A Prescription for Marxism

The next great battle between socialism and capitalism will be waged over human health.

Karl Marx may have suffered a second death at the end of the last century, but look for a spirited comeback in this one. The next great battle between socialism and capitalism will be waged over human health and life expectancy. As rich countries grow richer, and as healthcare technology continues to improve, people will spend ever growing shares of their income on living longer and healthier lives.

U.S. healthcare costs have already reached 15 percent of annual national income and could exceed 30 percent by the middle of this century -- and other industrialized nations are not far behind. Certainly, an aging population is part of the story. But if economic productivity keeps growing at its current extraordinary pace, Europeans, Japanese, and Americans could triple their current income per person by 2050. Inevitably, we will spend a lot of that income on improving and maintaining our health.

Which brings us to Marx. When the price of medical care takes up just a small percentage of national income, it is hard to argue with the notion that everyone should enjoy similar medical treatment. Sure, critics may gripe that the higher taxes needed to pay for universal health coverage may cut into economic growth a bit, but so what? A little redistribution won't suddenly transform the United States into a failed, Soviet-style "workers' paradise." But as health costs creep up to, say, 25 percent of national income, things get more complicated. Americans would see their tax bills more than double, while total taxes could reach 75 percent of many Europeans' income. With oppressive tax burdens and heavy state intervention in health -- already the largest sector of the economy -- socialism would have crept in through the back door.

Of course, smug Europeans, Canadians, or Japanese may think that exploding healthcare costs are a purely U.S. problem. Certainly, the British and Canadian governments successfully wield their monopolies over healthcare to hold down both doctors' incomes and prescription drug prices. And part of the rise in U.S. healthcare costs stems from the breakdown of the checks and balances that more centralized systems provide. (For example, Americans are several times more likely to receive heart bypass surgery than Canadians, where the procedure is reserved for extreme cases. Yet several studies suggest that patients are no worse off in Canada than in the United States). And even the most fanatical free marketers recognize that healthcare is different from other markets, and that the standard supply-and-demand principles don't necessarily apply. Consumers have poor information, and there is an obvious case for greater government involvement than in other markets.

But if all countries squeezed profits in the health sector the way Europe and Canada do, there would be much less global innovation in medical technology. Today, the whole world benefits freely from advances in health technology that are driven largely by the allure of the profitable U.S. market. If the United States joins other nations in having more socialized medicine, the current pace of technology improvements might well grind to a halt. Even as the status quo persists, I wonder how content Europeans and Canadians will remain as their healthcare needs become more expensive and diverse. There are already signs of growing dissatisfaction with the quality of all but the most basic services. In Canada, the horrific delays for elective surgery remind one of waiting for a car in the old Soviet bloc. And despite British Chancellor Gordon Brown's determined efforts to rebuild the country's scandalously dilapidated public hospital system, anyone who can afford to go elsewhere usually does. With public healthcare systems fraying at the edges, many countries outside the United States increasingly face the need to allow a greater play of market forces.

During the next few decades, modern societies will wrestle with very tough questions and tradeoffs: What, exactly, are people's basic health needs in an era where medical technology relentlessly advances the frontiers of the possible? How do we help people while still giving them the incentive to economize on their use of scarce healthcare resources? And who plays God -- the bureaucrats, the doctors, or the forces of the market?

Ultimately, the case for some government intervention and regulation in health care is compelling on the grounds of efficiency (because costs are out of control) and moral justice (because our societies rightly take a more egalitarian view of health than of material possessions). The issue is precisely how much redistribution of income and government intervention is warranted. With the health sector on track to make up almost a third of economic activity later this century, the next great battle between capitalism and socialism is already underway.


The Essential Vladimir Putin

A semiauthoritarian present is Russia's best hope for a liberal future.

In the West, hostility toward Russian President Vladimir Putin stems from two beliefs: that Russia should move quickly toward Western-style democracy and that there is a strong, popular, liberal opposition ready to lead such a transformation. The first is mistaken, the second, pure fantasy. It will take at least a generation for Russia to build the foundation for a modern market economy and democracy. It's an uncomfortable reality, but, for the foreseeable future, only a semiauthoritarian government such as Putin's can keep Russia moving in the right direction. If Putin weren't there, we'd soon miss him.

