Saturday, 28 March 2015

Shall we cap profits in health care?

As the general election campaign is limping from one damp squib to another, Labour came up with an idea on the NHS. Yesterday Ed Miliband made a commitment that all profits from health care contracts with private providers should be capped at 5 per cent. Any profits above that threshold will be seized by the government and ploughed back into the NHS.

The suggestion to cap profits resonates with many people's gut feelings that health care provision should not be a matter for capitalist profit. Health, so the reasoning goes, is not up for sale.

The principle is a well respected one and echoes fundamental reservations about mixing up health and capitalism. However, at closer inspection, it seems to rest on confusing two different dimensions of health care provision. The first dimension is the relationship between doctor and patient. Whatever goes on between patient and doctor is regulated by codes of medical practice and national guidelines. Profits have never played a role in this relationship despite GPs being private enterprises since the foundation of the NHS in 1946. And neither should they.

The second dimension is the health care market grouped around the first domain, ranging from the supply of protective gloves to syringes and capital investment into NHS hospitals. To wish away the market element in the supply of the health economy is like legislating for sunshine on Tuesdays.

Labour's proposal willfully confuses the two dimensions, the doctor patient relationship and the health care economy around it. As a former Labour health minister noted today, Ed Miliband's NHS policy amounts to little more than bluster.

So, what do other countries do about profits in the health care economy? The issue has been intensely debated during the introduction of Obamacare in the US and the lead of the implementation team (no other than Larry Summers) decided against a profit cap. Why? He argued that profit caps eliminate the (only) positive effect private providers bring to the health economy: their ability to look for savings.

Private providers have an incentive to seek out lower prices for comparable services or products because they can pocket the difference (the profit). If profits are capped, that incentive does not exist and prices will inevitably rise. This can be disastrous for a tax funded service like the NHS or one like Obamacare, since without the pressure of providers to identify cheaper options prices for the buyer (the NHS) will increase. In other words, eliminating the market element in private provision leads to higher costs for tax payers.

Miliband claims he is an ideas man. Looks like precious little thinking has gone into his last policy.

Sunday, 22 March 2015

Does impartiality foster extremism?

My friends on the right and the left of the political spectrum usually agree on one thing: the shocking partisanship of the BBC. To those on the right of centre, the BBC is full of unadulterated socialists, while for those on the left of centre, the Grand Old Dame of public broadcasting is a mouthpiece of Thatcherism. To me, the unison condemnation of the BBC by all of them demonstrates that the BBC is clearly doing something right. In fact, I believe that its journalists are unfailingly impartial.

Compared to German news (Germany has a similarly tax funded broadcaster obligated to impartiality) the BBC's reporting strikes me as notoriously bipartisan. Listening to Nick Robinson's verdict on Prime Minister's Questions on Daily Politics I am always struck by his verbal contortions to do justice to everyone involved.

So, far so good. But is impartiality always good for us as a society?

The question may sound strange, but there is an argument that, unfailing impartiality may contribute to a lack of representation of extreme views in public debate. If you thought that this would not matter (the likes of BNP or al-Muhajiroun clearly make good use of social media) you are wrong. Any healthy society needs open and honest debate, and part of that debate is the ability of people to voice their views and opinions. The founders of American government recognised that by enshrining the right to free speech in the constitution. That right has repeatedly been interpreted by the Supreme Court to include the articulation of unpalatable ideas, unpalatable, that is, to you and me.

But is the BBC just as representative of those voices as it is of the mainstream? I think it may just fall victim to its own laudable, yet narrowly applied, principle of impartiality there. When it invited (then) BNP leader Nick Griffin to Question Time, the media storm lasted for weeks. As it happened, his views seemed to sink without much notice and the BNP is now nowhere to be seen.

So, perhaps the BBC and other broadcasters should have more faith in our ability to listen, engage with and ultimately reject the extreme and radical ideas of some on the fringes of the political spectrum. After all, confronting their ideas should make good debating practice.

On 'being ready' for government

Popular wisdom has it that all it takes to win a general election is to have better answers to the problems a country faces than your opponents. A coherent vision and narrative may help too, plus a consistent message articulated on the door steps when canvassing the great British public.

A recently published study in the academic journal however questions this view (Hartwig Pautz, The Thinktanks behind Cameronism'. It argues that opposition parties that are successful at general elections undergo a period of intense debate about ideological renewal, often leading to political re-orientation. The arena for this debate are often think tanks that are more or less associated with the political party in question. Labour underwent such a period before it emerged as New Labour under Tony Blair. The hallmark of such a renewal, and measure of success in readying the party for government, may be the extent to which new policy ideas are being generated, debated, rejected or endorsed. Idea generation, in essence, is an indicator of how effectively a political party functions as a powerhouse for policy formulation necessary to formulate future government programmes. 

The Conservative Party experienced a similar period of internal debate and renewal under David Cameron before the general election in 2010. The jury is still out whether or not it was sufficient to make the Tories a genuinely modern party, but hardly anybody denies that the party has undergone fundamental changes with modernisers, such as George Osborne, in key positions. 

Squeezing through - Ed Miliband - Man without policies?

The picture is different for Labour under Ed Miliband. After five years of relative discipline and few internal squabbles, the party emerges almost empty handed to face the electorate in less than 2 months. Whilst Miliband himself tried to provide an overarching narrative in the 'cost of living' argument (a debate that is vanishing fast with wage rises gathering pace), the party is casting frantically around for policy ideas even at his late stage (note the recent speech of Shadow Education Secretary Tristam Hunt on 'innovation' in the classroom). Whatever Labour wants to be (a force for good in society) and who it wants to represent (the long suffering middle classes or people on zero hour contracts?) it lacks the wealth of ideas and the history of constructive policy debate that characterised New Labour in 1997. 

