Archive for the ‘Politics’ Category
How the enemy needs war to stay alive
Tags: 11262008, 2008, Al-Qaeda, America, Fareed Zakaria, John McCain, Mumbai, Politics, Terrorism, War
When watching GPS with Fareed Zakaria on the Mumbai massacre I was struck by a testimony in his feature.
Mumbai attacks
A young terrorist is instructed by his controller in Pakistan to set a room ablaze. The controller understood that if the Taj Mahal was on fire, this would offer a more dramatic visual. The visual of Taj Mahal on fire would garner media attention and strike fear in the heart of the West, witnessing the might of this one terrorist cell.
It struck me that the controller had not ended with corrupting the mind of this young terrorist, brainwashing him to kill dozens of innocent people before deliberately giving his own life to his ‘cause’. He was also intending to stir up feelings of hatred and fear in the hearts of the Indians who watched this on television.
It reminded me of an Al-Qaeda statement posted on the al-Hesbah Web site during the presidential elections. It said if al-Qaeda wants to exhaust the United States militarily and economically, ‘impetuous’ Republican presidential candidate Senator John McCain is the better choice because he is more likely to continue the wars in Iraq and Afghanistan.
‘This requires presence of an impetuous American leader such as McCain, who pledged to continue the war till the last American soldier,’ the message said.
‘Then, al-Qaeda will have to support McCain in the coming elections so that he continues the failing march of his predecessor, Bush.
When a small group chooses to attack a behemoth, nothing much can happen when the behemoth decides to simply ignore the small group and keeps it at arms length. The only hope the smaller group has is that the behemoth starts chasing it, and that the smaller group can stay alive long enough to exhaust the behemoth and then strike it when it is weak.
Al-Qaeda can never win from the US in a conventional way. But it can trick us into wearing down our military personnel, exhausting moral and depleting the coffers as we fight a financially imprudent war.
Perhaps it isn’t just the young peasants who are brainwashed to become jihadists. Perhaps we are all ‘brainwashed’ to enter into a full-blown war against a small number of enemies who have strategically positioned themselves in 7 countries that the US could never truly tame nor occupy without fatal costs to its economy or standing in the world. And perhaps, when we rely on the prudent way to dealing with this ‘small enemy’ by choosing to fight it through intelligence agencies alone, Al-Qaeda will step up its efforts to produce a terrorist attack on American soil again, because it knows it can only win when it can get the behemoth to chase it instead of having the Behemoth keep it at arms length.
Tags: 11262008, 2008, Al-Qaeda, America, Fareed Zakaria, John McCain, Mumbai, Politics, Terrorism, War
A Historical Perspective on Health Care
Tags: 2009, America, Health Care, History, Politics
Health Care Reform
The American health care system is entering reform as most systems in the world are facing intense pressure. As a result, it cannot turn to any model as a shining beacon, but will have to get its hands dirty trying to find a solution fit for a 21st Century world, where life spans are longer, birth rate in developing worlds decline and expenditure must be curbed. And that’s just naming the most obvious problems.
So what are the lessons America must learn?
The idea for health care insurance (see latest news on Health Care Reform) at its conception was a simple one: illness in a population is not the norm, most people are healthy most of the time. But sometimes disaster strikes, we don’t know when and don’t know who it will strike. Economies of scale can deal with this: if everybody pays a fee to an account, that pays out when disaster happens, everyone is covered.
Economies of scale also suggest that the bigger the group you include, the better you can predict risk and therefore the lower a fee you charge everyone. Simply put, take a group of 10 people and it is hard to predict how many of them will face some serious illness in their lifetime. 100 people, predictions work a tiny little better. The more you increase that number, the more predictable the model becomes.
That further brings a challenge to a Free Market model: economic models predict that where perfect competition exists, the consumer will pay bottom prices for the best and most innovative services. But health care doesn’t work in a perfect competition model: it would be too fragmented and wouldn’t be able to benefit from the economies of scale that allow it to actually be effective. As a result, health care insurance must be provided by oligopolies or monopolies (in some European countries there exists a free market solution where many insurers must compete to sell their services to a single buyer: the government. This can easily be called an inverted monopoly: the government has monopoly on demand. A perfect example of this is the Swiss health insurance model. Do read this, it’s a very interesting compromise.)
Most developed countries opted for the welfare state. This model isn’t popular because of socialistic reasons, but because of economies of scale. It is simply cheaper for one insurer to provide health care insurance than 10 insurers, due to the economies of scale.
There is however one massive problem with this model in the developed world. It works great when the majority of your population is young and vital.
