James K. Galbraith On The Minimum Wage

Galbraith demolishes many pillars of the conventional wisdom in his book The Predator State. One of his more interesting discussions centers on the effect of raising the minimum wage. The conventional wisdom would predict that the effect would be to eliminate jobs and raise the level of unemployment. Galbraith argues that the data indicate just the opposite. When the minimum wage is raised unemployment actually goes down. His explanation for why this happens is not totally convincing at first consideration. He argues that making employees more expensive to employers requires them to use their employees in a more efficient manner. In principle, this can be a win-win situation: the employee ends up with a more satisfying and more responsible job, and the employer reaps the benefit of greater productivity. This claim becomes more credible when Galbraith describes what is referred to as "The Scandinavian Model."

"The Scandinavian countries are the most egalitarian capitalist economies on earth. They have nearly universal unions, high minimum wages, and a strong welfare state. But as trade campaigners often neglect to acknowledge, they also are highly open. They practice free trade. Business there is free to import, export and outsource. Business there is free to hire and fire, change lines of business, and otherwise conduct itself as it sees fit.....There is, however, one thing you are not free to do: you are not free to cut your wages. You are not free to compete by going after cut rate workers, either native or immigrant. You are not free to undercut the union rate. You have to pay your workers at the established scale, and if you cannot do that and earn a profit, too bad for your business. The effect of this on business discipline is quite wonderful."

Given this environment the Scandinavian countries enjoy prosperous economies and usually among the lowest unemployment rates in Europe.

This approach ties into the overarching issue of whether our economy should be producing more highly skilled jobs worthy of a living wage, or reducing tasks to their minimal scale so that ever cheaper labor can be sought to perform them. More on that later.

Bad Aid: Why Aid Is Not Working and How There Is a Better Way For Africa by Dambisa Moyo

The author was born and raised in Zambia. Her education there was interrupted by political unrest, causing her to depart for the US where she received a scholarship to continue her education. She spent two years as a consultant at the World Bank in Washington DC, two years getting a Master’s degree at Harvard’s John F. Kennedy School Of Government, and four years getting a PhD in economics at Oxford. Subsequently, she worked for eight years at Goldman Sachs where her focus was on global economics and strategies. Given her background it is not too surprising that her solution to Africa’s economic and political problems is to rely on traditional, sound economic policies to foster growth. Her focus, of course, is on the nations of sub-

Saharan Africa. The aid under discussion is not the charitable aid or emergency aid provided in response to natural disasters, but the huge grants and loans that are made by countries and international organizations that can contribute large fractions of a nation’s governmental income. She makes compelling arguments that the aid that has been and is now being provided is not working. She goes further to claim that not only is aid not a solution, aid is the problem. The support for this latter claim is less obvious, but, after a series of variations on aid policies over the last 60 years that were intended to make things better and failed, the circumstantial evidence is compelling. The book is structured to show that aid is not working, illustrate why it is not working, and to provide a better path to economic and political self-sufficiency.

This is a slight book of about 150 pages, yet it does provide a number of interesting insights. It is quite readable and the economics is not too dense. There is a short but excellent forward by Niall Ferguson, the conservative economic historian, that provides a good summary of the author’s conclusions. These few pages are worth reading for those who are interested in the subject but do not wish to commit to the entire volume.

The first part of the book is devoted to describing the history of aid to Africa and the effect it has had on the African nations. It is not difficult to believe that there is something inherently wrong when one is continually bombarded with tales of corruption, civil strife, and poverty. Moyo provides some quantitative data that provides a more relevant context for judging the state of affairs.

"Africa’s real per capita income today is lower than in the 1970s, leaving many African countries at least as poor as they were 40 years ago."

"Adult literacy across most African countries has plummeted below pre-1980 levels."

"A World Bank study found that as much as 85 per cent of aid flows were used for purposes other than that for which they were initially intended, very often diverted to unproductive, if not grotesque ventures."

"....although not as extreme as Gambia or Ethiopia where 97 per cent of the government’s budget is attributed to foreign aid."

Moyo has the task of explaining why other countries have received aid, profited from it, and moved on to self-sufficiency, while many African nations have fallen into a cycle of seemingly endless aid dependency. The answer presented is that the examples where aid produced positive results were often in countries with a history of strong civil institutions, and the aid was targeted and time-limited and small compared to the overall size of the economy. The success of the Marshall Plan in Europe is the most noteworthy example. None of these preconditions existed in most African states. When aid money began flowing, most African countries were European constructs just emerging from colonialism and beset by an array of geographic, historical, cultural, tribal and institutional issues. The author does not allow these initial problems to excuse the current unsatisfactory state of affairs. She proceeds to demonstrate how the influx of large amounts of "free’ money actually inhibited the establishment of healthy governments and economies. Unfortunately, the explanation involves a confluence of factors that are not easily summarized, although this paragraph is a good attempt.

