The first half of this week’s episode of Economic Update features updates from Professor Wolff on Berlin, Germany's law freezing all rents for 5 years, over–indebted corporations threatening the world economy, prisoners' slave labor in Los Angeles, French inequality and yellow vests and Bernie Sanders’ push to put workers on corporate boards of directors.
On the second half, Prof. Wolff interviews Dr. Michael Magee on the medical-industrial complex in the United States.
Mike Magee MD is the author of CODE BLUE: Inside the Medical-Industrial Complex which received a Kirkus Star review. He is a medical historian and journalist at the President’s College at the University of Hartford. He has held similar roles in a range of academic institutions. He was an Honorary Master Scholar at NYU School of Medicine, and a Distinguished Alumnus award recipient from the University of North Carolina. Beginning as a country doctor in western New England, he rose to the highest levels of his profession holding senior executive positions at Pennsylvania Hospital in Philadelphia, and as head of global medical affairs for Pfizer. He is editor of the blog HealthCommentary.org
Transcript has been edited for clarity
Welcome, friends, to another edition of Economic Update, the weekly program devoted to the economic dimensions of our lives: jobs, incomes, debts—all that sort of thing—for ourselves, for our children.
And I’m your host Richard Wolff.
I want to begin today by mentioning a remarkable law that was just passed by the legislature in Berlin, Germany. To remind everyone, the government of Berlin, Germany, is a coalition government, composed of three political parties who together represent a majority of Berlin citizens. The three parties are the Socialist Party, the Green Party, and the Left Party—in German it’s Die Linke—it’s a party that is generally considered to the left of the Socialist Party. In other words, a clearly left government. What they did, after much deliberation lasting over a year, was to pass a law that freezes all rents in Berlin for five years. No rent increases in the apartments of people living in Berlin. I should clarify there is a cost of living clause in the law that allows, I believe, it’s 1 to 1.5% percent increases per year in the event that certain conditions are met, and inflation occurs, and so on, but the basic rents cannot be increased for five years. In Germany, unlike the United States, a clear majority of people are renters, not homeowners. So this is a law that is very popular and that has enormous popular support. In Munich, Germany, the second most important city in that country, a similar law is working its way through the legislature, only it would freeze rents for six years. Amsterdam and other cities are studying all of this because it is a movement, whose time, apparently, has come, and is another sign that the inequalities being bred by modern capitalism are beginning to generate a broad backlash. If we had more time, I would give you more illustrations, such as street demonstrations in Chile, and in Lebanon, which are making parallel demands. But I don’t, at least not for the moment, have that time.
Let me turn then to a remarkable story about modern capitalism that sort of illustrates the idea that the problems it has force solutions, which then create more problems. Let me give you the example that is urgent now. You all know that we had a crash of global capitalism in 2008 and 2009 and that we’re still kind of digging our way out. One of the ways that governments around the world, the United States and other countries, tried to cope with that crash was by dropping interest rates to historic lows. In a number of countries to this day, interest rates are actually below zero, they’re negative. In other words, the bank pays you for you to loan money or deposit money in the bank, not the other way around etc., etc.
So what happened with these very low interest rates, designed to boost the economy in the face of that crash, was that every corporation that had any kind of economic problem or need suddenly had big help—it could borrow money for next to nothing, or literally for nothing. Cheap money was a temptation very few corporations could resist. And the end result has been over the last 10 years the growth of corporate borrowing unprecedented in the history of capitalism. And it means we now have basically what we call a debt overhang—corporations doing a lot of business but owing more money than ever before.
This has led one of the international agencies charged with watching this situation called the International Monetary Fund, the IMF, to take a close look at the level of debt to come to some assessment of what it means. And in the last few weeks, they’ve issued a number of reports that I want to highlight for you.
First, 40% of the corporate debt in eight leading countries, led by the United States—and now I’m going to almost read, so you understand what’s at stake here. Those levels of debt in those eight countries would be impossible to service if there were a downturn half as serious as the one we had in 2008. In other words, they are so leveraged there, so indebted that if we had a downturn only half as bad, as the last one we had, they couldn’t pay their debts, those corporations. And “dot, dot, dot…” no one knows what the consequences could be, but here’s a clear message—not good.
Second implication. Many corporations borrowed for reasons, among others, of being able to repurchase their own stock in the stock market. These things are called “stock buy-back”—the company is buying back from the public the shares it issued at some earlier moment. Okay, what this does, and why it’s done, is to boost the price of these stocks in the market, because the companies are buying them and so the imbalance between supply of these shares and a new buyer, the corporation itself, drives up the price. This may be done because the bonuses that top executives get come from the price of the shares, which they are, therefore, raising for their own reasons. But it suggests that had the cost of borrowing been less they would have been less of this, which led the IMF to conclude that in the event of a problem, share prices could come down very fast, very far. Notice, capitalism’s developing new problems: debt overhang, overvalued shares, because of the way it solved its last crash, leading to the problem that the IMF warns about of an impending other crash. Capitalism is a system that is fundamentally unstable, always has been, and all that the IMF is telling us is that it continues to be so and threatens everyone as a result.
