Monday, 29 May 2017
A Labour supporter and NHS flag-waver appearing on BBC’s The Big Questions on Sunday morning spoke enthusiastically about fiscal multipliers; the notion that government spending can stimulate the economy. Yay, spend! But this ignores the simple fact that basic economics is about how we individually and collectively allocate scarce resources with alternative uses. In this respect, money is not a resource but an exchange mechanism allowing us to avoid barter and directly trade labour and materials we possess or control for other labour and materials we desire.
His argument is that if we plough more money into the NHS this would pay more people who would then spend locally, thus stimulating other businesses, all miraculously making profits from that original injection of capital. But where do those businesses source their raw materials? And how many in the local economy are saving for their own, nobly selfish needs and how many are sending money abroad? Come to that, how much of NHS funding goes to buy goods and services from overseas? All of this is a drain on that funding, making the miracle of fiscal multiplication less likely.
Providing government assistance for an area overcome by natural disaster, or local industrial collapse, buying time for the local economy to get back on its feet is one thing, but sooner or later the assistance has to stop, or risk that society becoming dependent on the charity of others. Unfortunately, once that welfare tap has been turned on you need to keep opening it ever wider. (See whole swathes of formerly industrial regions whose old fester and whose talented young leave) Yes, but, the argument goes, the NHS is different; better health in society IS a form of profit, providing healthier workers, who live longer, with fewer end-of-life costs. This is a noble and moral belief, but is it true?
When we decide how to spend our money we effectively ration our consumption to keep within our means, foregoing one good for another where necessary. Those who use the least amount of NHS services are generally the wealthiest, opting to go private, only when they actually need to, on their own timetable. Yet they pay the most into the pot. At the other end of the scale the vast majority of those who use state-supplied medicine contribute nothing to it. Dressed up as ‘need’, those who contribute little gorge themselves on the free stuff. More free stuff, less incentive to ration its consumption.
The NHS. Doing as well as expected...
The NHS is an almost perfect model of what happens when the state tries to organise anything. There is no real price mechanism to allocate resources, just an ever-expanding need, a capacious maw that always needs feeding. For as long as there is an NHS, the Labour Party (for which it is a deity) will ceaselessly declare that we have six-hours/three-weeks/two-days, etc to ‘save’ it. But no matter how much this emotive pleading appeals to the hard-of-thinking we must never forget Mr Micawber’s sage advice.
"Annual income twenty pounds, annual expenditure nineteen pounds, nineteen shillings and sixpence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."
Physician, heal thyself.