"Foreign aid props up corrupt governments—providing them with freely usable cash. These corrupt governments interfere with the rule of law, the establishment of transparent civil institutions and the protection of civil liberties, making both domestic and foreign investment in poor countries unattractive. Greater opacity and fewer investments reduce economic growth, which leads to fewer job opportunities and increasing poverty levels. In response to growing poverty, donors give more aid, which continues the downward spiral of poverty."

The author provides a number of interesting insights that provide a basis for this summary statement. For example:

"One of the features of the Cold War was the West’s ability and eagerness to support, bankroll and prop up a swathe of pathological and downright dangerous dictators. From Idi Amin in the east to Mobuto Sese Seko in the west, from Ethiopia’s Mengistu to liberia’s Samuel Doe, the competition among these leaders to be more brutal to their people, more spendthrift, more indifferent to their country’s needs than their neighbors were, was matched only by the willingness of international donors to give them the money to realize their dreams."

She provides some thoughts on how aid can help slide a country into corruption and tyranny.

"In most functioning and healthy economies, the middle class pays taxes in return for government accountability. Foreign aid short circuits this link. Because the government’s financial dependence on it citizens has been reduced it owes its people nothing."

".... in a world of aid dependency, poor country’s governments lose the need to pursue tax revenues. Less taxation might sound good, but the absence of taxation leads to a breakdown in natural checks and balances between the government and its people"

"Africa is the most conflict ridden region of the world.....There are three fundamental truths about conflicts today: they are mostly borne out of competition for control of resources; they are predominately a feature of poorer economies; and they are increasingly internal conflicts......The prospect of seizing power and gaining access to unlimited aid wealth is irresistible."

Moyo puts the emphasis placed on encouraging democratic governments in an interesting light.

"What is clear is that democracy is not the prerequisite for economic growth that aid proponents maintain. On the contrary, it is economic growth that is a prerequisite for democracy.........In What Makes Democracies Endure Przeworski et. al. offer this fascinating insight—‘a democracy can be expected to last an average of about 8.5 years in a country with a per capita income of less that $1000 per annum, 16 years in one with income between $1000 and $2000, 33 years between $2000 and $4000, and 100 years between $4000 and $6000....above $6000 democracies are impregnable...’ It is the economy, stupid!"

If aid is so ineffective why continue to provide it? Again Moyo provides an interesting perspective.

"There is simply a pressure to lend. The World Bank employs 10,000 people, the IMF over 2500; add another 5000 for the other UN agencies; add to that the employees of at least 25,000 registered NGOs, private charities and the army of government aid agencies: taken together about 500,000 people, the population of Swaziland.....they are all in the business of aid.....their livelihoods depend on aid, just as those of the officials who take it."

　

The author provides a telling example of how short-term beneficial intervention can have unintended long-term consequences. She does not say if this is an actual example or an illustration.

"There is a mosquito net maker in Africa. He manufactures about 500 nets a week. He employs ten people, who (as with many African countries) each have to support upwards of 15 relatives. However hard they work, they can’t make enough nets to combat the malaria carrying mosquito.

Enter vociferous Hollywood movie star who rallies the masses, and goads western governments to collect and send 100,000 mosquito nets to the afflicted region, at a cost of a million dollars....and a ‘good’ deed is done....With the market flooded with foreign nets our net maker is promptly put out of business. His 10 employees can no longer support their 150 dependents (who are now forced to depend on handouts), and one mustn’t forget that in a maximum of 5 years the majority of the imported nets will be torn, damaged and of no further use."

This example is the point of departure for describing the path to African economic independence. The better solution, the long-term solution, would have been to support the extension of the local net making industry so that a sufficient and continuous supply could be made available and jobs would be created. Aid could be used in this way, but the country, and even the net maker himself, could also have accessed loans that could be used for this purpose.

The crux of Moyo’s plan is for African nations to wean themselves off of aid and establish for themselves a place in the world economy. The second half of the book is devoted to convincing the reader that this a practical path to take. Botswana is used as an illustration of a country that has greatly diminished the flow of aid funds and established a stable and growing economy by utilizing her approach. She lists and discusses six financing paths that can bolster African economies. They are, in rough order of importance or effectiveness: trade, foreign direct investment (FDI), capital markets, remittances, micro-finance and savings.