My second… third update has to do with an activity in Los Angeles. It recently was exposed that up to 5,000 people are basically given the following choice in Los Angeles; you can either go to jail for some infraction that could be as little as not paying accumulated parking tickets, or traffic tickets, or you could work for free for the county. 5,000 people working for little or no money to avoid incarceration. That, folks, gets really close to slavery. A slave has to work or else what? Will be beaten, will not be fed, will not be housed—the equivalent of incarceration. You are not supposed to threaten people in order to get work done. It’s an extraordinary exposure. One wonders how many other American cities are doing something that is fundamentally against the notion that slavery has been abolished.
Moreover, let’s be real clear, when you punish a person for a crime, you’re depriving him or her of their freedom to move, to do what they want, to live where they want. It is neither necessary nor appropriate to add to that punishment being required to work for no real pay. This is an additional punishment and one wonders: a) why that would be done, and b) whether that isn’t excessive punishment, which are not supposed to do, and whether that corrects this person’s behavior, makes it less anti-social or builds up resentments and angers that anyone forced to work for no pay would be likely to accumulate. Whose benefit does this serve? And I’m not even talking about the 5,000 people in Los Angeles who could get a proper job and proper pay in the city doing important things if it weren’t for this coerced labor by people facing jail.
Many of you know that over the last year I’ve devoted quite a bit of attention to the yellow vest movement in France, a broad-based, a year-long effort, which continues by the way, to confront the government of Macron in France with the demand for less inequality, for less injustice, economically speaking. Well, the latest report by the government’s own agency indicates that over the last two years, inequality in France has gone much worse quickly. Ironically, proving that the claim, made by the yellow vest movement to justify its activities, was in fact an accurate reflection of what was going on. Add to that the fact that in recent weeks two interesting groups of people have gone on strike in France, in Paris and beyond, one—firefighters, two—the police. That’s right. Firefighters and police have gone on strike. If history is any guide when firefighters and police—who are usually the last ones to do this—go on strike, a government is reaching the end of its tenure.
My next update has to do with the proposal from Bernie Sanders (I-Vt.), who once again shows his courage and going beyond what others are willing to do in raising questions about how our capitalist system works. This time his proposal is for something between 20 and 45% of corporate boards of directors should be the workers, who depend on those corporations, who do the work and make the profits. This is an attempt to produce here in the United States something analogous to what already exists in Germany. In Germany it’s called “Mitbestimmung” in German, which means co-determination, co-responsibility, co-decision making powers that workers since they depend on and make the company grow or to sit on the direction, not just shareholders, that the workers have a stake in what happens just like shareholders and, indeed, just like the communities, where these enterprises are located.
I understand the courage of Mr. Sanders in bringing it up, I understand it’s important for Americans to know, I think it’s clear that the German economy—the most successful capitalist economy in Europe for the last 40 years—is a society in which it has been doing that all that time and clearly giving workers that control, giving workers that power, has not compromised or hobbled capitalism in that country not at all. But there also lies a lesson. Yes, it’s better that workers have some say than if they don’t, that seems an elemental notion of what a democratic workplace ought to be. But giving workers 20 to 45% in Germany did not stop a situation in which a small elite becomes much richer at the expense of everybody else, it did not change the basic control of what was going on or the basic patterns of capitalism.
That’s not a reason not to support it. I do support it. I applaud Mr. Sanders for pushing it forward. But it is an important lesson not to think that this by itself is going to get the kinds of changes that we need. Here’s an analogy. We all support universal suffrage: the idea that every adult man and woman ought to have the right to vote and participate in elections as we have now become used to. But would that solve the problem of capitalism, the inequality, the instability of the society we live in? No. Because it turns out that capitalist too can use the mechanisms of universal suffrage to keep themselves rich and powerful and they can do that with co-determination, or Mitbestimmung, as well.
Well, we’ve come to the end of the first half of Economic Update for today. I want to, as usual, thank you: the patron community first and foremost for the support it gives all of you, who make use of our websites. Please follow us on Facebook, Twitter, and Instagram. And let me also remind you that your questions about Marxian economics let us to produce this book Understanding Marxism, which I know many of you have, and I would urge you to take a look at it if you have questions in that area because the book was written in response to the questions that came to us through email for answers about what Marxism has to offer. Thank you very much for your attention, stay with us, we’ll be right back.
