Japan’s Slow Suicide

WASHINGTON – Japan is slowly sinking. This is due to the impact of many self-inflicted wounds, starting with the collapse of fertility rates. “Civilizations die from suicide, not by murder.”, wrote revered British historian Arnold Toynbee. Considering that not enough babies eventually means the death of a society, his words truly apply to Japan. Indeed, as baffling as this may sound, it is true that civilizations implode for non material causes. Their demise is not due to wars or natural catastrophes. It is about lack of confidence in the future that brings about loss of vigor and optimism.

From greatness to decline

And this is today’s Japan. And what is most remarkable is how fast Japan changed from its role of unchallenged Asian Superstar to yet another “has-been” case. Think about it. Throughout the 1980s Japan was the shining example that demonstrated to the entire world the triumph of “Asian Values”. At that time it was thought that Japan had the skills, the drive and the determination that would have allowed it to surpass America as the leading global economic power.

Not enough babies

But now Japan is one of the best examples of a civilization’s “slow motion suicide”. High debt, massive public spending and slow growth point to a bleak future. While there are many factors contributing to this picture, the most visible is the incredible collapse of fertility rates, (average of 1.39 children per woman) . Very few children and extended life expectancy for older Japanese mean a net population decline (minus 244,000 in 2013), and a society that will soon resemble a giant geriatric ward. And this is not a temporary phenomenon. This decline has ben going on since the 1970s.

Population decline

Indeed, a study by the Japanese Ministry of Health and Welfare indicates that, if the country keeps its present  demographic trends, by 2060 Japan’s total population will go from 127 million down to 87 million, of which 40% will be 65 or older. This is a real catastrophe.

Very few workers, many pensioners

Imagine the implications of this shrinkage. Japan will have a substantially reduced work force, and this is bad news for future economic expansion. At the same time, there will be a need to increase public spending for more and longer lasting old age pensions. Likewise, many more senior citizens mean higher health care and nursing home costs due to the needs of millions of old people who cannot rely on a social safety net provided by large extended families. The sad truth is that millions of elderly Japanese live alone.

Larger welfare programs, more debt

In all this, please remember that Japan already has –today– a monstrous public debt, now 240% of GDP.  A reduced working population will translate in reduced tax revenue, while the state will have to keep or even enlarge all its welfare programs in order to provide for tens of millions of older Japanese. This means even more spending and therefore more debt. And it also means that most of Japan’s financial resources will be devoted to support the elderly. Where will the money for R&D and therefore new economic growth come from?

The government led by Prime Minister Shinzo Abe is aware of all this and it is trying to think about ways to reverse this rapid population decline. But I suspect that there is no public policy “silver bullet”. Of course, a simple solution would be to encourage immigration, on a massive scale. But this is almost unthinkable in a society that does not welcome foreigners. And Japan would need millions of newcomers to stabilize its population.

The role of women

Many think that the key issue is about changing the role of women in Japan. Some believe that if more Japanese women worked, then they would have more babies. However, others argue exactly the opposite. If more young and productive Japanese women could work, then they would postpone marriage and motherhood.

Reinvent Japan?

Ideally Japan would need to reinvent itself. Right now it is a society suffocated by strict social norms, economic rigidities and high taxes. The country would need a real breath of fresh air. Lower taxes and substantial deregulation, plus incentives for genuine economic competition would create a new pro-growth environment for would-be entrepreneurs. If this were possible, who knows, may be more people would marry and have more children.

Shinzo Abe is trying to revive Japan’s dormant economy with  turbo-charged Keynesian policies. Higher spending, cheap money and an artificially depressed currency should boost consumption and exports. Sure enough exports are growing, and the stock market is booming. But the overall economy is doing at best so-so, while the national debt is growing, and the population continues to decline.

This is Japan’s slow suicide.



Italy Overwhelmed By Immigrants From North Africa

WASHINGTON – Regarding the constant flow of illegal immigrants from North Africa into Italy and to a lesser degree Spain, the main media focus is on the all too frequent tragedies at sea. Old and overcrowded vessels sometimes do not make it. Sadly, lots of people drown.

Tragedies at sea

Italian media have almost daily reports about the heroic deeds of the Italian Coast Guard and/or the Italian Navy. While patrolling the seas, they spot shipwrecked people and often save lives. The survivors are brought to shore.

