Well, this should go down well with the “force the disabled to work for fuck all” crowd…

Dear Hannah

I’m sure that you’ll decline those really expensive drugs if you are unlucky enough to need them when you’re older then.

Strange to associate killing with healing, don’t you think?

Take two industries that contribute significantly to UK growth – arms and pharmaceuticals. Both industries create jobs, at face value a good thing. But what about their wider social and environmental value?

Just speaking personally, I’m really quite glad that my daughter didn’t die of pneumonia last winter. Seemed like a reasonable quantity of social value.

Yup to Stuart. While the pharma industry does some bad things, mostly associated with pricing and direct-to-consumer advertising (and most certainly not in the UK, where the centralised buying power of the NHS and the value-for-money insistence of NICE has kept prices way down compared to other wealthy countries. And yes, I know the current bunch of idiots in power want to abolish both of these things), it seems flamboyantly, waltzingly insane to list *the reason we don’t die of preventable diseases any more* as something that UK industry does which is value-destructive.

Arms on the other hand, absolutely – and economist Bastiat identified this point in the early 19th century (pointing out that breaking a window and fixing it shouldn’t be counted as a growth in wealth). Like most people who criticise economics, you don’t know enough economics to understand that it often has good responses to the criticisms you think you’re being clever in raising.

I think you’re all being a bit unfair and picking up on only one part of the blog. From what I read, Hannah is not suggesting the pharma industry is necessarily bad. The main thrust of the argument (with which I agree) is that we should start explicitly aligning social goals to economic policy, as per the example of the MDGs. I think it also about communication – politicians need to get better at explaining what particular economic decisions mean in terms of social outcomes.

Implying that criticising big pharma is the same as hating all medicine is a stupid and lazy argument, designed to ignore the point of the article.

Hannah doesn’t even say that parmaceuticals are bad, she asks whether the UK pharmaceutical industry is. Get down off your high horses, and engage with the point – doesn’t it make more sense that we should direct economic growth into areas that benefit the most people? Wouldn’t growth in renewable energy, social housing and community education be preferable to growth in arms, finance and mining?

Ciaran

And herewith the problem. I’m sorry, but you can’t direct economic growth any more than I can make the sun shine at Wimbledon. You can spend money, but that’s a completely different thing.

GDP growth is an approximate indicator of standard of living. At what point do you think our standard of living should level off?

As for chid poverty, I’m sorry but IMHO there’s no such thing. There’s (family) poverty, certainly, but my kids live a very comfortable life with no income or assets of their own.

Good article. What is the point of an economy that has doubled in size since the 80′s yet economic opportunity has declined for most people? Most would have been better off with an economy that stayed the same size, but maintained opportunity. Also that maintained the quality of the environment, healthcare etc.

@7 Stuart

“you can’t direct economic growth any more than I can make the sun shine at Wimbledon. You can spend money, but that’s a completely different thing.”

You can also tax and regulate different industries differently – I think there’s actually rather a lot of directive stuff we could do if we were prepared to define growth without the positive value judgment, as Hannah suggests.

Thanks for the comments.

Just to clarify, I didn’t intend to reject any social value of pharmaceuticals, that would clearly be inappropriate. My original pre-edited paragraph on this issue read as follows:

“It has long been documented that increases in GDP can have negative environmental and social consequences that offset any economic benefits. Take, for example, two industries in the UK that contribute significantly to UK growth – arms and pharmaceuticals. Both industries create jobs – so let’s accept for at face value that this is a good thing. But what about the wider social and environmental value of such industries? Growth in UK arms manufacturing is predicated on increased conflict and threats to peace and security elsewhere. And the pharmaceutical industry is often driven by a short-term profit motive instead of seeking positive long-term health outcomes.”

I hope that helps to clarify!

Thanks, H

“What is the point of an economy that has doubled in size since the 80?s yet economic opportunity has declined for most people?”

That is just silly, I suspect the writer doesn’t remember the 80s. Any consumer in 2011 enjoys things that only the super-rich had access to in the 80s and a whole bunch of things that didn’t exist at all. It is always funny hearing from people who weren’t there just what a lovely time we had in the 70s and 80s before the free market ripped up our charming, cohesive, community-led, various and vibrant high streets.

“And the pharmaceutical industry is often driven by a short-term profit motive instead of seeking positive long-term health outcomes.” I hope that helps to clarify!”

That does clarify but a ‘for example’ would help more. What would a pharma industry that did seek ‘long term health goals’ look like? Would it have kept viagra from us? statins? retro-virals for management of AIDS? the HPV vaccination that has just made cervical cancer a thing of the past for women in the UK?

Thanks Hannah – while I’d still urge you to look at the work of economics in dealing with precisely the issues you raise here, I apologise for slating you about pharmaceuticals: the pre-edit version is completely legitimate.