Moyo would argue that the first step a country should take to shed its aid dependency would be embark on the effort to obtain a credit rating so they can borrow money from the international financial markets. The advantage of this approach is that it requires the Africans themselves to do the planning and the marketing. The markets themselves will demand discipline from the Africans in terms of cost of credit or denying credit entirely if they establish a reputation for defaulting on loans. It is this demand for discipline and responsibility that has been lacking in the aid-dominated environment. Moyo argues that some African nations have already made this move successfully, money is available at moderate interest rates, and the economic benefits have been realized by both the borrowers and the lenders.

"...the beauty with bonds is that their very existence lends further credibility to the country seeking funds, thereby encouraging a broader range of high-quality private investment. More credibility equals more money, equals more credibility."

"The notion of a sovereign ceiling means that a company can never obtain a credit rating higher than that of its country. In places where a country has no rating the ability of companies to seek outside investment capital is hampered greatly."

"...in 2006, emerging market debt gave investors a return of around 12 per cent. The performance beat the 3 per cent return on US government bonds in the same year. Moreover, emerging-market debt has almost consistently outperformed international stocks over the past 10 years."

Foreign investment in African nations is clearly an effective way of injecting capital into a nation to create jobs and incomes. Unfortunately, Africa has not benefited from investment due to a number of factors:

"... wide spread corruption, a maze of bureaucracy, a highly circumscribed regulatory and legal environment, and ensuing needless streams of red tape."

In addition:

"In 2006, the $37 billion that Africa received as official foreign aid was more than twice the continents foreign direct investment, and today Africa attracts less than 1 per cent of global capital flows, down from almost 5 per cent a decade ago."

Moyo argues that a combination of business-friendly reforms by the African nations and a more aggressive stance by investors would be very profitable for both participants. Africa possesses some of the poorest countries on earth and yet is relatively wealthy in terms of natural resources. It should be an ideal candidate for foreign investment. She presents China as an example of a country that has made a concerted, and successful, effort to invest and trade with Africa and has had a profound effect on the continent. China has a vast need for energy and raw materials. Africa has an abundance of both. She argues that, acting in its own self interest, China is doing more to benefit African nations than are the western countries with their aid-based approach.

"Bartering infrastructure for energy reserves is well understood by the Chinese and Africans alike. It’s a trade-off, and there are no illusions as to who does what, to whom and why....Africa is getting what it needs—quality capital that actually funds investment, jobs for its people and that elusive growth. These are the things that aid promised, but has consistently failed to deliver."

"...in nearly all African countries surveyed, more people view China’s influence positively than make the same assessment of US influence."

Trade is perhaps the most straightforward way of improving the economic well being of a nation. Consider China’s approach compared to that of the western nations.

"In December 2005, at the Second Conference of Chinese and African Entrepreneurs, China’s premier, Wen Jibao, pledged that China’s trade with Africa would rise to $100 billion a year within 5 years. Forget the capital markets, forget FDI, forget the US $40 billion a year aid program, and forget trade with any other country in the world—this is trade only with China.....by 2015, just 5 years later, that would be $500 billion of trade income—50 per cent of the trillion dollars of aid that has made its way to Africa in the past 60 years. The difference is, of course, one is laced with bromide, the other steroids."

"Estimates suggest that Africa loses $500 billion each year because of restrictive trade embargoes—largely in the form of subsidies by Western governments to Western farmers.....EU subsidies are approximately 35 per cent of farmers’ total income. What this means is that each European Union cow gets $2.5 a day in subsidies, more than what a billion people, many of them Africans, each have to live on each day."

"Western farmers get to sell their produce to a captive consumer at home above world market prices, and they can also afford to dump their excess production at lower prices abroad, thus undercutting the struggling African farmer."

"But perhaps the most egregious examples come from Africa itself. African countries impose an average tariff of 34 per cent on agricultural product from other African nations, and 21 per cent on their own products."

The term "remittance" refers to the money that Africans living abroad send home to their families. This can be an important source of income to help in financing a country’s balance of payments. It is equivalent to a source of income for the families so blessed.

"...the money Africans abroad sent home to their families totaled about $20 billion in 2006. According to a United Nations report.....between 2000 and 2003 Africans sent home about $17 billion each year, a figure that tops even FDI which averaged $15 billion, during this period."