No policy

That said, the larger issue here is that, tragedies notwithstanding, there is no policy to stem or reverse the flow of these desperate would-be immigrants. More of them, one way or the other, manage to get to Italy. A little more than 100,000 landed just this year, including 14,600 minors and 8,600 unaccompanied children.

A constant inflow

Now, this is not a tidal wave. But it is a constant stream of poor, in most cases illiterate, immigrants who create additional burdens for already over extended social and health care services.

Of course, If we looked at the impact of this immigration on the European Union as a whole, it would not be so great. The EU is made out of 28 countries, with more than 500 million inhabitants. Surely a relatively large Continent could make room for a few hundreds of thousands arriving from North Africa every year.

But the fact is that, in practice, there is no real Europe-wide policy aimed at absorbing illegal immigrants from North and Sub-Saharan Africa.

Immigrants become the problem of the host country

Whatever the existing EU programs, the hundreds of thousands of illegal immigrants getting in, year after year, de facto become the problem of the countries welcoming them. The Africans landing in Sicily are not going to eventually settle in Denmark or Ireland. Most of them will stay right there, in Italy.

In the case of Italy, there is the issue of the significant cost of patrolling the coastal waters, rescuing people at sea, placing them in some sort of livable accommodations, feeding them and caring for them. This is truly burdensome for a country with a disastrous national debt, (around 130% of GDP), and a semi-comatose, zero-growth economy.

Not a temporary phenomenon 

That said, beyond the immediate costs, one should look at the long-term impact of all these immigrants from Maghreb and other African countries.

For starters, let’s understand that this is not a temporary phenomenon. Tens of thousands of semi-desperate people will continue to arrive, every month, driven mostly by extreme poverty but also by endemic conflcits.

Indeed, unless the economic circumstances in their countries of origin improve dramatically –and this is practically impossible– the drive to emigrate and look for a better life in Europe will continue.

Case in point, now there is a civil war in post-Gaddafi Libya. This chaos creates an additional incentive for more people to leave. If Libya were at peace, if there would be investments, economic growth and demand for labor, then the poor Libyans would probably stay at home. But this is not the case; and so they emigrate, trying to sail into Italy on overcrowded vessels.

Long term impact

This slow but constant migration is already changing Italy’s demography. Assuming no reversal, in a few years the changes will be more and more visible. And, unfortunately, these are not good changes.

These immigrants are by definition needy. They do not bring much intellectual capital in the shape of valuable skills. These are not doctors, engineers or architects. These are mostly illiterate people who do not speak Italian. And, even if they could get jobs, please consider that Italy has a 12% unemployment rate. Youth unemployment reaches 60% in the South. Where are the jobs for these immigrants, even assuming that they were qualified?

On top of that, most of them are Muslim, and this adds another layer of complexity. Very hard to assimilate people of different races, with minimal or non existent education, and a different religion.

A new demographic make-up

Everything else being equal, considering an extremely low –below replacement level– fertility level among the native Italians, 20 years from now there will be areas of Italy completely dominated by the recent immigrants who tend to have many more children.

Again, nothing wrong with that in principle. The problem is that it would take a real optimist to assume that these hundreds of thousands –and in the end millions– of poor immigrants will quickly adjust, get a good education, and become productive workers and tax payers who will end up enriching Italy.

Poor Italy will become poorer

Most of them are likely to live at the margin of the society hosting them, requiring help, health care and other costly social services.

Sadly, an already semi-impoverished Italy will do even worse because of all these additional costs, not to mention the predictable political reactions to all this immigration in the shape of more, and possibly violent, xenophobic, anti-foreigners  movements.


Yes, There Are Young American Innovators

WASHINGTON – While the marvelous “American Innovation Machine” is not moving ahead as fast as it used to, luckily for us it is still alive. Reading Forbes magazine, the chronicler of American capitalism and enterprise, I recently saw a very interesting piece.

Self-made billionaire

It is a short but compelling profile of the youngest female self-made billionaire. (Bloody Amazing, July 21, 2014). Elizabeth Holmes is only 30; but her company, Theranos, has been valued at $ 9 billion, and she own 50% of the stock.

