Monday, December 8, 2008

Government-sponsored healthcare during a recession

One of the questions during the US presidential debate was whether healthcare was a right, a privilege, or a responsibility.

In an ideal world, this should be a right. If one is sick, one should be able to expect from his government the care deserved by any human being.

Healthcare is scheduled to become the largest expense, and most possibly, the largest sector in the global economy in the coming decades. With the continuing increase in life expectancy, more and more people are rushing into the senior demographic. Many of today’s seniors are likely going to be still around in ten years, but more are going to be joining them in the coming years. And with the baby boomers of the developed countries joining this demographic en masse in this coming decade, we are bound to see a boom in the number of retirees, and in healthcare expenses nationally.

Unfortunately, unlike manufacturing, trading, or many service industries, healthcare is not value-creating. It is, by its essence, value-consuming. Most other businesses, those that sell tangible products are able to create livelihood for their employees, promote trade, and generate profit for the business, or surplus for the economy - profit or surplus which can then be used to fund more activities. Healthcare, meanwhile, while providing livelihood for its medical practitioners, eats away from its patients’ incomes, and the more healthcare needed, the more income eaten away.

Healthcare takes away resources that might have been used to grow the economy. The more sick people a country has does not bode well for the country, no matter how much income that could mean for its domestic healthcare economy. Sickness is always value-consuming, and the more that it spent on it, the less is spent elsewhere on value-creating activities.

With a long and protracted recession world-wide, governments will be hard-pressed to maintain many of its existing expenditures. Any expenditure that governments maintain, and even more so, increase, need to help jumpstart economic activity. These should therefore be expenditures that result in the creation of jobs.

In today’s recessionary environment, healthcare is more a privilege than a right. It is a provision that will be given only if there are any funds left over after all other national expenses. What is necessary, going in the direction of solving the problem, is to increase society’s over-all ability to pay for healthcare.

Firstly, people will need to be able to continue working, to help pay for their healthcare, for as long as they need it. Secondly, the number of people in working age should increase proportionately to the number of people taking healthcare benefits. That means that the larger the number of people expected to enter their senior phases in coming years, the greater the proportion of working people need to enter the workforce to help pay for these government expenditures. And third, more activity has to be put in value-creating economic activities. Any and all incentives needed to encourage more investment in job-generating economic activities will have to be put in place.


smfpthm101 said...

Is it possible for there to be a world currency that all countries (well at least a good majority) can adopt to increase trade and limit exchange rate. Of course there are many reasons why it won't happen with many poor countries not being able to afford the new currency and diplomatic reasons but with the world economy growing and evolving the way it has is there a chance for a world currency in the future?

Rogue Economist said...

Given where we are, it seems the world is not yet ready. We would probably more likely see a reduction in world trade as opposed to seeing a confluence to one currency. But that's just my opinion.