because of the scale required.  They are not events one would wish to endure in order to attain greater equality.

“For thousands of years, civilization did not lend itself to peaceful equalization.  Across a wide range of societies and different levels of development, stability favored economic inequality.  This was as true of Pharaonic Egypt as it was of Victorian England, as true of the Roman Empire as of the United States….Four different kinds of violent ruptures have flattened inequality: mass mobilization warfare, transformative revolution, state failure, and lethal pandemics….Sometimes acting individually and sometimes in concert with one another, they produced outcomes that to contemporaries often seemed nothing short of apocalyptic.  Hundreds of millions perished in their wake.  And by the time the dust had settled, the gap between the haves and the have-nots had shrunk, sometimes dramatically.”

It has been only in recent years that states have been accumulating economic statistics that allow a straightforward evaluation of inequality, but scholars have been trying to deduce relevant information from archeological and other sources.  These efforts have provided Scheidel with enough information to support his conclusions.

He begins with early humans as hunter-gatherers.  This is not a way of life that is generally consistent with the accumulation of surpluses, but it is one in which hierarchies within group members are expected.  There is evidence from burial sites that suggests particular individuals were provided the trappings of either greater wealth or greater respect than others.

There was a long period in which hunter-gathering coexisted with the knowledge of how to cultivate crops and manage herds of animals, but it took thousands of years before the large-scale domestication of plants and animals became common.  One usually refers to the period when agriculture became the dominant mode of providing food as an advance in civilization.  Rather, it was an advance in the production of economic inequality.  Agriculture, along with the early formation of states, was the mechanism by which elites provided themselves with wealth and cheap labor.  It is no coincidence that grains were the cultivated crop of choice.  Grains delivered a crop that was clearly visible, would produce its yield at a known time, and it could be easily transported and stored.  Therefore, grain crops provided the elites with something they could easily extract from the people and land they controlled, and which they could use in trade for other goods.  It was wealth.

Agriculture was much more labor intensive than hunting and gathering, and thus required coercion on the part of the elites to acquire the workers they needed.  Slavery was common; the existing records indicate that much of the states’ activities involved trying to keep workers from escaping or raiding other states to capture more workers.  It would take a combination of climate change and population pressure to make agriculture a tolerable alternative to hunting and gathering.

These early states accumulated people and animals in unprecedented numbers.  This crowding provided the opportunity for diseases to develop and propagate.  It also allowed for the interchange of diseases between humans and animals, and invited pests such as rats and mice to coexist with humans.  It was a rather nasty period in our history.

It would be a long time before the concept of a state as an entity devoted to serving its citizens would take hold.  For most of history states were controlled by a small group of elites who could use the power of the state to enrich themselves.  That has not changed in modern times; the methods have merely become more subtle.  Power begets wealth and wealth begets power.  This is the formula that has associated periods of peace and stability with ever-increasing inequality.

“Rents from access to political power are not exclusive to low levels of development.  A recent study of dozens of super-rich entrepreneurs shows how they benefited from political connections, exploited loopholes in regulation, and took advantage of market imperfections.  In this respect, the difference between advanced democratic market economies and other types of states is a matter of degree.”

Scheidel discusses numerous examples of how the four types of “violent ruptures” contributed to the leveling of economic inequality.  Consider first the case of state failure.

“State failure was a powerful means of leveling because of the multiple ways it interfered with the enrichment of the ruling class….in premodern societies, elite wealth was primarily derived from two sources—the accumulation of resources through investment in productive assets or activities such as land, trade, and finance and predatory accumulation via state service, graft, and plunder.  Both income streams critically depended on the stability of the state: the former because state power provided a measure of protection for economic activity and the latter even more so for the simple reason that state institutions served as a vehicle for generating and allocating gains.”

In these cases, everyone might be diminished by state collapse, but the elite had much more to lose—and lose they did.  The best example is the fall of the Roman Empire.  State collapse does not serve as a viable path to a more equal society.

Lethal pandemics have also proved capable diminishing inequality, but in a not very satisfactory manner.  Any mechanism that kills a large fraction of available workers will produce an increase in the wages of those remaining.

“In premodern, agrarian societies, plagues leveled by changing the ratio of land to labor, lowering the value of the former (as documented by land prices and rents and the price of agricultural products) and raising that of the latter (in the form of higher real wages and lower tenancy rents).  This served to make landowners and employers less rich, and workers better off, than before, lowering inequality in both income and wealth.”