So, there you go: 30 years old and worth $ 4.5 billion. “Only in America”, as we used to say.

New blood testing technology

And what did Elizabeth Holmes come up with? Something really remarkable. She developed a disruptive technology that allows medical facilities to easily conduct blood tests using only drops of blood drawn from patients. Theranos blood testing technologies are now available at 21 Walgreen’s clinics.

What this means is that tests that normally require relatively large amounts of blood, plus complex machinery and facilities with lots of personnel, now can be conducted by drawing minimal amounts of blood from patients. The whole non invasive procedure can be completed at easy to reach facilities located within drug stores.

This means lower costs and less complexity for all: patients, lab technicians and doctors who ultimately use the test results to have a diagnosis on the patient’s conditions.

Innovation and its reward

There you go: Elizabeth Holmes conceived and developed a novel way to deliver at a lower cost, with minimal disruption, routine medical services used by millions, every day. Great idea.

And this is good news for America. It would appear that the US economic eco-system, notwithstanding its shortness of breath, and in spite of all the stupid, cumbersome regulations and our byzantine tax system, can still provide enough encouragement for people like Elizabeth Holmes to think something new and try to make it happen.

Her newly created substantial personal wealth is the reward for her creativity, and for her courage in pursuing her goals.

More like her

I really hope that there are many others out there, just like her. Undaunted young entrepreneurs, men and women, willing to think outside the box, and with enough guts to develop and bring to market their amazing new technologies.

It is because of people like Elizabeth Holmes and her peers that America managed to become prosperous, while generating new devices that benefit our quality of life.

Attracting talented people

Despite the current stagnation, let’s hope that we can keep the “American Innovation Machine” running. This is by far the best thing we have got. And it is the main reason why talented people from all over the world still want to come to America.


Does The Veterans Affairs Scandal Prove That Governments Do Not Know How To Deliver Quality Services?

WASHINGTON – The unfolding scandal affecting more than 20 medical facilities run by the Department of Veterans Affairs, (false records, lies about waiting time, veterans dead because of lack of service), is great news for the Republicans.

Obama promised VA efficiency

Improved care for all US veterans was and is yet another high profile Obama issue on which the administration failed to deliver –in a most spectacular way, it seems.

Way back in 2008, candidate Obama attacked the Bush administration for its poor record on delivering necessary medical assistance to US veterans. Obama promised that his administration would do a lot better. Every veteran would get all the medical care he or she needed. As President, Obama continued to give speeches on this topic.

A disaster

Well, more than 5 years later, it turns out that the Obama administration did not improve anything at all. In fact now the picture looks a lot worse.

The biggest headlines are about the recently discovered willful manipulation of records at many VA medical facilities, so that the actual wait time for doctors visits and procedures would look much better. This by itself is egregious. VA medical and administrative directors conspired to hide poor services at their facilities by falsifying records.

Veterans died while waiting for needed appointments

But it gets worse. Actual wait time for appointments and sometimes critical procedures in many instances is so long (several months) that it makes a mockery of any theoretical promise to deliver care.

On account of this, there are plenty of horror stories, still to be verified, of several veterans who died while on a waiting list for appointments to see doctors.

Bad service

And there is more. Mundane services like transferring medical records from one facility to another may take weeks or months. Unresponsive and uninterested VA staff react slowly or not at all to routine requests.

Furthermore, there are credible allegations that theft of expensive medications and of medical equipment happens frequently at many VA medical facilities, while internal policing is minimal.

Money not the main issue

And money is not the main issue. While it is true that the Department of Veterans Affairs is dealing now with a huge surge of demand for medical services on account of the large increase in the number of veterans who came back from Iraq and Afghanistan, budgets have also been increased substantially in recent years.

In other words, some of the dysfunctions can be attributed to the strain on the system caused by so many new customers arriving all at the same time. But it would appear that the problems run deeper. They are systemic.

Political fallout

Looking for a moment at the political consequences of this VA scandal, this is yet another black eye for Obama. Again, do keep in mind that candidate and then President Obama promised to improve upon the poor record of George W. Bush.The President frequently talks about the supreme obligation to care for all returning soldiers.