Welcome back, friends, to the second half of Economic Update.
I am proud and pleased to present to you a conversation with Dr. Mike Magee. He is the author of a book called Code Blue: Inside America’s Medical Industrial Complex. Those of you who watch or listen to this show know that we talk about the medical profession from a critical perspective. But this is the book you want to read and look at to get a comprehensive view from the inside about what that medical industrial complex is and what it means for the United States of America as a society.
Dr. Magee, M.D., medical doctor, that book he wrote, received a Kirkus Star Review. He is a medical historian and journalist at President’s College at the University of Hartford. He has received awards from the NYU School of Medicine, the University of North Carolina. He literally rose from being in a New England country doctor to the highest levels of the medical profession here in the United States. He’s held positions at the Pennsylvania Hospital in Philadelphia. He was Head of Global Medical Affairs for the Pfizer pharmaceutical company and is the editor of the blog healthcommentary.org as well as his own blog. And I want very much to welcome him to our show.
Wolff: Thank you, Mike
Magee: Rich, thank you for being who you are. I was so excited to be joining Economic Review. It reminds me of where I began with Code Blue, which was a Warren Buffett quote that said that healthcare in America is the tapeworm on our economic competitiveness.
Wolff: Very good. Alright. Anyway, let’s jump right in. Your book has as its subtitle something about the medical industrial complex. Tell us, tell our viewers, our listeners what is it and why is it important?
Magee: Well, the title, I think, in some ways says it all. “Code Blue”, of course, is that term that they use inside hospitals, when something urgent is happening that requires an emergent response, a coordinated response, a life-saving response. The medical industrial complex is a conspiratorial and collusive network of individuals and organizations that are pursuing in healthcare profitability above all. They’re dealing each other and they’re dealing everyone accept the patient.
Wolff: Is it true, as folks have said, that medical care that comes from that complex is both more expensive and less effective in terms of our health than in other societies?
Magee: Absolutely. I mean, it’s been clearly shown over and over again that in this country, which does not have a universal healthcare system, where we’re leaving a large portion of our citizens uncovered, we spend actually twice as much as all comparator nations, and the results that we get are dismal. For example, we have much higher rates of maternal mortality during pregnancy than any other country in the world, and the same holds true for unnecessary deaths of children under the age of five. So both in maternal fatalities and in children we do poorly. And across the board in every measure we seem to underperform. And the real mystery is, why do we keep on doing it the way we’re doing it?
Wolff: Right. The question that I’m asked of it is, if it’s true that we spend more than everybody else and we get results that are worse than many others in any other industry that would have been the cause for soul-searching and change. And in a sense, you’re saying, if I understand you, that the medical industrial complex is the explanation for why this situation persists.
Magee: Yes, absolutely. You know, people say to me, “Oh well, it’s too complex to fix.” And I think what they forget is it’s complicated on purpose. The more complicated it is the less you know, the less you know the more we pay. I mean, if you want to see what this has delivered for us just take a look at the number of non-physician workers in healthcare. There are 16 workers for every doctor in America and half of those 16 workers have absolutely no clinical purpose—they never see a patient, they never touch a patient. And in that excessive hiring of all of these individuals to handle coding, and to handle billing, and to handle the sale of insurance—there’s over a half a million Americans alone that just sell health insurance. And all of that complexity, we see the ways that we’re experiencing. And the bottom line is the more complicated it is on that scale the more people we hire the less likely it is that we’re going to get good outcomes with our patients.
Wolff: How do you connect or how do you compare, what we have the United States, with what’s going on in Canada? A lot of things are said about it. I’d like to hear your senses.
Magee: That is true, and a lot of misconceptions. For example, let me just give you a couple. It’s said that Canadian doctors are fleeing south to work in the United States, because American health care is better. The truth of the matter is that the flow is in the reverse direction. It is said that Canadian doctors make less than American doctors. In fact, on average, they make more than we have. It is said that their care doesn’t involve any private insurance, when, in fact, the national healthcare system that has been successful in Canada covers about 70% of cost. They have a thriving private insurance system, but it’s just providing supplemental care. So on every scale, the Canadians have made compromises and have been doing it since World War II. But the important thing about the Canadian system and why it outperforms our own, is that they began by asking a very simple question. They said to themselves, “How can we make Canada and Canadians healthy?” In the United States we never asked that question.
Wolff: We asked the question from what I read in your book, “How can we make medical care profitable?”
Magee: That’s right.
Wolff: Which is a very different question.