If it squeakes into government on 8th May, it will resemble the government of Miliband's political mentor: Gordon Brown. Having exhausted his energies and political capital in the fight against his own party and the Blair camp, Brown, when he finally moved into Number 10, had nothing to say and no policies to implement. If it hadn't been for the economic crisis, Brown's government would have quickly been revealed as one without purpose or direction. With Britain on the path to economic recovery, Miliband wont be so 'lucky'. The lack of ideas will come to haunt him as he steps into Number 10. If he gets that far. 

Saturday, 14 March 2015

The iconoclasts

In 2007, the British Channel 4 television series Time Team started an archaeological dig in Coberley, a location in the Cotswolds. The dig quickly revealed a stunning mosaic within a large building, probably built in the early 2nd century AD. It was undoubtedly Roman.

As the archaeologists revealed ever more of the mosaic something strange started to appear. The mosaic showed the usual plow damage, straight lines across it where the tesserae has been ripped out. But by and large, it was still in excellent shape, yet its central piece was gone.

Outrageous sacrilege - a 4th cent depiction of Bacchus

Mosaics in Roman villas are often of similar shape and pictorial content. Experts agreed that the central missing piece was most certainly a depiction of the God Bacchus. If it had not been damaged by plowing, what could have caused the destruction?

On closer inspection it became clear that the picture of the God in the centre of the mosaic had been deliberately taken out and replaced by broken pieces of roof tiles. So, somebody had removed the original picture and substituted it with a crude floor. This indicated that, whenever it was done, the villa was still a functioning building and the floor was still needed. So it was repaired.

The culprits were quickly identified. As Romano Britain declined, early Christians often embarked on iconoclastic destruction. A particular target of theirs were depictions of pagan Gods, like Bacchus.

I was reminded of this Time Team episode and its remarkable window into early Christian iconoclasm when I recently heard of the wilful destruction of the Assyrian city of Nimrud in Iraq by Islamic State. What struck me are not so much the parallels between religious fanaticism of either creed or conviction, but the ultimate futility of iconoclastic destruction. We still know what Bacchus looks like. In fact, the void in the centre of the mosaic speaks to us just as eloquently about the failure of any effort to destroy the fabric of human culture as a complete mosaic would have spoken to us about its longevity.

Following the destruction of Bacchus portrait, the early Christians in the Roman villa in Coberley patched up the mosaic and continued to live within the building. Whatever they hoped to accomplish by hacking off the picture of a pagan God, all they did is add another layer to the eternal human story of destruction and renewal.

Friday, 13 March 2015

The blackmailers

Greece's financial situation is becoming more precarious by the day. Paradoxically, it is not its debt that is weighing Greece down nor the greed of its lenders, but it is the lack of trust by its own population that is making life harder by the day. Greeks are still withdrawing millions of Euros every day from their bank accounts, clearly anticipating that this will all end in tears, i.e. the Greek exit from the Euro.

The sad aspect of this Greek saga is that it was entirely preventable. Greece's debt burden was heavy yet entirely manageable at the time of the election, and the budget ran a first initial surplus. The economy showed some signs of recovery and investments picked up. All that has now stalled due to the insecurity created by the zig zag course of the new government.

So what's the case for the strategy pursued by the Greek government? Let's look back at the last six weeks. Starting with the election, the Greek government had a very strong lever at their disposal. Germany as well as all other main players signalled that they would make sure that Greece remained within the Euro. This was a solid foundation from which to build within the Euro zone a coalition around change for growth and investment. At about the same time, the recently appointed Commission President Juncker announced that he was working on something similar which chimed with the intentions of the Greek government to move from austerity to investment for growth, a (now approved) 350 billion Euro programme.

Yet, within two weeks after the elections, the Greek government managed to antagonise not just its main lender (Germany and the IMF) but also its smaller European partners, such as Slovenia and Slovakia, who notably contributed millions of Euros to the Greek bailout programme despite being much poorer than Greece. Talk by the Prime Minister Tsipras and his thin-skinned Finance Minister Varoufakis about Greece's entitlement to other countries taxes ensured that they lost all good will by their European counterparts. Eventually, the Greek government had to climb down and accept a four month extension of the existing bailout programme to the old conditions. This can only be called a phenomenal failure of policy on the part of the Greek government given that they actually had a strong negotiating position at the start.

Why did this go so horribly wrong for the Greek government? The main reason appears to lie in their inability to differentiate between electoral campaigning and negotiating with European partners. Both Tsipras and Varoufakis appeared to believe that their electoral campaign rhetoric would bear just as much weight in negotiations with their European partners as it had with the Greek electorate. Their maximalist demand (access to taxpayer's money of other countries without any budgetary control) may have made sense within the domestic national debate, but its logic fell apart quickly when articulated within European institutions. Confronted with this failure to get their way, Tsipras and Varoufakis resorted to blackmail, indicating that they would violate ECB rules if their European partners would not meet their demands.

In a way, this strategy ensured that Euro zone members are now seriously thinking whether a Greek exit from the Euro would indeed weaken the Euro, or whether in fact it may strengthen the currency. Which is exactly where the Greek government does not want to be in the larger scheme of things. Once their main negotiating asset, the unwillingness of their partners to allow a Grexit is gone, they will have no levers for negotiating further debt relief. The Greek negotiating tactic resembled a high wire act which they embarked on with several heavy suitcases stuffed with maximalist demands instead of travelling the rope as light as possible. This whole episode may soon feature in university handbooks on policy making as a prime example of poor strategy. Once safely back in his university post, Professor Varoufakis may be able to read up on it.