Take Japan as an example. Its ‘welfare state’ was so successful that by the 1970s life expectancy in Japan had become the longest in the world. So the population was rapidly aging, and to exacerbate the problem, birth rate was falling. In effect, the ratio between old and young got to be the steepest in the world: 21% of its population was over 65, and it is projected that if the current trends prevail, 50% of the population will be pensioners by 2044. These trends have brought the Japanese welfare state to its knees. The problem is so formidable, the population so old on average, that even private insurers cannot present any solutions to Japan’s challenge. Life insurance companies have been fighting for their lives after the stock market crash of 1990, and 3 of its largest insurers failed.
So Japan acts as an omen: in the West, our population is following a similar trend, one where the population noticeably ages. Where the welfare system could be saved by the arrival of a large number of newborns, birth rate in the developed world is less than impressive and immigration isn’t bucking the trend.
As a result, countries in the developed world are looking for a privatized solution to be added to the national insurance model. When there is less money to go around, the money has to work harder. Perhaps private investment companies can help.
Take Chile as an example: brokers invest the pension contributions of Chilean workers in their own stock market. This has wielded impressive results: the annual rate of return on the Personal Retirement Accounts is more than 10%, thanks to an extremely healthy stock market that has risen by a factor of 18 since 1987.
Of course, this model, as all other models has its problems: not everyone in the system has a full-time job and the self-employed don’t have to contribute which leaves a substantial part of the population without coverage. The administrative and fiscal cost of the system are also deemed too high.
It remains however ironic that this type of radical reform did not originate in the heartland of free market economics: America, but instead was executed in Chile.
Reform in America is unavoidable. America’s hospitals vary in great degrees from state-of-the-art to challenged at best, but none can be called cheap (see the World Health Organization Report). For those who need treatment before retirement, the need a private insurance policy. It is estimated that 47 million Americans don’t have one, partly due to the structure of the system: such policies tend to be available only to those in regular, formal employment – any other scheme has a prohibitive price ticket attached to it.
[Cartoon courtesy of Seppo Leinonen. Be sure to check out his other great cartoons!]
The ultimate result is a welfare system that is not comprehensive, marginally redistributive (compared to European systems) but costs a whole heap more. Public health expenditures hover around 7% GDP while private health care is equivalent to 8.5% (in addition!)
In America, over the next 40 years, life expectancy is to rise even more, and the number of the population over the age of 65 will rise from 12% to 21%. However, according to the the 2006 Retirement Confidence Survey , only 60% of American workers say they save for retirement and just 40% has actually calculated how much they should be saving. The average worker plans to retire at the age of 65, but actually retires at 62. All these miscalculations require the tax payer to cough up one way or the other. Currently 36 million retirees receives a total of $21,000 each in Social Security, Medicare and Medicaid. According to one projection, left alone the cost of Medicare alone will account for 24% of all federal income tax by 2019.
Reform is necessary, and the government hopes to cooperate closely with private insurers. But leaving health care to private insurers is not entirely without risk either, considering the fragmented mosaic of responsibilities that often offers an opt-out for insurers.
Hurricane Katrina forced the myth of the well-oiled American welfare state to collapse for even the most ardent of believers. Those who choose to remain ignorant had no choice but to recognize that the current insurance models no longer cover the risks.
In the aftermath of Hurricane Katrina 1.75 million property and casualty claims were made to the sum of an estimated $41 billion. In America, private insurance companies offer protection against wind damage, and the federal government offers protection against flooding. As a result, the assessors sent out by the insurance companies were not sent to fairly assess the damage, but instead to visit properties and find reasons why damage could be due to flooding and not wind. The objective was to limit the amount of claims that would have to be paid out. At the time, insurance companies were portrayed as evil, but this is merely human nature, men are not angels driven by altruism, but driven to thrive and survive. The insurance companies acted in a predictable fashion, and ultimately it was the system that failed, because it allowed for ambiguity, vagueness and shied away from a comprehensive solution, instead leaving in place a fragmented, ‘puzzled’ system.
The same dangers lurk in the modern health care system, as a recent, perhaps slightly alarmist documentary of PBS suggests on health care in America. A fragmented system of insurers, whose company goals are to increase the bottom line year by year (and have done so more than 400% between 2000 and 2007), a system complex enough that it can often avert responsibility at crucial moments but works just well enough on the surface for people to still want to rely on it, while in the background gobbling up so much of America’s GDP and costing employers so much that it actually threatens America’s future in the world…
The challenge for the Obama administration is formidable…
Tags: 2009, America, Health Care, History, Politics