In the light of this, ensuring appropriate medical care for all veterans should have been a high priority. Someone, starting with VA Secretary Eric Shinseki, (a retired General, therefore himself a veteran), should have been looking at all this and fix any problems way before any disservice could develop into a crisis resulting in a huge embarrassment.

Well, no wonder –say Obama’s political enemies– this is all about incompetence.

And they add that for those who would love to have a truly national, government-run health care system for all Americans, they should look at the Department of Veteran Affairs to see how well the government delivers health care.

Public policy questions

Aside from partisan politics, from a public policy analysis stand point, these are some of the questions stemming from this egregious example of public service failure:

–Is the government simply incapable of delivering quality services to the general public at a reasonable cost? 

–Is it just impossible to set up proper checks and accountability systems within large, national bureaucracies?

–Is it simply out of the question that the government will be able to recruit dedicated and capable people who will work just as hard as their colleagues in the private sector?

In other words, is the VA scandal now unfolding an exceptionally bad case due to bad leadership? (By the way, for the moment VA Secretary Shinseki –the man in charge– has no intention to offer his resignation). Or is it yet another piece of evidence indicating that governments just do not know how to run complex services?

Bernard Tyson, Kaiser Permamente CEO, Argues That The US Health Care Industry Should Re-Focus On Prevention

By Paolo von Schirach

October 16, 2013

WASHINGTON – Whatever the eventual fate of Obamacare, let’s be clear that this law is not “health care reform”. It is “health insurance reform”. It is a noble effort to allow millions of uninsured to finally get into the system, while eliminating various obstacles to obtaining insurance. Now insurers are obliged to cover people with of pre-existing conditions.  And this is a good thing.

Not health care reform

That said, Obamacare, while it claims that it intends to make health care delivery more cost-effective and in the end cheaper, does not attack the structural problems that have created the most expensive and least efficient health care system in the Western World. America spends an astronomic 17.5% of GDP on health care. Obamacare may do  something to reduce this amount; but not much.

Fee for service

But why does medical care cost so much in America? Ironically, it is because of health insurance. Yes, the combination of self-employed doctors setting their own fees and patients covered by insurance, produces health care inflation. In America physicians make money only when they “do something” to their patients; while patients are passive in this process, because most of them do not pay out-of-pocket for whatever their doctors prescribe. 

And there is more. From the standpoint of economic incentives, American doctors have no interest in promoting prevention and “wellness education”. The fact is that doctors do not make any money when their patients are well. They make money only when they are sick.

The Kaiser Permanente alternative model

Well, there is another model, in America. If one day there will be some sanity (of the mental kind) we will wake up and decide that this alternative is much better for the nation. Kaiser Permanente is one of the largest health maintenance organizations in the US. At Kaiser, doctors are salaried employees. Kaiser wants to keep its costs down and so it promotes prevention and wellness. At Kaiser, a healthy patient is a good thing, in the same way as a safe driver is a good thing for a car insurance company. Kaiser’s members who stay healthy pay premiums; but they do not require expensive treatments.

In polite words this is how Bernard Tyson, CEO of Kaiser, described to the FT (October 14, 2013) the problems of the US care industry as he sees them: “I feel strongly that the fee for service payment system creates the wrong incentives because it is volume driven….And there needs to be greater emphasis on prevention, early detection and really moving the dollars upstream as opposed to a healthcare industry that is really faced with dealing with episodic care…Finally, we need to get electronic medical records, the ability to aggregate information, throughout the entire industry“.

Structural changes needed

So, there you have it. 1) Fee for service is a bad thing, as it creates the wrong incentives: such as over treatment and over prescribing, mostly just to increase doctors’ income; 2) We should invest more “upstream”. Teach people good habits. Yes, as boring as this may sound, healthy diet and exercise matter –a great deal. Obesity and type 2 diabetes cost billions, and yet they are totally preventable; 3) Finally, electronic records. Yes, it would be nice if the health care industry discovered IT, a tool that would help with more rational care delivery, while it would reduce the massive administrative costs that plague the industry.

AARP Magazine Placed A Good Article On Bill Clinton’s Healthy Diet On Page 38 – Why Not The Cover Story?