Consider, for a moment, if Putin were to fail. There is no Thomas Jefferson waiting in the wings. Instead, he would almost certainly be replaced by a figure and a movement that are just as authoritarian but more nationalist, more anti-Western, more populist, and less committed to market reform. A Putin meltdown is not out of the question. He began his term with the disastrous decision to reoccupy Chechnya. He may now be moving toward a second blunder, if there is any truth to rumors in Moscow about a future abolition of Russia's autonomous ethnic republics. Still, the West should wish him well.

Why do so many in the West have such a naive faith in Russia's prospects for rapid reform? The persistent belief that Russia will wake up to free-market democracy is rooted in the success of the former Communist states of Central and Eastern Europe. But the analogy is a faulty one. Compared to Russia, those countries are small and ethnically homogeneous. Russia is a vast fragment of a former empire, and it continues to embrace large, traditional, and impoverished Muslim populations in the North Caucasus. The European successor governments could fall back on pre-Communist statehood and economics. In Russia, Stalinism lasted far longer and was imposed on a far less developed population.

The burgeoning nationalism and desire to escape Russian domination in Central and Eastern Europe impelled these states in the direction of NATO and the European Union, enabling their governments to push through deeply unpopular economic and political reforms. In the Soviet Union -- with the exception of the formerly independent Baltic states -- the historical, economic, and cultural background was very different. Placed in the context of most former Soviet republics, Russia looks better than average in terms of both development and democracy.

It is not just the burden of history that makes hope for a rapid transformation in Russia illusory. The country's dreadful economic decline, social and moral chaos, and rampant corruption in the 1990s shattered the image of economic reform and democracy for the bulk of the population. By 1996, long before the accession of Putin, the combined vote of the liberal parties was already below 12 percent. Russia's first taste of democracy was bitter, and fairly or unfairly, those who championed it have been held responsible for policies that created misery for tens of millions while grotesquely enriching a favored few.

So Russia now has no modern mass democratic parties, and without them, any democracy is likely to be a sham. The inchoate frustration of many ordinary Russians flows either to the worn-out former Communists, or to menacing new groups on the populist right. Like their equivalents elsewhere in the world, these far-right parties do not offer serious alternatives to economic reform and could well act as fronts for oligarchic interests. The combination of economic populism and disgruntled nationalism has little to offer, but it could still be potent.

In this environment, no Russian government can mobilize broad support for further economic reform. The bulk of the population would be outraged if asked to make additional sacrifices. The strong popular opposition to the recent radical overhaul of Russia's system of social subsidies was evidence enough of the limited tolerance for reform. Putin's popularity ratings suffered a steep drop -- as much as 20 percentage points in some polls -- as a result of his support for the reform. The move depended on Putin's willingness and ability to defy public opinion. He will need to be stronger still if he is to take on Russia's oligarchs, whose rise is probably the worst byproduct of Russia's early introduction to democracy. These magnates have a strong grip on the mass media, judiciary, and large parts of parliament. It's wishful thinking to believe that a fully democratic and law-abiding government would be able to take the oligarchs down a peg.

When observers seek parallels for Russia's condition, they should look not to Europe but to Latin America and parts of Southeast Asia. There, the appearance of democracy has often masked domination by elites who have plundered the state, obstructed economic reform, and murdered journalists and activists who dared to expose their behavior. This pattern has, in turn, produced periods of populist backlash, which have damaged prospects for economic growth and democratic consolidation still further.

Criticism of Putin, often justified, should be leavened with a recognition that on a number of vital issues, he is still pushing economic reform in the face of the entrenched opposition of powerful elites and public opinion. Putin may be an uncomfortable partner, but the West is unlikely to get a better one. In a generation, things may look more hopeful. If they do, it will be due in large part to Vladimir Putin.