Thursday, October 28, 2010

The Attraction of Free Medical Care: Egalitarianism

I have seen several different facebook entries, blog posts, and articles about how bad medicine under state control is. I am sure that an actual effort to put together a history of medical care in Canada, for example, would provide more horror stories and causes for fear than we could imagine. Socialized medicine, medicine under the rule of force, is bad medicine.

What is even more disturbing is that the citizens who live under government controlled medicine know very well what is happening to them. They are the ones who have to suffer the mistreatment, poor service, lower standards, and rationing that state controlled medicine inevitably leads to. Why haven’t we heard from these victims? Why are they silent?

There are mundane answers to those questions, for example, the fear that speaking out would result in being treated even worse by vindictive administrators and “doctors” who have bought into the “free” system. Fellow citizens also may inflict punishment on “complainers”, who, after all, are threatening a service that everyone has a right to receive, in the local accepted prejudice.

But there is something deeper I think. This isn’t just the ideal of altruism, because socialized medicine isn’t solely, or predominately, based upon the sacrifice for the sake of others or even the state. This is worse. It is egalitarianism. This is the enforced requirement that everyone be treated equal, and lower quality, equally bad medical care is acceptable. To not accept it would require questioning the premise. A person cannot argue that they should have good medical care, because that would be demanding something that cannot be offered to everyone within a socialized country. To demand good medical care is to demand that you be treated as an individual.

In “The Age of Envy”, Ayn Rand offered this example of egalitarianism, “Suppose a doctor is called to help a man with a broken leg and, instead of setting it, proceeds to break the legs of ten other men, explaining that this would make the patient feel better; when all these men become crippled for life, the doctor advocates the passage of a law compelling everyone to walk on crutches – in order to make the cripples feel better and equalize the “unfairness” of nature.” (The New Left, p. 170)

In practice, if that term has any meaning, the medical practice in a socialized country will not go around breaking legs. That would be even too obvious for most people. What it does do, however, is almost the same. Instead it makes treatment egalitarian by limitation (not to be confused with rationing). That means that the treatment a person can receive has to fall within a certain range of acceptability, of equality. This restriction to a range is justified by citing the funding limits. But is actually the reverse. It is the principle of egalitarianism that mandates the “equality” of treatments. Even if funding was unlimited, treating individuals differently would violate the fundamental tenant of egalitarianism.

Thus the result is not that the doctor has to go around breaking legs. He only has to say that available resources and funding limits restricts the treatment options available to different cases, regardless of the severity of their illness. Thus someone with a leg that is severely damaged would suffer amputation or permanent disability, rather than receive treatment that is significantly beyond what a broken leg would normally receive. Then, as funding levels do decline, doctor availability and capability decline, as standards of the population decline, the level of treatment will continue to decline over time, with no noticeable reaction from the populace.

The egalitarian application to health care also means that any medical treatment that is considered optional, such as hip replacements, would be eliminated, as has been the case in Canada for decades. It is not egalitarian to offer options.

Just this week there was a long article on the current status of Canadian health system on Yahoo. In the article there is a significant glorification of the size of the operation, ranking it internationally as a business. There is criticism of some spending shortcomings, as you find in the criticism of many government operations in this country. They are only concerned with waste and fraud, ignoring the inherent incompetence of government bureaucrats attempting to deal with such a complex subject as medical care. The article attacks the elements of the Canadian “system” that still contains some element of individual choice (the doctor’s choice of business organization and medical decisions). It goes on to discuss future funding issues. Nowhere does it discuss the actual level of care a Canadian resident receives. This subject is irrelevant!

You find the disconnect between the promise of government run health care and the quality of the care in every discussion of government run health programs. You find this disconnect in the arguments for government health care in the U.S. The proponents of health care provided by force do not actually care about the quality of care. They do not care about the consequences for the individual recipients of government run health care. Neither, apparently, do the proposed recipients, who seem only to care that they are receiving “free” health care. They only care about the implementation of force by the government. The supporters of freedom fail to point this out. It needs to be emphasized.

To my knowledge there has not been a study of the level of health care in any of the Western nations that have socialized medicine. It is quite puzzling. This study needs to be done. A study of the Canadian experience would be most helpful, since it is the most recent and most like our experience would be. (If anyone knows of a study, please tell us.)

As these arguments go on, and egalitarianism becomes more entrenched, at least implicitly, it will be harder to dig out. We must not forget the ideal of egalitarianism in our arguments and protests. It is a special application of altruism and needs its own special attention. Otherwise we shall see continued adverse consequences from both the liberal left and the religious fundamentalists. Both will push egalitarianism.