By Paolo von Schirach

August 8, 2013

WASHINGTON – The 38 million strong AARP (formerly the American Association of Retired Persons) is often described as one of the most powerful lobbies in America. It is in fact the voice of the vast army of US pensioners. For this reason AARP is a staunch defender of the status quo when it comes to protecting existing Social Security and Medicare ( federal health insurance) programs and benefits for senior citizens.

AARP endorses services

It should also be noted that the AARP has built alliances with others who benefit from the status quo, such as companies that sell supplemental insurance that will pay for some of the medical expenses that the federally funded Medicare program will not cover. In other words, while the picture is not entirely clear, the AARP seems to have a bias in favor of keeping a system in which there is a high demand for medical services, some subsidized through federal entitlement programs, and some paid for by patients.

Preventable illnesses

That said, to place all this in context, we should also point out that the extremely high and rising cost of Medicare and of all the additional services offered to Medicare recipients, (some of them with the blessing of the AARP), is in large measure due to the extremely bad personal habits of most Americans –and that certainly includes senior citizens.

Yes, America has become an obese nation. Bad nutrition and lack of exercise are the root causes of many illnesses. And it is a fact that a huge portion of the national health care bill is due to the need to treat totally preventable chronic diseases. And that includes the cost of Medicare for seniors. Yes, it is well known and now properly documented that chronic diseases, such as type 2 diabetes, are totally preventable. Indeed, if most Americans, young and old, embraced a healthy life style in terms of diet and exercise, millions of people would not require medical attention, or at the very least they would require a lot less –and that includes the retirees that make up AARP’s membership. 

Nothing on wellness education

In this context of high but preventable health care costs, it should be noted that the AARP magazine, the main vehicle used by the association to communicate with its members, does not focus on issues of wellness education and/or advice to seniors on how to stay healthy. Knowing what we know today about the value of prevention and the importance of spreading information about “wellness” and a healthy life style this silence is rather stunning. Is this reticence due to the fact that AARP does not want to cause problems with all the service providers who benefit financially from a high demand for medical care? I do not know for sure.

An article on Bill Clinton’s vegetarian diet

Still, given this background, I found it interesting that the AARP magazine published a fairly extensive spread on former President Bill Clinton (My Lunch With Bill, August/September 2013) focusing on his post-heart surgery super healthy eating habits. The article clearly explains what motivated Bill Clinton to adopt a vegan diet. He avoids meat and fish, processed foods, cheese and dairy products because eating them caused him to develop a serious heart disease that almost killed him. Being a smart man, Clinton finally learned what any American nutritionist can tell you: a mostly vegetarian diet is a ticket to good health and a longer life. And he is a pretty good living advertisement of the benefits of healthy nutrition. Now a senior citizen, Bill Clinton looks positively great. He is lean, healthy and in almost perfect shape.

The value of a good life style

His secret? His secret is simple: lots of veggies and fruits. The article provides details on what Clinton eats every day and it includes Clinton’s advice to all Americans to follow a similar healthy eating regime. He clearly explains how healthy food equals a healthier, mostly disease free, life. Coming from a well respected, intellectually gifted former President involved in all sorts of worthy causes, I would say that Clinton’s message is both credible and pretty compelling: “America: Change your diet. Adopt good eating habits in order to stay healthy and live longer”.

And yet, while the AARP magazine editors published the piece with some relevance, they put singer Gloria Estefan on the cover of the August/September issue, and not Bill Clinton and his diet.

And why is that? Clearly making the Clinton diet the cover story would have forced millions of readers to really focus on it. Whereas, by relegating it on page 38, this story can be viewed by many readers as a “color piece” on the somewhat bizarre eating habits of an ex President with a rather nerdish reputation. “Alright, this is interesting. Well, if eating carrots and broccoli works for him, let him do it. As for me, well, pass the ribs and corn bread, if you please”.

Why so little effort to educate seniors?

The AARP magazine has an enormous reach. I praise them for publishing this story on Bill Clinton’s healthy diet. However, if they were really serious about wellness education and its transformative effects, they could do a lot more. They talk mostly to millions of senior citizens, most of them with health issues. If they really wanted to help them, they should educate them on the life changing value of healthy eating. And do consider the compounded effects of a healthier America. This would translate into a lower demand for health care services and consequently a much reduced national health care bill. In case you wonder how big that bill is, it amounts to a stunning 17.5% of GDP, well over 1/3 higher than what other rich countries pay for health. And yet Americans are unhealthy and do not live long lives.

