Why is Finland the best place to have a baby?

March 5, 2019

https://www.cbsnews.com/news/why-finland-is-consistently-ranked-one-of-the-best-places-in-the-world-to-be-a-mom/

The above-linked segment aired on “CBS This Morning” today, reporting that Finland is one of the best places in the world to have a baby because of the low infant mortality rate and the fact that, on average, the medical bill is only about $60.  Why?  The story highlights higher taxes in Finland which fund their socialized health care program.  Finns don’t seem bothered.  In the U.S., if the government raised taxes enough to fund a health care program similar to Finland’s, many Americans then couldn’t put food on the table.

I bring this up because it’s worth considering how balance of trade factors into the equation.  In 2017, Finland enjoyed a $4.4 billion surplus of trade with the U.S., which accounts for approximately 80% of its surplus of trade with the rest of the world as a whole.  That may not sound like much, but in per capita terms the surplus is almost $800 per person, or $3200 per family of four.  That’s how much money the U.S. injects into their economy through trade.  The rest of the world injects about a quarter of that, or another $800 per family of four, for a total of $4,000.

Now consider the U.S., which has a trade deficit with the rest of the world of about $720 billion.  In per capita terms, that’s a deficit of about $2,200 per person, or $8,800 per family of four.  That’s how much the trade deficit sucks out of the U.S. economy.  And that’s how much the federal government needs to inject back into the economy through deficit spending – much of which is accomplished by under-taxing its citizens.

The trade deficit makes Finn families $4,000 richer and makes American families $8,800 poorer.  It’s as simple as that.  That’s why Finland is able to afford a health care system that Americans can only dream of, or that older Americans can remember from decades ago when company-provided health care that required almost no out-of-pocket expense was a benefit that virtually all working Americans expected.

“Wait a minute,” you may be thinking.  When we talk about the trade deficit, we all think of China, and maybe Japan and Germany.  But Finland?  How do we have a deficit with Finland?  Well, for starters, in 2017 we imported $1.14 billion worth of cars from Finland.  Can you name what brand of car is imported from Finland?  I doubt it.  All of them are Mercedes-Benz’s.  Finland’s Valmet Automotive manufactures Mercedes models under contract with Mercedes.  How many cars does America export to Finland in return?  In 2017, we exported only about $32 million worth of cars.  To put that into perspective, we import 20 cars from Finland for every car that we export to them.

Our next biggest import from Finland is pharmaceuticals – about $0.7 billion worth in 2017.  How much pharmaceuticals do Finns buy from us?  About $47.8 million in 2017 – only one fifteenth of what we buy from them.  And on it goes across hundreds of categories of products.

Finland is merely one tiny example of how balance of trade matters – how a trade deficit drags down our economy and our standard of living while boosting them in other countries.  But no one ever explains it to the American people because it’s too complicated a subject to be covered in a five minute story on “CBS This Morning,” or in a 60-second story on the evening news.

I wonder how many people who complain about the sorry state of health care in America are also those eager to lambast Trump for trying to get tough with our trade partners, not understanding the connection?  Is it any wonder that we’re in such a mess?

 


The Missing Ingredient in the Health Care Debate

August 24, 2009

There is no health care crisis in America.  The country is virtually awash in top-quality health care.  It’s available on practically every street corner.  Clinics, medical office buildings and hospitals have become as ubiquitous as gas stations. 

What we have is an affordability crisis.  To be sure, there are many facets to the affordability issue.  Our society promotes over-use of health care – especially with the incessant pharmaceutical advertising in the media.  And our society does too little to promote healthy life-styles, especially with – once again – incessant advertising of calorie and fat-laden junk foods.  Could health care be made more affordable by cutting out the middle-man profits – the private health insurance industry?  Perhaps a little – maybe ten percent, but also perhaps at the expense of efficiency. 

What’s being completely missed in the debate about the affordability of health care is that it has two components – the cost of health care, which has gotten all of the attention, and the availability of income to pay for it, which has been completely left out of the debate.  The failure of incomes to keep pace with inflation over the past few decades, much less the cost of living, is more to blame for the health care affordability crisis than the cost of health care itself.  For most working people, health insurance has long been a component of the compensation package provided by their employers.  As the demand for labor has failed to keep pace with the supply, employers have been able to cut their compensation packages without fear of losing their best employees and, naturally, the component that’s cut first and the most is the one that’s been growing in cost the fastest – health insurance (followed closely by the cost of pensions).  Employers either cut the cost by dramatically raising premiums, or they simply eliminate it altogether.

To a great extent, the crisis in the affordability of health care isn’t the real problem.  It’s a symptom of a deeper, underlying problem and, as such, attempts to treat the health care crisis are akin to treating the flu by wiping our runny noses.  There is no solution without addressing the underlying problem in our economy that is exacerbating the imbalance in the supply and demand for labor. 

The problem I speak of is trade policy that sees trade not as a vehicle for marketing our excess capacity for producing products, but for trading away the jobs involved in meeting even our domestic demand.  In exchange, we get cheaper products, but at the cost of a downward spiral in wages.  When  products like health care, which can only be provided domestically, don’t follow that downward spiral, then a crisis is inevitable. 

If we want a real solution to the health care affordability crisis, we need to consider both sides of the problem – not just the cost of health care, but also the factors involved in driving down the incomes we use to pay for it.  Without addressing the underlying causes of this problem, we’ll find that there aren’t enough bandages in the box to stanch the bleeding.


Health Care Crisis?

November 8, 2007
There is no health care crisis. We have top-notch health care available everywhere you look. There are hospitals, clinics or medical offices at practically every major intersection. What we have is an affordability crisis – an income crisis. Wages haven’t kept pace with inflation for the past thirty years, not to mention the cost of living. (The Consumer Price Index is not a “cost of living index.”) The real problem is the falling demand for labor that our trade deficit has purchased from over-populated countries with bloated work forces desperate for work, driving down American wages. But what is the government doing? Right now, not much, except that candidates are cooking up schemes to provide government-funded health care. That funding will come from deficit spending, financed by a sell-off of American assets to foreign entities. That scheme will only work until all of our assets have been sold. At that point, the whole system will collapse around us.

Pete