Consider the effects of the Black Plague which was caused by bacteria residing in fleas whose favorite hosts were rodents.  Once the population of rodent carriers was reduced, the fleas would look for human hosts.  The plague seems to have originated in the Gobi Desert around 1320 and gradually spread over much of the world.  It would come and do its damage then subside only to return again in cycles that persisted over several generations.  The extent of population loss was remarkable.

“By 1350 the plague had run its course in the Mediterranean, and by the following year it had abated all over Europe—if only for the time being.  Little would be gained by recounting the casualty numbers proffered by medieval witnesses who struggled to measure the immeasurable and often fell back on rounded or stereotypical figures.  Even so, the 23,840,000 plague deaths calculated for Pope Clement VI in 1351 need not be wide of the mark.  Modern estimates of overall losses range from 25 percent to 45 percent.  According to the latest reconstruction by Paolo Malanima, Europe’s population fell from 94 million in 1300 to 68 million in 1400, a drop of more than a quarter.  Attrition was most severe in England and Wales which may have lost almost half of their preplague population of close to 6 million and which did not reach preplague levels until the early eighteenth century, and in Italy where at least a third of the people perished.”

Scheidel’s survey of history shows that while war was frequent, most conflicts were basically elites battling other elites, doing little to affect the fundamental inequality that existed.

“Most wars did not have any systematic effect on the distribution of resources: although archaic forms of conflict that thrived on conquest and plunder were likely to enrich victorious elites and impoverish those on the losing side, less clear-cut endings failed to have predictable consequences.”

It would take the advent of modern, total war in the twentieth century to produce what Scheidel refers to as “mass mobilization warfare.”

“For war to level disparities in income and wealth, it needed to penetrate society as a whole, to mobilize people and resources on a scale that was often only feasible in modern nation-states.  This explains why the two world wars were among the greatest levelers in history.  The physical destruction wrought by industrial-scale warfare, confiscatory taxation, government intervention in the economy, inflation, disruption to global flows of goods and capital, and other factors all combined to wipe-out elites’ wealth and redistribute resources.”

Instances of “transformative revolutions” as sources of inequality leveling are scarce.  Scheidel finds only two examples: the communist revolutions in Russia and China.  Both succeeded because they utilized violence and its threat to alter society totally.  The net result was a leveling of inequality, but by destroying wealth rather than redistributing it.  Nearly everyone affected by these revolutions suffered harm, at least initially.

“The overwhelming majority of violent popular uprisings in history sought redress for specific grievances and were, equally overwhelmingly, unsuccessful.  More ambitious movements that succeeded both in seizing power and flattening the income and wealth distribution appeared only in the relatively recent past.  Much as in the case of war, intensity of effort was a critical variable….It was the sheer amount of violence that mattered most: just as the two world wars were the bloodiest wars in human history, so the most equalizing revolutions were among the bloodiest internal upheavals on record.  My comparative survey of revolts and revolutions confirms the central importance of large-scale violence as a means of leveling.”

Scheidel’s study concludes with the observation that while we are just a few generations removed from the most violent—and most successful—inequality leveling events in history, we appear to be well on our way into yet another extended period of stability and growing inequality.  If history is to be a guide, societies will not be able to deal with this trend using peaceful means, implying that large-scale violence may be the only recourse.  He finishes with this comment.

“If history is anything to go by, peaceful policy reform will prove unequal to the growing challenges ahead.  But what of the alternatives?  All of us who prize greater economic equality would do well to remember that with the rarest of exceptions, it was only ever brought forth in sorrow.  Be careful what you wish for.”

Is such a gloomy sentiment justified?  Consider Scheidel’s list of the factors that contributed to the leveling of inequality during and after World War II—the period referred to as The Great Compression.

“The physical destruction wrought by industrial-scale warfare, confiscatory taxation, government intervention in the economy, inflation, disruption to global flows of goods and capital, and other factors all combined to wipe-out elites’ wealth and redistribute resources.”

Except for industrial-scale warfare, all the other factors are policy changes made under extreme duress, of course, but undertaken by representative governments in search of solutions to problems.  Before we submit to inevitable gloom and doom we should go back and examine what occurred in the 30 years between the start of the first world war and the end on the second, and understand the subsequent policy decisions that produced The Great Compression.