Finally, it is critical for Africa to provide its citizens with secure and effective financial institutions. Without them people will not deposit savings and make funds available to lend to entrepreneurs. The author is particularly impressed with the results attained through micro-finance approaches. She quotes a default rate on such loans in Zambia as being about 5 per cent. In fact:

"With the advent of Kiva, a California-based interface, pretty much anyone sitting anywhere with a keyboard can lend money to anyone across the planet. This is how it works: a woman in Cameroon goes on line seeking a $200 dollar loan towards her tailoring business. She makes her case, as best she can, and a man in Des Moines, Iowa lends her $25 of it, someone in Sweden lends another $25, and the balance is covered by someone in Japan. The loan is made for a set period, for a pre-agreed interest rate, and she regularly updates her lenders on her progress. In the week—just one week—leading into 19 April, 2008, over $625,000 was lent by almost 3000 new lenders....the default rates have been minimal. Thus far since Kiva’s inception in 2005, some $30 million has been lent, 45,000 loans made to people in 42 countries. A wonderful innovation—get involved."

This book has been an eye opener. Whether or not one agrees with all of the author’s conclusions, it will leave one with a new perspective, and perhaps, a new interest in the evolution of Africa and its diverse nations. It will certainly allow one to judge more

intelligently the Obama administration’s approach to Africa as it unfolds.

　

The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems by Van Jones

If one comes to this volume, The Green Collar Economy, looking for a discussion of macro-economic and political issues associated with a failing economy and a ravaged environment, they would not be disappointed. Excellent introductions to these issues are presented by Robert F. Kennedy Jr. and by the author. However, those are not the main focus of Mr. Jones. He approaches these issues not as a politician or an academic, but as a social activist. In his own words:


"We want to build a green economy strong enough to lift people out of poverty. We want to create green pathways out of poverty and into great careers for America’s children. We want this green wave to lift all boats."

Most of the book is devoted to demonstrating that the author’s goal can be reached and to laying out the path that should be followed to get there.

He begins by delivering a thrashing to traditional environmental activism. He describes the first wave of environmentalism as one of conservation in which the rights of the native population were trampled on:


"National parks and wilderness areas were set aside for the benefit of white American tourists.....the conservationists stood up for the most vulnerable places—but not always for the most vulnerable people."

The second wave he refers to as that of regulation.


"The movement to better regulate industrial society was, in its origins, almost entirely the purview of the affluent and white. As a result it failed to see the toxic pollution that was concentrating n communities of poor and brown-skinned people, even after major environmental laws were passed. In fact, some people of color began to wonder if white polluters and white environmentalists were unconsciously collaborating."

These concerns led to the development of a parallel movement focused on environmental justice.


"Since the 1980’s the United States has had a shameful secret: its environmental movement is almost explicitly segregated by race—the mainstream environmentalists are in one camp (mostly white), and the environmental justice advocates in another (made up almost entirely of people of color)."

Mr. Jones’ hope is that the third wave, the green wave, will be focused on all the population.


"The green sector needs to break out of its elite niche and succeed on a broad scale economically. If the green economy remains a niche market, even a large one, then the excluded 80% will inevitably, and perhaps unknowingly, undo all the positive ecological impacts of the green 20%."

This argument drives the structure of the remainder of the book. He discusses how to form a coalition of interests to drive for a "Green New Deal." He points out that many initiatives are already in place demonstrating the potential for energy savings and job creation, but that only the government can scale these types of activities up to the level needed to address our problems. He also points out that it is necessary to have the business community as an active and an enthusiastic partner. "Only the business community has the requisite skills, experience, and capital to meet the needs." Jones provides a detailed and convincing game plan for the next (current) president to use in implementing a green revolution. The most compelling sections are those in which he describes the large number of jobs requiring only a minimal amount of training that can be created and pay a living wage. These were the types of jobs that allowed blue collar workers to send their children to college in the decades after WWII. Jones would like to see that dynamic reproduced here. His warning is that "positive government action is required to steer jobs and investments to areas where they are needed." It is not surprising, given his background and interests that Van Jones was appointed by the Obama administration as "Special Advisor on Green Jobs for the Council on Environmental Quality (He has since resigned that role)."

It was pleasant to encounter a treatise so positive and hopeful. The author threw out a particularly pleasing quote which he vaguely ascribed to the thinking of the native American Indians:

"We don’t inherit the earth from our parents; we borrow it from our children. The earth doesn’t belong to us; we belong to the earth."

All You Can Eat: How Hungry is America by Joel Berg

Mr. Berg served eight years in the Department of Agriculture during the Clinton administration. His most relevant role was as leader of the Community Food Security Initiative, an effort that George Bush terminated when he took office. Joel Berg is currently the executive director of the New York City Coalition Against Hunger.