Prisoner of the status quo?

The only reason for not educating seniors about wellness is that the AARP may be prisoner of a really cynical calculation whereby there is nothing to be gained by upsetting the status quo, including the interests of all the medical insurance providers who benefit from AARP endorsements. As for the average AARP members, let them eat poorly so that they will have to go to the doctor who will prescribe cholesterol lowering medications.

Even though it is manifestly stupid to spend money to treat a condition that could be easily prevented, the fact is that doctors and pharmaceutical companies do not make any money when people are healthy. Under the present –horribly wasteful– system some people make lots of money. 


Former Wells Fargo CEO, Warns That America Is losing Small Business


WASHINGTON – Much is said about the magic powers of well crafted federal public policy to “create jobs”. Yet, the record is not so good. Plenty of honest attempts; modest results. But how about the opposite? How about a mix of bad policies that tend to depress job creation?

Job killers, according to Richard Kovacevich

Well, you should listen to Richard Kovacevich, former Wells Fargo CEO. In a recent interview on Bloomberg TV Kovacevich pointed out that small businesses, traditionally the true engine of jobs creation in America, are no longer performing their historic role. And why not? According to what business owners tell Wells Fargo, (their banker), for three reasons.

Number 1: Too much regulation makes it difficult and far too onerous to understand and comply with the new rules.

Number 2: Obamacare compliance looks too expensive for small businesses. So, they prefer not to hire and stay small, in order to avoid the legal mandates that will soon hit larger firms on providing insurance to employees.

Number 3: Taxes are too high. And this is not about corporate taxes that may even be cut. The fact is that most small business owners pay taxes as individuals. As individual tax rates go up, small business owners feel the pinch.

Anybody listening?

The Obama administration should listen to people like Richard Kovacevich, people with considerable experience in lending to small enterprises. Contrary to popular belief, America’s economic might is not about General Motors, IBM, or General Electric. It is about small enterprises that energize the whole country. If they cease to be the jobs creators because they see too many public policy obstacles on their way, then you can expect this unprecedented period of American stagnation to last even longer.

Obama Care Will Not Be Able To Bring Down US Health Care Costs – America Needs To Embrace Prevention, Doctors Should Have An Incentive In Keeping People Healthy

By Paolo von Schirach

February 19, 2013

WASHINGTON – The “birth defect” of Obama’s Affordable Care Act, (universally known as Obamacare), is that it tackles the almost impossible topic of US health care coverage and out of control spending from the wrong end. It tries to reduce spending by reapportioning the bill. The problem is in the spending drivers.

Increasing coverage while reducing costs?

This effort is a bit like buying the best new tires for on old car that needs new tires alright; but most urgently it needs a new transmission. If you do not fix the transmission, the brand new tires will not get you very far.

The laudable goal of the ACA is to extend coverage to millions of uninsured Americans. But the wishful thinking here is in the unsupported assumption that, by some magic, it will be possible to change almost overnight established practices whereby we will get the miraculous result of an entire US population insured, sensible, cost-effective new protocols adopted by the medical profession, and therefore a net reduction in overall health care costs.

This outcome is most desirable, but most likely unachievable, unless enormous transformations will take place. And the ACA does little to get us there.

Doctors make money only when you are sick

It has been said before; but it is well worth repeating. Most US doctors are paid only if and when they treat and prescribe. Hence a built in financial incentive to do “more” rather than “less” regarding any given patient. Combine this with “defensive medicine”, and it becomes clear that the tendency to over treat and over prescribe is almost irresistible. Considering that most patients are insured, all this insane hyperactivity would appear painless, as patients pay out of pocket only a small portion of their health care.

But higher costs translate into higher insurance premiums. And this is inevitably translates into a larger burden for employers who provide medical insurance for their workers.

Unhealthy Americans

Add to this problem another –possibly bigger– one. Americans are more and more unhealthy because of the widespread adoption of bad habits. Addiction to processed foods and nutrition generally rich in fat, starch, sugar and salt has caused a massive, nationwide obesity epidemic. All this causes more diseases, many of them (like type 2 diabetes)  chronic and costly.