We must start with the assumption that the inequality that seems inevitable in unconstrained human interactions is really just a failure of social policy.  If compression can happen once, it should be possible to make it happen again.

The interested reader might find the following article informative:

Wednesday, January 17, 2018

Electric Vehicles Are Coming, So Why Do We Need to Drill for More Oil?

The Trump administration has been supportive of further extraction of fossil fuels from the earth.  It recently announced that it would encourage exploration for oil off most of the US coastline, although Florida was provided an exception for suspiciously political reasons.  Does any of this make sense?  Ignore for the moment the climatological folly of burning the existing petroleum reserves.  Will there even be a market for all those new barrels of oil that might become available in ten years or so?  Conflated with news of oil exploration efforts are statements by both nations and automobile manufacturers that they are moving towards a not-too-distant future when gasoline burning vehicles will be the exception rather than the rule.  Several countries have announced an all-electric-vehicle future.  Does this suggest we could reach a peak in oil demand before long?

The Economist featured as the lead article a eulogy for the internal combustion engine, The death of the internal combustion engine, which featured this lede.

“It had a good run. But the end is in sight for the machine that changed the world.”

There are several evolving situations that bode ill for the currently constituted market for automobiles.  The first is the rise of hybrid and all-electric vehicles as viable alternatives to gasoline burners in terms of both cost and convenience.  Electric autos have been more expensive than the traditional competitors because of the cost of the batteries needed to provide sufficient range to be of interest.  And this has been so even though manufacturers have been selling their products at a loss in order to generate some market share.  That will soon no longer be the case.

“UBS, a bank, reckons the ‘total cost of ownership’ of an electric car will reach parity with a petrol one next year—albeit at a loss to its manufacturer. It optimistically predicts electric vehicles will make up 14% of global car sales by 2025, up from 1% today. Others have more modest forecasts, but are hurriedly revising them upwards as batteries get cheaper and better—the cost per kilowatt-hour has fallen from $1,000 in 2010 to $130-200 today.”

This projects more battery power in less volume and at lower cost.  Everyone is betting that battery technology will continue to improve in the coming years and the relative cost of electric vehicles will continue to fall.

Thus far, the public—at least in the United States—has been tepid in its enthusiasm for these models.  Even though the price has fallen, the infrastructure to support battery recharge is just nowhere near adequate.  However, auto producers find themselves in a bind and feel they must bet on improved infrastructure and a more enthused consumer base.  Pressure is coming from politicians to address climate change and pollution issues, and from the evolving market for automobiles.

“Charging car batteries from central power stations is more efficient than burning fuel in separate engines. Existing electric cars reduce carbon emissions by 54% compared with petrol-powered ones, according to America’s National Resources Defence Council. That figure will rise as electric cars become more efficient and grid-generation becomes greener. Local air pollution will fall, too. The World Health Organisation says that it is the single largest environmental health risk, with outdoor air pollution contributing to 3.7m deaths a year. One study found that car emissions kill 53,000 Americans each year, against 34,000 who die in traffic accidents.”

Tesla has provided a chilling example of how much easier it is to become a mass market competitor when producing electric vehicles rather than the more capital- and labor-intensive gasoline burners.

“But electrification has thrown the car industry into turmoil. Its best brands are founded on their engineering heritage—especially in Germany. Compared with existing vehicles, electric cars are much simpler and have fewer parts; they are more like computers on wheels. That means they need fewer people to assemble them and fewer subsidiary systems from specialist suppliers. Carworkers at factories that do not make electric cars are worried that they could be for the chop. With less to go wrong, the market for maintenance and spare parts will shrink. While today’s carmakers grapple with their costly legacy of old factories and swollen workforces, new entrants will be unencumbered. Premium brands may be able to stand out through styling and handling, but low-margin, mass-market carmakers will have to compete chiefly on cost.”

Changing technologies and evolving consumer attitudes towards owning automobiles suggest declining demand in the future.  Younger people seem to have far less interest in automobiles than their parents.  Ride-hailing services like Uber and Lyft have made getting from point A to point B much simpler than driving one’s own auto, and much cheaper than buying something that will spend most of its lifetime parked somewhere.  It is now expected that self-driving cars will also become a market factor in providing an alternative service that will limit personally owned vehicles.

“Assuming, of course, that people want to own cars at all. Electric propulsion, along with ride-hailing and self-driving technology, could mean that ownership is largely replaced by ‘transport as a service’, in which fleets of cars offer rides on demand. On the most extreme estimates, that could shrink the industry by as much as 90%.”