Despite the glib title and uninspired artwork on the book cover, All You Can Eat: How Hungry Is America, was a serious and well-constructed effort to describe the extent of hunger in our country, and to detail the ramifications of “food insecurity” for both those suffering from it and for society as a whole. The author tells the reader exactly where he is heading on the very first page: “...this book argues that only government has the size, scope, resources — and yes, the legitimacy — to take the lead in actually solving the problem. And make no mistake: Government can solve the problem.” The beginning of the book focuses on defining the extent of the problem of hunger, euphemistically referred to as “food insecurity” by the government. The remainder is devoted to justifying this thesis. The final section includes the author’s plan for eliminating food insecurity. Berg also includes two appendices, one providing a list of activist organizations, the other provided advice on how to be a successful activist.

There was much to learn from this work. The author provides an interesting history of hunger in the USA, implying that many of our attitudes toward the problem are derived from our British-oriented heritage. He states that the USA and Great Britain have in common very high levels of inequality, and very high levels of child poverty, more than one observes in most advanced countries. He attributes this to a form of social Darwinism which allows one to view hunger as an unavoidable fact of life rather than addressing the issue as a solvable problem. He states: “America has been tricked into thinking that these problems can’t be solved and that the best we can hope for is for private charities to make the suffering marginally less severe.” Berg provides a detailed description of the evolution of the government’s intervention in providing food for the needy. His basic conclusion is that the safety net society provides is sufficient to keep people from starving, but is not sufficient to provide security and to allow recipients to function effectively in society. A number of interesting historical tidbits are revealed along the way. For example:

• during the depression when large numbers of people were actually starving, the nation was awash in farm output, but the notion of the government buying the food and distributing it to the needy was too advanced a concept at the time, 
• the national school lunch program was developed during World War II because recruits were emerging from the depression so malnourished that they could not immediately function as soldiers, 
• a government study accused the state of Mississippi of purposely trying to starve African Americans in order to drive them out of the state.

The real key to eliminating food insecurity is to eliminate poverty. The author expends much space to what he refers to as the “poverty trap.” This was one of the best and most informative sections of the book. He points out that you cannot get out of poverty unless you are able to accumulate savings. However if you accumulate savings then you lose your eligibility for government support. Another undesirable consequence of “means testing” is that it becomes complex and time consuming to apply for assistance. So much so that many eligible people do not gain access to the support, and many of those that do, eventually lose it through bureaucratic errors. Many of the recipients of food support are employed, but in jobs that do not pay a living wage. The provision of jobs that pay enough for a person to support minimal needs without external assistance should be, and must be, one of society’s goals. The author describes how hard it is to survive on the food stamp allotment, let alone eat healthy foods. A good discussion is provided of the tie between poverty/hunger and obesity/malnutrition. Berg points out a number of less well-known tribulations of living in impoverished areas. Supermarkets with competitive prices and abundant supplies of fresh fruit and vegetables are not likely to be found where people have little money to spend. The simplest financial transactions are either unavailable or very expensive for the poor. People in impoverished areas lack the social capital that could provide a network of friends and connections and guidance on simple things like how to approach a job interview.

The author views charitable activities in the area of food distribution as a mixed blessing. While the effort is certainly well-intentioned, it often has the effect of diverting attention from what is really needed, which is a coordinated, guaranteed government anti-poverty program. He further points out that the overhead in running a charitable effort is often much higher than it would be for an equivalent government program. In fact, most of the food distributed by charities comes from the government, either directly or indirectly through tax write-offs.

In summary, the author quotes a figure of about 35 million people who experience a significant level of food insecurity in the course of a year. Of these, about 11 million suffered from hunger or very low food security for extensive periods during the year. Studies are cited which support ties between hunger and increased health care costs, reduced productivity, and diminished educational performance. All of these factors represent a cost which the country must ultimately bear for neglecting to care for its citizens. Berg estimates that an additional $24B annual increase in food purchasing power could eliminate the issue of food insecurity if it was properly distributed. In the grand scheme of things, this does not seem like a large amount of money. The costs of inaction are undoubtedly higher.

The author did a good job in presenting a complex problem and placing it in its historic and political context. His style was rather informal and heavily anecdotal, producing text that was quite easy to read. A bit of judicious editing could have produced a volume that was significantly shorter, but just as effective.

The Healing of America by T. R. Reid

This review was written just prior to the passage of the health care bill. Its relevance has not diminished.