Torquil: chiefly, it would spend less time making almost-identical versions of existing, successful and clinically effective drugs that were just about different enough to get new patents, and then blanket-advertising them on TV to the point where people requested the new one (and despite it costing 10x as much as the almost-identical prior drug, having it prescribed, because fuck it, it’s not the doctor’s money). Which is what a depressingly huge amount of the pharma industry currently turns on. Remarkably, despite this fact, it still only accounts for about 20% of parasitic thievery in the US healthcare sector.

Instead, it’d spend *more* time making novel drugs such Viagra, ARVs, vaccines and new antibiotics, and all the drugs that we’re grateful for the pharma industry for making, alive today because of, and which I thought Hannah was slating in the original.

[former analyst consultant to pharma industry; proud when it invents antibiotics, ashamed when it advertises "NEW DRUG SAME AS OLD DRUG WILL MAKE YOU NOT DIE. BUY IT OR YOU'LL DIE" on primetime Yank TV].

john b, you are talking about a problem with the US pharma industry, aren’t you? I can’t think of a UK example (interestingly, though, making the patient pay for the medicine would eradicate the problem from what you say).

And the pharmaceutical industry is often driven by a short-term profit motive instead of seeking positive long-term health outcomes.”

This reminds me of something…

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest.

Torquil: and a sizeable proportion of UK national income (ie AstraZeneca and GSK’s patent royalties and remitted profits) comes from the US pharma market. If you’d bothered to read my comment at 4, you’d've noted I agree that due to the NHS’s purchasing efficiency, this isn’t a concern in the UK.

” If you’d bothered to read my comment at 4, you’d’ve noted I agree that due to the NHS’s purchasing efficiency, this isn’t a concern in the UK.”

I am sorry if my comments on a blog thread are insufficiently cross-referenced or indexed, john, but thanks for the clarification. So Hannah’s complaint about pharma policy in the UK is baseless? We agree.

I am not too convinced by her comments on arms trading either. I think there are valid ethical reasons for oposing for-profit arms manufacture, but I haven’t seen any evidence that profits in that industry depend on an increase in conflict. What are the states? It seems to me that the technology race would be sufficient to keep the profits up and the fact that most customers are governments which are notoriously poor at keeping costs down.

One other comment @JohnB

“Like most people who criticise economics, you don’t know enough economics to understand that it often has good responses to the criticisms you think you’re being clever in raising.”

As it happens I am actually familiar with Bastiat, along with a diverse range of economists who have historically made similar arguments. My re-iterating these arguments in a contemporary context does not – I hope – suggest that no-one has ever made these economic arguments before. But these arguments need to be articulated by politicians and opinion-leaders today, in a language that people can relate to. Economic wonks quoting Bastiat to each other does not constitute a wider conversation – also with the general public – on what growth is really for, and the social (and environmental) outcomes that it should seek to achieve.

But thanks for retracting the slate about pharmaceuticals .

Cheers,
H

For those unfamiliar with Bastiat, try this (satirical) petition to the National Assembly in France “to shut off as much as possible all access to natural light, and thereby create a need for artificial light”:
http://bastiat.org/en/petition.html

“It is time to build our society based on outcomes that people can relate to ”

Agreed, absolutely!

so, let’s start with asking the people should we?

Would you like what that nice lady over there, she studied at Oxford you know, thinks you ought to want or would you like to have the cash and the choice to get what you want yourself?

All those in favour of the second option? Ah, so that would be everyone except that nice lady who went to Oxford who went for the freedom and liberty option then, would it?

OK, well, glad we’ve got that sorted then.

What was the next question? Thank you, yes…..what do we think Sunny is going to bring us back from Netroots then? An Amanda Marcotte auto column generator?

Not much I would disagree with there.

But until you change the nature of money – none of it will happen.

Our money supply is created – by private banks – as debt.

So it is inevitable that the banks will only loan money that will return them a fast buck.

Hannah makes the novice mistake that many people do, in imagining that we live in a functional democracy – but we do not.

As long as banks retain the power to create over 98% of our money supply as debt, then bank serving growth is the non-negotiable collateral we must offer up in exchange for the numbers in our bank account.

Politicians have a vested interest in deluding the public about the things tney have actual control over – and currently seem to lack the wit or the courage to reclaim the right to create money for the state in the public interest.