Car makers are being forced to invest in a future in which outcomes are highly unpredictable.  Paul Lienert penned an article for Reuters: Global carmakers to invest at least $90 billion in electric vehicles

Allana Petroff provided a summary of actions being taken by nations to force the switch to electric vehicles in These countries want to ditch gas and diesel cars

As of July, 2017, India (2030?), France (2040), Britain (2040), and Norway (2025) have expressed the intention to ban sales of new gas and diesel cars.  India’s target of 2030 is described as “aspirational”, but the others seem quite serious.  The British want all cars on the road in 2050 to be emissions free.  Norway plans on using incentives to facilitate the switch.  New cars have a tax of about 100% imposed on them.  That tax is waived for electric vehicles.  Electric vehicles and hybrids were already about 30% of all new cars purchased in Norway last year.

“Austria, China, Denmark, Germany, Ireland, Japan, the Netherlands, Portugal, Korea and Spain have set official targets for electric car sales.”

“China -- which buys more cars than any other country -- is also the largest electric car market. China accounts for more than 40% of the electric cars sold in the world and more than double the number sold in the U.S., according to the IEA.”

China has dreadful pollution problems and cannot stand a future in which every Chinese family is tooling around in a gas guzzler.  It would not be surprising for them to make a big move in the electric vehicle market.

But does all this mean that the demand for petroleum is going to decrease?  Light and heavy trucks are also a significant factor in petroleum demand.  It is not clear yet when or if those products will be electrified.  Air travel provides an even farther reach.  And petroleum byproducts provide a significant level of demand as well.  A McKinsey study provides some insight: Is peak oil demand in sight?

“The total demand for liquid hydrocarbons will play out as a tug of war between growth in the petrochemical sector and declining demand from passenger cars. Petrochemical feedstock will drive 70 percent of the growth in demand for liquid hydrocarbons through 2035. Demand for liquids, excluding chemicals, will peak and flatten by 2025 because of a decline in demand from light vehicles. The petrochemicals demand will drive the growth of light end products, a large share of which are not made from crude oil.”

Demand for petrochemicals is decreasing in many of the advanced countries, meaning any growth in demand will come from the developing nations.  The level of that growth will depend on overall economic growth, responses to pollution, and the penetration of recycling technologies and recycling legislation.  The demand for gasoline depends on how one views the growth in the number of electric vehicles.  McKinsey leans towards a future in which lower GDP growth is expected and a more rapid growth in the sales of electric vehicles is predicted.

“ McKinsey’s latest automotive consensus suggests that by 2030, electric vehicles (including hybrids and battery-powered plug-in vehicles) could represent close to 50 percent of new cars sold in China, the European Union, and the United States, and about 30 percent globally. Also, for the first time, our business-as-usual case includes autonomous-vehicle adoption and car sharing. If the market penetration of electric, autonomous, and shared vehicles accelerates, oil demand driven by light vehicles could be approximately 3 million barrels lower in 2035 than assumed in the business-as-usual case. Together, this accelerated adoption of light-vehicle technologies and the adjustment of plastics demand could reduce 2035 oil demand by nearly 6 million barrels per day. An important result is that oil demand will peak around 2030, at fewer than 100 million barrels per day in this scenario.”

So, there is at least one credible prediction that petroleum demand could peak as soon as 2030.  If this conclusion gains credibility, will oil companies be willing to invest in ever-harder to extract oil sources?  Will those with significant, easy-to-access sources begin to flood the market to extract as much income as possible from their reserves before falling demand drives prices lower?  Will consumers learn to love electric vehicles and be followed by trucking companies in electrifying their fleets?

Stay tuned.  The next few decades could be quite interesting, but not necessarily pleasant for all.

Monday, January 8, 2018

Nordic Societies and the Nordic Theory of Personal Freedom

The Nordic states include the Scandinavian nations of Sweden, Norway, and Denmark plus Iceland and Finland.  They all have similar philosophies with respect to the role of government in society.  To outsiders—especially those in the United States—these governments are thought of as being socialistic because they levy high taxes and provide a broad array of “cradle-to-grave” services that sap individual initiative by creating a dependency upon the “nanny” state.  These are all robustly capitalistic economies so the label of “socialist” is complete nonsense.  However, these states do use their tax revenues to provide free, or nearly free, services such as preschool childcare, education, healthcare, unemployment benefits, and pensions.  But what if the effect of all these services is not to damp individual initiative, but to promote it?  That is the contention made by Anu Partanen in her book The Nordic Theory of Everything: In Search of a Better Life.