This was one of the most interesting and relevant books I have encountered in some time. The author makes two valuable contributions to the discussion of health care issues in the USA. The first is to emphasize that any formulation of a health care strategy must evolve from the answer to this most basic of questions: can society allow a person to die because they do not have the funds to purchase health insurance? Health care is thus posed as a moral issue. The second contribution is to travel the world investigating how other countries have developed systems of care and to report back on the strengths and weaknesses of the various approaches. After having read this book, one will have plenty of ammunition to throw the next time the words "we have the best health care system in the world" are uttered. If you hear: "we don’t want to do things like France/Germany/England/Canada/Switzerland/Japan/Taiwan" you will be ready to pounce.

In the author’s words:

"But the primary issue for any health care system is a moral one. If we want to fix American health care, we first have to answer a basic question: should we guarantee medical treatment to everyone who needs it, or should we let Americans.....die from a lack of access to health care?....Beyond this general ignorance about the fate of the uninsured, Americans have never really carried on an ethical debate about health care as a right—that is about which inequalities we are willing to tolerate."

Mr. Reid performs a valuable service by reminding us that there is a moral obligation at issue here. While he is persistent in damning the current state of affairs, he lets general citizens off perhaps a little too lightly. He criticizes the Clinton approach as being focused on health care as an economic issue, implying that this was a major reason for failure. He refers to polls which indicate that when presented with the abstract question: "Do you think that everyone has a right to medical care when they get sick"?—a significant majority answer: "yes". He then implies that people would be more in favor of a universal health system if they only understood the implications of not having one. One could just as compellingly argue that people fully understand the implications and have chosen to pursue their own, narrow self-interest. It is useful to evaluate the response of the various demographic groups to the current legislative activities providing the opportunity (threat?) of universal health coverage. There is a narrative that says the administration began by focusing on the need to provide health coverage for the uninsured, a moral issue, but that did not sell well with most people and they had to switch to an approach that essentially answers the question "What’s in it for me?" If this interpretation is correct, it says something rather disturbing about our society. For example, who better understands the need for access to good health care than senior citizens? Yet the unsubstantiated hint that seniors might get a little less in order that those with nothing might get a little bit more sent them running to the barricades. These people might be ignorant when it comes to the details of what is being discussed in Washington, but they know full well that many people without health care are going to die. Shared sacrifice seems to become popular in this country only when it comes with a healthy tax deduction.

Another disturbing aberration demonstrated in the current health care arguments concerns the role of religion. Bismarck described his development of social services, including universal health care in Germany as "a program of applied Christianity." In our country it is the secular segments of our society that are leading the charge towards universal coverage. It seems that the more loudly one proclaims one’s Christian credentials the more likely that person is to be against health care reform. We can’t even do Christianity right anymore.

The author uses a clever ploy to introduce us to health care in other countries. He approaches each country both as an investigative reporter and as a patient. Mr. Reid has a shoulder that was seriously injured many years prior. He is suffering increasing pain and disability from this injury as he grows older. His US doctor has recommended what is essentially a shoulder replacement, a very expensive and somewhat risky procedure. The process of acquiring appointments and the recommendations he receives from the various doctors in other countries would make an interesting story in itself. His approach allows him to interleave the expected statistics and facts with personal stories from the perspectives of both the patient and the health care provider. This strategy yields accounts that are exceptionally readable as well as informative.

The author begins by providing a short summary of the various health care strategies that are available for study.

The Bismarck Model (Germany, Japan, France, Belgium, Switzerland)

This model uses private health insurance plans, usually financed jointly by employers and employees through payroll deduction. The unemployed or those unable or no longer working have these insurance premiums paid by the government. These plans cover everyone and they do not make a profit. Tight regulation of medical services and fees provided the necessary cost control.

The Beveridge Model (Great Britain, Italy, Spain, most of Scandinavia)

In this system health care is provided and financed by the government through tax payments. There are no medical bills. Medical treatment is considered a public service similar to fire or police services. Many, but not all, hospitals and clinics are owned by the government. Most, but not all, doctors are also government employees. Cost is controlled because the government, as single payer, controls what doctors can do and what they can charge.

The National Health Insurance Model (Canada, South Korea, Taiwan)

This system combines elements of the Bismarck and Beveridge models. The providers of health care are private, but the payer is a government-run insurance program that everyone pays into.

The Out-Of-Pocket Model ( countries too poor to provide a national health service)

The rich get medical care and the poor stay sick or die.

The author points out that the US has aspects of all of these models in its convoluted system.