This is the way mankind pulls back from civilization, from industrialization, from the digital world, from large populations, from survival. What is killing us is egalitarianism.

Sunday, October 17, 2010

Gold is Undervalued

I have come to the conclusion that gold as a financial hedge or currency is undervalued, probably by a very large factor. Actually, a better way of saying that is that today’s currencies, all of them, are very much over valued in terms of gold as a standard of value. A further way of saying this is that as the world population begins to realize the problems that fiat currencies, social programs, high debt, and reduced freedom have created, they will at least try to flee to gold to some extent, and the limited quantity of gold in existence will result in an amazing increase amount of fiat currencies required to purchase a troy ounce.

My conclusion may seem to be obvious, maybe even trivial. My point is that the current price level is not something to be seen as high or remarkable. The current price level is the result of a few people out of our total population, worldwide, who have decided to use gold as a store of value. The current portion of our wealth that is placed in gold is a very small portion.

Currently, the gold market goes up and down (trending upward in what is really a fairly slow assent) as a result of daily random news releases about things of little, long-term significance. None of these news events about government activities or economic events addresses the underlying problems or will stop the consequences of those problems.

What is up in the air, I think, is whether the consequences will be swift and catastrophic or wind us down painfully over a longer period of time. But, the reality of the situation is absolute. Some of those people who claim to be gold bugs who pay any attention to the daily or short-term prices changes, including trumpeting new “highs”, are missing the point. Sure, point out the new high level of fiat currency needed to buy gold, but also keep people’s eye on the necessity of the price going higher. The price is still low. By keeping your eye on the fundamentals, you will not get caught up in day-to-day irrelevancies. If the price of gold should fall for a while, keep in mind that nothing has changed in the fundamentals, you should not be concerned. It is actually a buying opportunity.

The relationship between gold and the present day currencies is just as any other market relationship. There is a limited supply of gold, more so than most items for sale, even more so than most commodities. A higher demand for gold will elicit a greater production, as the prospect for profit encourages a search for more sites to mine and makes it possible to mine ore that would be unprofitable at lower levels of demand. Yet the amount of new production has rarely been sufficient to have much impact on the supply and demand balance. New production will not change the fundamental problem of fiat currencies. New production of gold will not sufficiently affect the day-to-day prices to enter into any purchase decision.

The amount of currency that is needed to acquire a troy ounce of gold depends then on the amount being offered for all the gold for sale. If the amount of fiat currency being offered raises, then the amount per ounce will raise. Supply and demand is a root an exercise of arithmetic. The relationship between the current level of fiat currencies and gold would require a much higher exchange ratio than currently exists. Since nearly all countries are continuing to inflate their currency, the amount of those fiat currencies necessary to buy an oz. of gold will rise even higher.

Gold has reached its current quantitative relationship with the currencies of the world in an environment in which few regard it as a real alternative to today’s fiat currencies and few are willing to take the risk of placing their liquid assets in a mere commodity. Gold has reached a high dollar “price” with only a few people actually using it as a value repository.

When gold was last widely known to be a store of value, the earth’s population was less than a quarter it is today. A century ago, there were perhaps only 5% the number of dollars in existence as there are today (the dollar has lost 95% or its purchasing power since 1913, and there is more loss to come). There are more currencies today and much more of each currency. I doubt that there is more than twice the amount of gold in human hands today than 100 years ago, maybe even less.

How many people own significant amounts of gold, say even $1000? How many people own gold as part of their portfolios? How many Objectivists own gold? The quantity of each has got to be very low, even after the last monetary crises.

As long as people with assets continue thinking that moving into dollar assets, especially U.S. government debt is a “safe” move, the upward pressure on gold will be slight. Probably enough to keep it rising and hitting new “highs”, but not enough to push it toward a realistic value in today’s world. Keep an eye on these people who are using U.S assets for safety. When the U.S. dollar assets are also viewed as less than safe, gold will begin moving upward on a steeper angle. At this point I don’t know what is required for people to realize the dollar’s weakness. The added debt, the continued current account deficit, the lack of movement in the U.S. economy, and the threat of more “stimulus” should have everyone worried. It seems that people worldwide have not accepted that gold could have a real role to play. The attacks by the Keynesians have had some impact. Instead, people are bouncing between the Yen, the Euro, and the dollar. At some point you would think that they would get tired of the bouncing and look for some actual safety. Given the state of the gold market, it would not take many new buyers for the dollar price to balloon. It won’t be an asset inflation, but a dollar fall.

If and when people become worried and there is a more concerted movement toward actually safe, real assets, the number of dollars or other currency necessary to acquire an ounce of gold will skyrocket. We haven’t seen anything yet.