Partanen, a journalist, is from Finland where she viewed the services provided to her as logical, natural, and very beneficial.  She moved to the United States following a romantic interest (it would be easier for an English-speaking Finnish woman to find work in the US than for an English-speaking man to find work in Finland).  She found it difficult and confusing to have to deal with acquiring all the services her former government had provided through the private sector in her new home.  Her book details this process and provides her comparisons between Finnish/Nordic ways and those of the United States.  Of particular interest are her comments on the differing concepts of individual freedom/liberty as viewed by her new and old homelands.

Many in the United States view liberty/freedom as the lack of restraints on what they might choose to do.  Government is viewed then as an agency which could interfere with your freedom by providing constraints.  From this perspective, government should play as little a role as possible.  However, by having little interference from government, the individual is left with the freedom to pay for his own education, pay for his own healthcare, and spend his life saving to educate his children and to survive the years in which he no longer can work for a living.

This so-called freedom, in fact, enmeshes individuals in a web of constraints imposed by family, friends, and employers.  Is a woman really free if she is unable to quit her unpleasant job because she would lose the healthcare provided by her employer; is she free when she must stay in an unhappy marriage because she is tied to her husband’s benefit plans at work; is she free if she must see her children grow up without the educational and social benefits available to wealthier families; is she free when she must ask her parents and friends for assistance in raising her children?  By limiting the role of government in providing services to individuals, the citizens of the United States have encumbered themselves with a host of other dependencies.

In Partanen’s view, society in the United States operates under an ancient paradigm that is inconsistent with a modern capitalist society.  The modern paradigm would include the notions that the most effective society is one where success is not determined by the income of one’s parents, where the choice of employment is not determined by power of an employer to grant or withhold healthcare benefits, where every child receives the same educational opportunity whether they were born to poor or to wealthy parents, and where one can pursue vocations of choice, not just the ones that promise a healthy income.  In such a society, people would have more freedom, not less.

“Indeed, what if the entire purpose of the state in the twenty-first century, as agreed upon and expressly stated by its citizens, was not to take more power away from people, but just the opposite: to push the modern values of freedom and independence even further, to provide the people with the logistical foundation for the most comprehensive form of individual liberty possible?  It is exactly this exceptional commitment to individualism that defines the Nordic social contract today.  And the results of this approach are plain to see from the Nordic region’s rankings in global surveys, not only in quality of life but in economic dynamism as well.”

“What really motivates….Nordic citizens to support their system isn’t altruism—no one is that selfless—but self-interest.  Nordic societies provide their citizens—all their citizens, and especially the middle class—with maximum autonomy from old-fashioned, traditional ties of dependency, which among other things ends up saving people a lot of money and heartache along with securing personal freedom….Nordic societies are, in fact, the most individualized societies on the face of the earth.”

Partanen lists some of the old-fashioned, traditional dependencies that detract from individual freedom.

“….the goal [of Nordic societies] has been to free the individual from all forms of dependency within the family and in civil society: the poor from charity, wives from husbands, adult children from parents, and elderly parents from their children.  The express purpose of this freedom is to allow all those human relationships to be unencumbered by ulterior motives and needs, and thus to be entirely free, completely authentic, and driven purely by love.”

Partenan refers to what she calls the Nordic theory of love.

“The core idea is that authentic love and friendship are possible only between individuals who are independent and equal.”

Let us pursue the consequences of this theory of love.

Two individuals who are attracted to each other may decide to marry or not.  It makes little difference financially; each person will have their own source of income and file their taxes separately.  If they decide to have a child, both parents will be provided, by law, with generous family leave and be required to make use of it.  As a practical matter, the mother will accept the greater burden early in the infant’s life, but the father must also take off time from work to ensure that both parents will suffer any consequences that might ensue from being away from the workplace for a significant amount of time.  The Nordic states are said to be the most female-friendly in the world.