"For most working people under sixty-five we’re Germany or France or Japan."

"For Native Americans, military personnel, and veterans, we’re Britain or Cuba"

"For those over sixty-five we’re Canada."

"For the 45 million uninsured Americans we’re Cambodia, Burkino Faso, or rural India."

Mr. Reid presents a good summary of the shortcomings of the US "system." These facts are not new to anyone who has been following these issues over the past year. His greatest contribution is to shed light on how the systems in other countries actually work. He devotes chapters to the state of health care in France, Germany, Japan, the United Kingdom, and Canada in order to survey all the established models in practice. He finds that all systems work in the sense that they provide an adequate level of care for the entire population. However, each has its own peculiarities and the occasional drawback. He also visits India as a means of discussing areas where out-of-pocket payments dominate. Presented below are some of his more interesting observations and conclusions.

Solidarité

The author first describes this concept in the context of France, but he encounters it in all the developed countries he visits. This term refers to the notion that citizens feel they must stick together to help one another in time of need. The fruit of this concept is the determination to provide health care coverage for every person, no matter how rich or how poor. This goal has been realized in every "rich" country except the United States. Clearly, we do not yet have a universally recognized goal of health care for all, but even more disturbing is the question of whether or not we even have this concept of solidarité.

Cost

Mr. Reid refers often to the table of health expenditure as a function of GDP for the various countries. We lead the pack at 15.3% (2005). France comes in at 11.1% and Japan at 8.0%. The fact that we spend the most and obtain relatively poor results should by now be well known. If we were to provide health coverage for all while maintaining our current cost structure, our percentage of GDP would be even higher. The author describes in detail how each of the countries control costs and what issues arise from each approach. It would appear that every country has similar issues related to the need to control the cost of medical care. For example, France has excellent health care results at much lower expenditure than the US, but the pressure to control costs is perhaps greater. Health care is still an enormous expense for them and increasing expenditures is politically difficult. The tendency is to clamp down on provider fees from doctors, hospitals and vendors. The author was of the opinion that some of the systems had gone too far in controlling fees and they would be better off by increasing their investment somewhat. The lesson for us is that eliminating inefficiencies will not be sufficient. We will not be able to sufficiently control our costs unless we figure out a way to limit the fees charged in our system.

Doctors

Doctors have strikingly different existences in the countries studied. Under universal health care there were strict limitations on what they could charge for a given procedure. This effectively limited their income to what the author claimed was equivalent to a mid-level corporate executive. In other words they could live comfortably but not get rich. There was some grousing about low salaries by the physicians Reid encountered in his travels, but, as Reid points out, there were also significant benefits to being a doctor in the various systems. Doctors in the US generally have to pay their own college and medical school expenses, often leaving them with an enormous debt to pay off after graduation. There is a tremendous amount of overhead required by our system. Doctors must support accountants, insurance specialists, someone to handle their billing, and must pay for expensive malpractice insurance. Besides practicing medicine they must become small businessmen. They can become wealthy, and perhaps assume they have earned the right to become wealthy, but only by charging their patients enough to cover all that overhead as well as their lofty income. In the other countries the cost of medical school was generally much lower and was often paid for by the government. With well-defined rules on treatment there was not the need to worry about whether given procedures would be covered. Reimbursement for services becomes trivial and rapid. Malpractice insurance was very inexpensive and often paid for by the state. In fact, the author did not indicate that any of the physicians he encountered even considered malpractice suits as something worth thinking about. In other words, doctors could concentrate on being doctors, and the system saved a lot of money.

With respect to medical malpractice, there was an interesting study related by Malcolm Gladwell in his book Blink.

"Believe it or not, the risk of being sued for malpractice has very little to do with how many mistakes a doctor makes. Analyses of malpractice lawsuits show that there are highly skilled doctors who get sued a lot and doctors who make lots of mistakes and never get sued. At the same time, the overwhelming number of people who suffer an injury due to the negligence of a doctor never file a malpractice suit at all. In other words, patients do not file lawsuits because they’ve been harmed by shoddy medical care. Patients file lawsuits because they’ve been harmed by shoddy medical care and something else happens.

What is that something else? It’s how they were treated, on a personal level, by their doctor. What comes up again and again in malpractice cases is that patients say they were rushed or ignored or treated poorly. ‘People just don’t sue doctors they like’ is how Alice Burkin, a leading medical malpractice lawyer, put it."

What a concept! You treat people with respect and you gain respect. Perhaps there is also something to this soliderité notion.