Bad health and eager doctors, a bad combination

And there you have it. A very unhealthy population and doctors eager to treat and over treat. The notion that it is possible to fix all this mostly by re-regulating insurance is crazy.

Better habits and doctors who teach prevention

In order to contain US health care costs and bring them down to the average of other rich countries, (this would be overall spending at around 9-10% of GDP, as opposed to US spending around 17% of GDP), Americans need to embrace a healthy life style, while the medical profession needs to be restructured.

Doctors should have a financial incentive to keep people healthy, as opposed to making money only when they (over)treat sick people.

Obamacare addresses some of the cost containment issues, but not in a systematic fashion. Its basic flaw is that it hopes to reform a horribly flawed  health care system mostly by broadening insurance coverage. This alone will not do it.


Happening Now: Bionic Human Beings With Man Made New Parts

WASHINGTON – Wellness gurus teach people good habits in terms of healthy nutrition, good exercise regimes, and stress management techniques that will help keep the body in good shape and therefore prolong the length of our lives, while making life less disease prone and therefore much more enjoyable, even when you get to old age.

Wellness practices prolong lives, up to a point

If we would all follow this sound guidance, we would do so much better. There would be no obesity epidemic, nor obesity related ailments. No more type two diabetes. No more high incidence of cardiovascular diseases. There will be a dramatic reduction of certain types of cancers, and so on.

Still, even the best wellness practices will get you only so far. You may stay healthy and you will live longer. But, in the end, the human body is “programmed” to age and eventually fail. If you take good care of it, your body will fail much later and gently. Still, even if much later, it is bound to fail. This is what we are told by the scientists.

Man made body parts

Well, may be it is not so anymore.

This is the startling new horizon opened up by science and technology. While most of this new research is still hazy and highly speculative, dramatic progress in electronics and nanotechnology allows scientists to predict that soon enough we shall have “failure proof” replacements for human organs.

We already make some artificial stuff. But what we shall have in the (not so distant?) future is much more sophisticated.  TIME magazine provides a small but revealing illustration of the new frontiers, (He Robot, The High-tech future of the human body, February 25, 2013). Scientists are working on artificial eyes, full functioning hearts, plastic made blood, totally functional artificial hands, and artificial kidneys.

Science fiction?

Sounds like science fiction? May be so. But people working in this field are not laughed at. Intuitively we can argue that our much more refined knowledge of human anatomy and physiology, combined with rapid advancement in miniaturized, sophisticated electronics may indeed yield viable man-made replicas of human parts. In fact, the manufactured replacements may even be better than the original parts, because they will not wear out.

Devices that will improve brain functions?

But wait. It gets better. A scientist interviewed on National Public Radio (NPR) went much further.

He indicated that soon enough there will be artificial devices that, when implanted in humans, will actually improve brain functions. In other words, we shall soon be able to perfect and refine “personality”, the complex construct of rational and emotional qualities that defines a person’s identity. This includes intellect, taste, artistic proclivities, feelings of love and anger, fantasies, and a lot more.

New, man-made personalities?

And here we enter a really complex, slippery new terrain. One thing is to give a human being a new hand. This is about restoring a function lost due to injury. However, a new artificial hand does not alter the individual’s personality.

But imagine instead a re-engineered human being with enhanced cognitive abilities, an improved memory, new skills, and different feelings.  If this were indeed possible, then we would essentially have transformed the human being  produced by the natural process of sexual union into “man-modified humans”.

Transcending our limitations?

The scientist interviewed on NPR did not seem to be at all disturbed by this revolutionary scenario.  (I paraphrase the exchange that went more or less like this). “But our individual minds, our characters and our predilections and feelings are what define us as humans” –pointed out the interviewer– “If we mess with all this, where are we headed?

“What defines us as humans, is our ability to transcend the limitations of our conditions. –replied the expert. “Men were not designed to fly or swim underwater. And yet we devised ways to do all that. Re-engineered bodies and improved minds will be just another milestone along this path”.

Think of that.