When both parents are ready to return to work full-time, childcare will be available at minimal cost.  The purpose for providing that state-supported service is enhanced economic efficiency in the workforce, but it is also the first step in producing independent citizens in society.  The goal is not to teach young boys and girls to learn to read and write at an early age, but to teach them how to operate as independent individuals—ones not totally dependent on their parents.  When the child goes to school, it will be to a state-supported institution like ones all the other children go to.  The curse of private education has not descended on the Nordic nations yet.  By the time the child reaches the age of eighteen he/she is expected to be totally independent, financially, form his/her parents—and the parents independent of him/her.  The parents cannot impose any constraint on the young adult’s vocational choices.  If he/she chooses to go to a university, tuition is free and low-cost loans are readily available to provide funds to cover living expenses.  These funds can be paid off in what is essentially a tax of a few percent on earnings.  When the parents grow old and too feeble to care for themselves their needs will be provided by the state.  Neither the parents nor the child have any dependency on the other except for whatever feelings of affection exist.

Partenan says that the Nordic theory of love works and provides strong family and social ties.

“All of this creates relationships that are much freer of resentments, guilt, and baggage.  In this sense then, the Nordic theory of love is an intimate philosophy for how empowered individuals can engage in personal relationships in the modern age.  Liberated from many of the more onerous financial and logistical obligations, we can base our relationships with family, friends, and loved ones more on pure human connection.  We are also freer to express our true feelings in our relationships with others.”

Partanen provides us with these words of advice.

“Seen from a Nordic perspective, the United States is stuck in a conflict, but it’s not the conflict between liberals and conservatives, or between Democrats and Republicans, and it’s not the old debate about bigger government versus smaller government.  It’s the conflict between the past and the future.”

There is no law against learning from others.  The services provided in Nordic countries are a lot cheaper than one would think.  And the Nordic middle classes seem to have plenty of money left over to spend on those five- and six-week paid vacations they are given each year.

The interested reader might find the following articles informative:

Why Swedish College Students Are Happily in Debt

Scandinavia and Gender Equality

Taxation, Redistribution, and Social Insurance

The Creation of the Middle Class

Tuesday, January 2, 2018

Opioid Addictions and Deaths: How to Punish Wealthy Pharmaceutical Companies

The current epidemic of opioid use has been compared as a societal problem to that of cigarette smoking.  While the health issues with each type of product are not identical, the issues to society are quite similar.  Both lead to addiction and the need for chronic use, both result in poor health outcomes, and both can cause death—sooner or later.  Cigarettes and opioids were both produced by companies that were aware of the dangers inherent in their products, yet chose to market them as being safe.  The marketing included lies, deceptions, and bribery.  Both products imposed health-related costs on society as well as diminishing productivity throughout our economy.  The tobacco companies were brought to heel eventually and agreed to change the way they did business in a nation-wide, industry-wide agreement to compensate states for the damage done and provide funds to discourage the smoking habit in the future.  The settlement included an agreement to provide $246 billion for health-cost compensation and to fund anti-smoking efforts.

The damage being done by opioid marketing and distribution is approaching that of smoking in scale.  More on the drug companies role in pushing opioids for general purpose pain relief can be found in Opioids: How Many People Must a Pharmaceutical Company Kill Before It Becomes a Crime?  This suggests that it is time for a similar approach to be taken in dealing with the pharmaceutical companies that are responsible for the crisis.  An article in Bloomberg-Businessweek by Esmé E Deprez and Paul Barrett titled The Lawyer Who Beat Big Tobacco Takes On the Opioid Industry provides background on the issue.

The authors provide the state of Ohio as an example of why opioid use should be considered an epidemic requiring drastic action.

“In 2012 prescriptions reached a peak, 793 opioid doses, according to state statistics—enough to medicate every resident with 68 pills apiece.  Half of the state’s foster-care population is made up of children with opioid-addicted parents, and the rate of babies born addicted to opioids grew almost eightfold from 2006 to 2015.  In 2014, Ohio Attorney General Mike DeWine, a Republican, began considering litigation.”

“Filed in May in state court, Ohio’s suit accuses drugmakers of ‘borrowing a page from Big Tobacco’s playbook’ by concealing addiction risks.  According to the state, Purdue, Teva Pharmaceutical Industries, Janssen, Endo, and Allergan invested millions to change attitudes about opioid prescribing.  Janssen distributed a patient education guide calling opioid addiction a ‘myth,’ for example, while Endo advertised that an abuse-deterrent reformulation of one of its most popular opioids, Opana ER, made it crush resistant, despite its own studies disproving the claim.  From 2001 through 2015, Purdue hosted the website which promoted ‘the notion that if a patient’s doctor does not prescribe what, in a patient’s view, is a sufficient dosage of opioids, he or she should find another doctor who will’.”