Carte Vitale

The author dedicated this book to General and former President Dwight D. Eisenhower. His reasoning was as follows. Most politicians would be afraid to admit that any other country does anything better than we do. As president, Eisenhower had to sign off on the plans for a new interstate highway system. He was presented with conservative extensions of what was currently in place: two-lane highways that went through the heart of every town. Eisenhower recalled the impressive autobahn system built by the Nazis in Germany consisting of four-lane highways with overpasses and ramped interchanges to avoid intersections. He decided that if the Germans had a better idea there is no reason why we cannot copy it. Reid is suggesting that with so many examples of how to do health care better, wouldn’t it be nice if a politician would stand up and say "We need to do it like the French/Germans/Japanese/British..........."

Carte Vitale seems like a perfect example of a better way to do things, one that we would never be allowed to copy.

"This carte vitale—the "vital card," or the "card of life"—contains the patient’s entire medical record.... Imbedded in the gold metallic square just left of center is a digital record of every doctor visit, referral, injection, operation, X-ray, diagnostic test, prescription, warning, etc., together with a report on how much the doctor billed for each visit and how much was paid, by the insurance funds and by the patient. Everybody in France over the age of fifteen has this card—a child’s medical records are maintained on his mother’s card—and it is the secret weapon that makes French medical care so much more efficient than anything Americans are used to.......But the greatest value of the carte vitale is its impact on the payment of medical bills. Each patient’s green card (carte vitale) knows which sickness fund and which private insurance plan covers that patient. When Dr. Bonnaud finishes a consultation and enters that day’s treatment on the patient’s card, he stretches out the ring finger on his left hand and hits the "transmit" key on his computer. With that single keystroke all billing information—how much the patient owed, how much he paid the doctor as a co-pay, how much each of the insurance plans should pay back to the doctor and the patient—is transmitted to each of the relevant insurance plans. With that single keystroke the billing process is finished. ‘I will be paid,’ Dr. Bonnaud told me, with total confidence, ‘in three days.’ The insurance funds are required to pay him that fast, with no quibbles—and they do"

Preventive Medicine

Much has been said about the efficacy of encouraging early detection of problems and healthy lifestyles. Mr. Reid makes a point about the feedback between universal coverage, or the lack thereof, and preventive medicine that is probably not very obvious.

"In a system where health insurance comes with the job and ends when the job ends, the insurer can expect many customers to terminate coverage in a few years. Insurance experts say the average customer stays with the same plan for less than six years, so an insurance executive with his eye on the bottom line has little financial incentive to pay for long term prevention. American health insurance plans sometimes do cover mammograms and PSA tests and similar preventive measures, but they do it primarily for marketing purposes, to make their plans more attractive to corporate customers.

On occasion, the incentives built into the US health care system are downright perverse. Because awareness of preexisting conditions can lead to higher insurance premiums—or outright denial of coverage—some Americans deliberately avoid physical exams or other medical tests for fear of losing their health insurance."

Compare the passage above with this quote from Tony Blair’s health minister in the UK.

"Almost every person in this country is my patient for life. From the minute the line turns blue on your mother’s pregnancy test until the minute you die, maybe ninety-nine years later, you are my patient. If you become ill it is the job of the NHS to treat you, without regard to cost. So of course I want to prevent you from becoming ill."

Change

One occasionally hears the comments like "this is all too complicated to fix" or "it’s just too hard." To counter such attitudes the author studied and visited Switzerland and Taiwan.

"Most important, both Taiwan and Switzerland had fragmented and expensive health care, similar to the American system—until they launched their reform campaigns. In both countries, payment for medical care was dominated by health insurance plans tied to employment; in both, significant numbers of people were left with no coverage at all. Even with large numbers of people uninsured, both countries were pouring considerable amounts of money into health care. In both Taiwan and Switzerland, as in the United States today, a growing chorus of voices began demanding universal coverage, arguing that every sick person should have access to a doctor.

But at that point the parallels end. The big difference between those two democracies and the United States is that, in Taiwan and Switzerland, the advocates of fundamental health care reform eventually won the day. Both of those nations adopted new health care systems to guarantee that everybody would be covered—and both of them happened to do it in 1994, the same year that the Clinton health care plan was going down in flames."

Shame on us!

The content of this book should have had some impact on the development, and selling, of a national health care approach. It is not clear that it did. Perhaps it appeared too late in the process to alter plans that had already focused on rather limited objectives. Or, perhaps, we are not yet a nation whose people feel united by common purposes. A mere two hundred years may not be long enough to form a stable nation.