The Health Care Crisis Few of Us Recognize


September 26, 2009


Browse in Diseconomy Health

A few weeks ago, researchers reported that drug use had increased “dramatically” among children in the U.S. These researchers weren’t talking about illicit drugs, but rather prescription medications for such conditions as obesity, asthma, depression and restlessness in school.

Another study found that American children are showing up in doctors’ offices with arteries that look like those of 45 year olds.

Most readers probably didn’t connect these stories to the world’s financial morass. For the media these are separate compartments – human health versus economic health. And yet the two have become related in a perverse way. The new diseases of childhood drive an increasing part of GDP. And they are part of what current efforts to “stimulate” the economy are likely to promote.

American kids – and adults too – are literally consuming themselves sick. C. Everett Koop, the former U.S. Surgeon General, estimated that some 70 per cent of medical expenditures in the US are for the treatment of ailments that are lifestyle-related – and in most cases, that means market-related.

As America exports its lifestyle and junk food habits, moreover, these pathologies are spreading. Even the Philippines, a poor country, is beginning to show an obesity epidemic. Yet seen through the lens of conventional economic reckoning, such increased “consumption” is a growth engine – whether it’s the consumption of processed food, or the consumption of medication that purports to deal with the effects. Both prompt more spending, and thus an increase in the GDP.

And though no one in the policy establishment seems to realize it, efforts to make “the economy” better could make those who comprise the economy – in the developed countries at least – worse off.? But the discussion is cast almost entirely in economic abstractions. The aim is to bestir “consumption”, whatever that might entail; the various proposals – tax cuts, unemployment and other benefits, public works – are judged almost entirely according to that criterion. Yes, we may also develop more efficient use of energy, and cleaner sources of it. That’s the hope at least. But exactly what will happen with that greater efficiency, and to what end?

The question might sound philosophical, or impertinent, or even subversive. In the past it has been considered all of those. The market knows best. Whatever people choose to buy is by definition good – because who knows better what people need than they themselves do? Only those of questionable ideological intentions would want to inquire further. That was the attitude in simpler times, when human needs could be presumed to be as “infinite” as the resources presumed available to meet them.

But now the economy has taken a grim new turn, such that an enlarging part of it consists of problems that the market itself has created. What right-wingers say about the government bureaucracy – that it constantly creates new work for itself – has become true of the economy at large. Growth has become iatrogenic. A process supposed to be conducive to well-being has become instead a continual disrupter of it, so as to stir the pot of expenditure and growth.

Obesity is just one example. The others are legion. Consider the $150 billion or so that Americans spend each year to repair the damage from auto collisions. Much of that comes from increasing traffic, which comes in turn from more sprawl and cars – growth engines both. (Americans spend some $9 billion alone on gas they burn to sit stationary in traffic.)??Antibiotics beget resistant strains of viruses that require new and more expensive antibiotics. Ditto for agricultural pesticides. Urban noise begets special insulation, double pane windows and white noise machines. Traffic begets bad air, which has helped give rise to an asthma treatment industry of about a billion dollars a year for children alone. The list goes on and on.

The human body is where it all comes most vividly to roost. Consider AstraZeneca, a multinational company that until recently made tamoxifen, a drug used to combat breast cancer; the corporation also makes fungicides, herbicides, and other chemicals widely implicated in causing cancer.

According to current projections, within a decade or two about a quarter of the American GDP will consist of medical care. Business Week magazine reported that, since 2001, every net new job in the U.S. has come from the medical sector. Some new growth comes from preventive medicine, to be sure. But disease, not health, is the driver; and much of that disease is a product of consumption itself.

Yet what is the alternative? “We have to spend our money on something,” a Stanford University economist shrugged when asked about the economy’s growing disease dependence. The question, it seems, is not what we need from the economy, but rather what the economy needs from us.? The roots of this strange dilemma go back to the beginning of the mass consumer market, when industrial capacity began to outstrip human need. But the more immediate story begins in the latter years of the Second World War, when there was brooding concern in U.S. business circles over what would happen next. What would keep the factories busy once the troops came home?

One answer came in the form of a Cold War. Another came from a young economist by the name of John Kenneth Galbraith, fresh from the wartime Office of Price Administration, who addressed the “What next?” question in a series of articles for Fortune magazine in 1944. He tackled the issue with the zest of an ardent Keynesian for whom the answer was clear. The returning troops could hand off the baton of high national purpose to the shoppers – who were soon heading off to a new base of operations, the mall.

But then Galbraith started to have second thoughts. About 10 years after he wrote the Fortune articles, Galbraith, then a professor at Harvard, published The Affluent Society, which cast a skeptical eye on the consumption economy whose blueprint he had helped to develop. The basic problem was what he called the “production imperative” – the belief that the market always must produce more, and then more on top of that. Yet look around us, Galbraith said. If it takes the marketing sector over $150 billion a year to prop up what economists quaintly call “demand”, is it really demand in any sane sense of that word? Does it really have the urgency and unquestionable sovereignty that economists assign to it?

Galbraith was suggesting heresy – that there might be a systemic point of diminishing returns to the corporate market. Wouldn’t it make sense, he said, to shift some resources from private wants that had been poked and prodded into being and put them towards public needs that were indisputably great?

The book touched a brooding unease about the corporate economy. It became a bestseller and provided a landmark rationale for liberal economic policy and increased expenditure by the state. But then came the Vietnam War, and after that the economic challenges from Asia. The Affluent Society began to seem an artifact of the 1950s. Now the U.S. had to compete with the Japanese – and the Chinese after them. Who cared what the economy produced, so long as it was growing?

The environmental crisis complicated that script, however. And now comes the inconvenient new realities of “consumption” itself. We have moved far past the Affluent Society and its marketing-aroused wants. Now it‘s real life problems – from traffic to disease – that the economy creates and then sells remedies for. In theoretical terms, environmental problems are a genre of what economists call “externalities”, which are unwanted side effects of consumption otherwise assumed to be benign. Now we are entering the realm of what might be called “internalities” – which is to say, dysfunctions inherent in consumption itself.

This is a black hole to the conventional economic mind. Economists don’t even have a language for it; the reigning vocabulary is encoded with the production imperative. An economy consists of goods and services. There are no bads or disservices – no negative products of any kind. What we call the “dismal science” actually looks at the world through eyes that see no evil where consumption is concerned.

Nor can economists deal with related new complications, such as the epidemic of compulsive buying. They assume a “rational” consumer who makes informed choices through an unfailing internal calculus of loss and gain. Thus whatever this hypothetical consumer buys can be assumed to contribute to their “welfare” in proportion to the price paid. But what about the millions today in the “advanced” economies who are engaged in a grim daily battle with themselves to consume less – to eat less, gamble less, shop less period? How can economists say consumption is good when the consumers themselves think it is bad?

This is something new in human history – an economy “in need of need,” as John McKnight of Northwestern University has put it. We can never overcome poverty, among other things, because our economic logic requires us constantly to reinvent it. In terms of policy, we are in a no-man’s-land. The old maps don’t work because they don’t even recognize the problem. Liberal and conservative nostrums have become, basically, different routes to an outdated end.

As Barack Obama and his counterparts around the world try to plot their way out of the morass they will almost certainly use those old maps anyway, because there are no others. We have to spend our money on something. But lurking in the background is this conundrum that will not go away. The financial crisis presents a rare opportunity to begin to find our way out.