“Ohio accuses the companies of creating a public nuisance, violating state laws against unfair sales practices, and committing Medicare fraud by spurring unnecessary prescriptions that the state reimbursed.  The conduct dates to at least 1996 and continues through the present, says Jonathan Blanton, who heads the AG’s consumer protection unit.  The companies, DeWine says, have reaped unjust profits while devastating communities and fueling a heroin resurgence.”

One of the perversities of medically prescribed opioid addiction is that the product is not cheap and any attempts to limit access to it drives up the price further.  The wealthy can continue to feed their habits by just paying more for pills, while the less-well-off find it cheaper and easier to feed their habit by turning to the illegal drug of heroin.  The profits then go to the illegal drug syndicates who seem to use similar marketing methods to those of pharmaceutical companies.

Ohio sought assistance in their litigation from Mike Moore who, as Mississippi Attorney General (1988-2004), led the charge that brought down the tobacco companies.

“In 1994, using an untested and widely derided legal strategy, he became the first state AG to sue tobacco companies for lying about nicotine addiction and hold them accountable for sick smokers’ health-care costs.  A Democrat, he marshaled AGs from around the country along with private plaintiff’s lawyers who stood to reap massive fees.  He went on to negotiate the largest corporate legal settlement in U.S. history: a 50-state, $246 billion agreement that funds smoking cessation and prevention programs to this day.”

 Why were Moore and his allies successful in bringing about this agreement?  The main reason was purely economic.  The tobacco companies had enormous amounts of funds to devote to litigation, and if they should fail in their efforts, they could buy off an individual, or a single state, with a settlement.  But they didn’t have enough funds to buy off every litigant and every state claiming damage.

“On June 20, 1997, a coalition of state AGs stood behind a podium in the grand ballroom of the ANA Hotel in Washington to announce the culmination of a four-year effort.  They’d filed so many individual, expensive lawsuits that tobacco companies were cornered into negotiating a collective settlement instead of fighting each one separately.  The agreement punished the industry for past misconduct, created a fund to pay for tobacco-related medical costs, and banned using Joe Camel in advertisements.  ‘We wanted this industry to have to change the way they do business—and we have done that,’ a youthful Moore said to a roomful of journalists and cameras.”

Moore is today assisting in assembling a similar coalition with similar goals of changing the way the opioid producers do business and forcing them to pay compensation for the damage they have caused.  The authors refer to a meeting that occurred in July, 2017 at the same hotel (now a Fairmont).

“Aided by the lawyers in the room (and others, including high-profile and high-profiting alumni of the tobacco wars, such as Joe Rice and Steve Berman), 10 states and dozens of cities and counties have sued companies including Purdue Pharma, Endo, and Johnson & Johnson’s Janssen Pharmaceuticals—beginning in 2014 but mostly in the past few months.  (Forty state AGs have launched preliminary investigations as a way to gauge the viability of litigation.)  The suits allege that the companies triggered the opioid epidemic by minimizing the addiction and overdose risk of painkillers such as Oxycontin, Percocet, and Duragesic.  Opioids don’t just cause problems when they’re misused, the suits argue: They do so when used as directed, too.”

“The opioid epidemic cost the U.S. economy $78.5 billion in 2013, according to the U.S. Centers for Disease Control and Prevention, a quarter of which was paid by taxpayers through increased public costs for health care, criminal justice, and treatment.  The industry, the suits contend, should bear the financial burden of this wreckage.”

There is another reason why the pharmaceutical companies might be driven to a universal agreement besides the pain of large-scale litigation.  The constant legal battles will illuminate to the general public the crimes they committed in promoting opioids, and make clear that they were willing to let tens of thousands die from drug overdoses in order to earn a profit.  Moore anticipates a process of “vilification” of these companies that will put at risk their ability to do business in the current mode with respect to their entire suite of products.

“Moore is confident that the opioid industry will be driven to negotiate by the same reasons tobacco companies were: to end the demonization and obtain financial predictability.  ‘The vilification of this industry has not even begun yet,’ he says.  ‘In other words: This litigation will vilify them.  It won’t make the companies look like they are legitimate businesspeople.  It’ll make them look like they took advantage and made billions of dollars on lots of people who died from their products’.”

Let the vilification begin!

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