Beyond The “Fiscal Cliff” Artificial Melodrama, There Is The Serious Business Of Real Fiscal Reform And The Need To Improve US Long Term Economic Competitiveness – This Will Require Leadership And Political Courage

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By Paolo von Schirach

November 30, 2012

WASHINGTON – No way to know how the unfolding “Fiscal Cliff” drama about the need to have a short term fix for US federal spending and revenue will end up. May be a last minute compromise (before December 31) will be hatched. Or perhaps not.

“Fiscal Cliff” is a distraction

Still, while all this is significant, the man-made element of urgency attached to this crisis may allow a misperception as to what America’s long term fiscal and economic predicament really is.

Right now we are all focused on the negotiations between the Obama White House and the House Republicans. Will they come to a compromise about immediate spending cuts and revenue increases? And, if so, who will benefit politically?

This is good Beltway melodrama, providing good fodder for the 24/7 cable TV programs that treat political news as entertainment. But, as all entertainment, it is ultimately a distraction. Even if Washington eventually managed to avoid the dreaded “Fiscal Cliff”, we can rest assured that that any deal will not take care of the slow deterioration of our national finances. And it certainly would not fix America’s systemic competitiveness crisis resulting in a less productive economy that generates a lower tax revenue.

The real issues: social policies

Let’s look at America’s predicament. Social policies first. Just like other advanced industrial democracies, over time America built up its social safety net with the policy goal of improving the living conditions of the elderly. Larger and more generous social programs in the aggregate mean more revenue devoted to more expensive social programs benefiting mostly retirees. Over time, just as in other Western countries, Washington discovered that these costly programs, designed in different times for a completely different society, no longer pay for themselves. And this is mostly due to new and negative demographic trends.

The social programs were designed to be be self-sustaining. Active people would pay into the system and the funds collected from them would be used to pay benefits to retirees. Good idea. Except that now, due to much lower US fertility rates, we have relatively fewer active people paying into the system, while we have more seniors living longer who receive inflated benefits.

Unaffordable safety net

Add to this negative demographic trend the peculiar American feature of out of control health care costs, and you have the making of a crisis, a slow moving crisis, but a crisis nonetheless. To put it simply, the systems making up the “safety net” are now financially unsustainable, unless we want to increase taxation in order to make up the difference between national revenue and what will have to be paid out to current and future retirees. If you consider that already today about 60% of total federal revenue goes to cover the cost of social programs, you get an idea of the horrendous dimensions of this problem.

Washington does not invest any more

An often overlooked but terribly important corollary of increased social spending is reduced federal investments in education, basic science, technology, medical research, infrastructure, space exploration, you name it. In a constrained fiscal environment characterized by permanent high deficits, as social spending goes up the percentage of federal outlays going to what is generally called “non defense discretionary spending” keeps going down, (to about 15% today), as it is crowded out by more politically sensitive social programs.

Impossible to calculate the long term damage caused by a government that, contrary to past performance, is now unable to contribute to the national innovation machine, since it has become essentially a giant transfer payments agency. But systemic government under investment is bound to have negative consequences.

The real issues: competitiveness

Looking at US long term competitiveness, we should consider public education reform, our rate of technological innovation and targeted immigration policies. It is no secret that America’s public education has been in a slow moving crisis for decades. Whatever the efforts, we are still far from a meaningful trend reversal. Put it simply, today’s under educated young Americans will be tomorrow’s under qualified workers. America’s superior economy was built on the basis of a good public education system. Impossible to stay competitive in a global knowledge economy with ignorant workers.

Furthermore, America needs to encourage innovation. One way to do this is to make it easier for average people to start a business. Lower corporate taxes in the context of a broad based tax reform that would lower rates while eliminating preferential treatment, (the so called “tax expenditures”), would help business formation, at the same time promoting innovation.

By the same token, encouraging talented immigrant (many already here because of their studies) to set up shop in the US would help economic activities, business formation, employment and innovation.

It can be done

Can Washington reform social spending, overhaul the tax system and at the same time create a more pro-business policy environment? Of course it can. All of this is complicated, but not impossible.

However, results are predicated on large amounts of political courage and true leadership. We can only hope that, once we have gotten beyond this artificial “Fiscal Cliff” melodrama, serious people will get to the serious business of fixing public spending and restoring the fundamentals of healthy economic growth. The more Washington waits, the more difficult it gets.