Magee: Well, basically after World War II we said to ourselves, “If we could only defeat disease the way we defeated the Nazis then health would be left in its wake.” So it was a fundamental misinterpretation of what health is. They felt that if you just conquered disease if we war on cancer and we win then everything will be just fine. They didn’t take into consideration the fact that health requires also good housing, safe and secure neighborhoods, a clean environment, clean water, which, you know, obviously, after Flint, Michigan, maybe people realize now, if your environments bad, your health’s going to be bad as well. So America is the only country in the world where we spend more on the actual delivery of health services than on all other social determinants of health combined. In all other nations they invest in all of these other things and as a result their citizens tend to be more healthy than our own.
Wolff: I recently went and visited a dermatologist to look at my skin. And I noticed—he took care of me—but I noticed there were six young women in his office working behind desks with computers. So I made a joke, you know, without having yet read your book, “Wow, that’s a lot of people working on healthcare. I’ve never met them.” And he smiled and said to me, “Well, you never will, because you’re here to deal with me.” I said, “Well, what are they for?” His answer, “To fight with insurance companies, negotiating who pays how much as they all try to get out of covering the patients. I’m trying to help.” He says, “It makes the problem worse.” And of course, he then has to pay all these people and we have to pay him. You can see the whole thing kind of right there.
Magee: That’s true, Rich. You know, there is a term in health economics “BIR expenses”. And it stands for billing and insurance-related expenses. And a study in 2014 found that you could eliminate 10 to 15% of the BIR costs simply by going toward a single-payer system that just in the billing apparatus, that we have, we waste 10 to 15% of our resources. You were asking me before we began the program about “How could I be optimistic?” Well, one of the reasons I’m optimistic is we’ve got plenty of money in the system, we pay twice as much as any other country in the world, right. So it’s not that we are not spending enough money, it’s just that we’re not allocating it properly. We also have great doctors and great nurses. And I think our schools of public health are an amazing resource. So we have a lot of assets. The problem is that we have decided that we’re going to hand the whole system over the profiteers. And those profiteers do not have our personal health interest in the forefront. They’re there to make money. And so I think the trick to getting this thing back under control do have a lot to do with these BIR expenses and how we bill, and how would we standardize our system, and include everybody in insurance coverage.
Wolff: Well, your focus on expenses leads me to ask another question. You worked for Pfizer for a while. It has been charged over and over again that the Americans pay more for pharmaceutical, medications, and drugs. Tell us a little bit about the prices we pay relative to the costs other countries pay and so on.
Magee: Well, we pay more than double than other countries, because other countries negotiate. But that’s not the only reason. There’s been a lot of talk about the Sackler family and the opioid epidemic. Well, the beginning of pharmaceutical marketing of detail men going to doctors, and of overselling, and of creating names for diseases that don’t even exist so that you’d have something that a product could treat—all of that began with Arthur Sackler in 1950. He was the major marketer for Pfizer pharmaceuticals and other companies—he represented Valium and Librium. He was the father of medical advertising. Well, if you combined that, now 70 years later, when it’s flourished and all this money that we see directed to consumer advertising and you realize that we’re one of only two countries in the world that even allow this time of advertising on television. And you combine that with how sloppy our prescribing has been amongst our doctors that allowed all of these opioids to be unleashed on the American public. You begin to realize that the problem is multi-factorial. It’s not simply that we overmarket and overadvertise. Or that Americans have become used to consumption of drugs as the first trick to trying to get over bad health, instead of saying, “How do I make my life adjustments to create health?” It’s that combined with direct-to-consumer advertising. We should always remember that pharmaceutical companies spend more in aggregate on medical advertising than they do on research. That tells you a lot.
Wolff: Yes. And they always defend their high prices because of the high price of research when the reality is the high price is mostly paying the costs of promotion and advertising.
Magee: Well, when I was at Pfizer, you know, one of the most successful products in the world at the time was Lipitor to treat high cholesterol. What people don’t realize is that, when Lipitor came to the market, it was not the first statin to treat high cholesterol. It was the fifth. Now, was it a little bit better? Maybe, than the other four. But really what made that the first $10 billion-dollar-a-year drug was Pfizer’s marketing machine.
Wolff: Mike, it’s been wonderful talking to you. Thanking really for condensing all of that. It’s something for everybody to think about. And to follow you in the hope that this irrational profit-driven system can be made to do what was supposed to do, which is to deal with our health.
Magee: Well, Rich, thanks for having me. I’m honored. You do a great service to the public in helping them understand these complex issues.
Wolff: Alright. And not too complex the way President Trump said, but perfectly understandable as you’ve helped make it.
Magee: Complicated on purpose.
Wolff: That’s right. Thank you all for watching. I hope you found Dr. Mike Magee’s work and commentary as important and interesting as I did. Thank you as always for supporting and helping Economic Update. I look forward to speaking with you again next week.
Transcript by Aleh Haiko
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