If you don’t understand how money works then go here:

http://www.positivemoney.org.uk/
.
.
If you want to know why Labour should embrace monetary refrom go here:

http://sodiumhaze.blogspot.com/2011/06/monetary-reform-labours-missed.html

Shorter #20: “The nice man who studied at LSE knows what you want”

“I am sorry if my comments on a blog thread are insufficiently cross-referenced or indexed, john”

Oh, sod off. If you’re going to comment on a blog thread, you owe the other commenters the basic decency of reading their posts on said thread before attacking them. I’m not suggesting that you (or indeed, anyone else – I’ve not updated it in months) should read my blog, but the suggestion that I’m unreasonable for saying that when you read 20ish comments you should vaguely note who wrote which one and view each commenter as a body of work is deranged.

Hannah: sorry for assuming you weren’t up there on the economics. There’s an interesting discrepancy in what LC is for – is it a polemic space for lefties who know what they’re talking about to try and engage neutral people who don’t in supporting the left, or is it a space for people broadly of the left to try and work out what we think with few holds barred? The pieces I write here are more aimed at the latter – (“the data supports these conclusions; you guys can work out how to sell it”) – but I’m aware that many of them have been written in a way that would turn neutrals off, because propaganda (even in a bloody good cause) isn’t where I’m at. I’m sorry for taking your piece as the second when it was the first.

“The nice man who studied at LSE knows what you want”

Both the right and ability to make your own choices, yes.

@Stuart

GDP growth is an approximate indicator of standard of living. At what point do you think our standard of living should level off?

Actually I think there has been some research into this question which has found that increases in GDP do improve happiness, but only up to a point of about $15,000 per capita (about £10,000) which in the UK was reached in the 1960s.

http://www.economist.com/blogs/dailychart/2010/11/daily_chart_1
http://www.guardian.co.uk/science/2010/dec/13/happiness-growing-wealth-nations-study
http://en.wikipedia.org/wiki/Happiness_economics

“Both the right and ability to make your own choices, yes.”

Not exactly what you said at 20, but nicely weaselled.

@20 – “… or would you like to have the cash and the choice to get what you want yourself?”

Just to be really awkward: would you like the next generation, or the one after that, to have the same choices as yourself?

Infinite growth in a finite world doesn’t add up.

Are humans smarter than yeast?

“Infinite growth in a finite world doesn’t add up.”

I’ve written a whole bloody book about this sort of stupidity.

GDP measures the value of goods and services produced (or consumed, the other way of measuring it). So, as Herman Daly points out, we cannot have infinite growth in the resource use to produce these goods and services. Yes, well done, there’s a limit to the number of iron or copper atoms on the planet.

But this does not mean there is a limit to the value we can add to those copper or iron atoms available to us.

This is what Daly means by “qualitative instead of quantitative” growth. This is what a “steady state” economy means. That GDP does grow as we work out how to add more value to those limited resources that we have available to us.

Which leads to a couple more observations:

1) 80% of the 20 th century’s economics growth came from that adding more value not consuming more resources.

2) 100% of the growth in the Soviet Union came from the consuming more resources type. Even a lefty like Paul Krugman has pointed this out in his writing.

So, we want more qualitative than quantitative growth. My word, how are we to achieve this? Through a market economy.

And, specifically and most importantly, we do this through technological advance, working out how to add more value. So, a properly green economy is one that is market based, almost certainly capitalist and one with high rates of technological change.

That that isn’t a Green economy is just an example of how damn stupid and ignorant the members of the Green Party are.

And the next person to quote that misunderstanding of Kenneth Boulding’s at me is going to get told to fuck right off. It’s not big and it’s not clever.

@28 – I’m not quite that stupid.

To quote you:

“Yes, well done, there’s a limit to the number of iron or copper atoms on the planet.”

To quote you again:

“80% of the 20th century’s economics growth came from that adding more value not consuming more resources.”

(And… the other 20%? What’s 20% of “lots”, anyway?)

To quote the author of the above piece:

“… at a point at which the world is fast approaching numerous environmental tipping points, mainly due to over-consumption of the earth’s natural resources in developed countries…”

Do you disagree? Just today IPSO released a report on the state of the world’s oceans concluding that a mass-extinction event was “likely to happen”. People have been talking about peak oil for some time, but that too seems more likely than ever.

I cannot see how things can change under the current economic model – can you?

Do you disagree?

Yes, from the IPCC:

“The global economy expands at an average annual rate of about 3% to 2100, reaching around US$550 trillion (all dollar amounts herein are expressed in 1990 dollars, unless stated otherwise). This is approximately the same as average global growth since 1850, although the conditions that lead to this global growth in productivity and per capita incomes in the scenario are unparalleled in history. Global average income per capita reaches about US$21,000 by 2050. While the high average level of income per capita contributes to a great improvement in the overall health and social conditions of the majority of people, this world is not necessarily devoid of problems. In particular, many communities could face some of the problems of social exclusion encountered in the wealthiest countries during the 20 th century, and in many places income growth could produce increased pressure on the global commons.

Energy and mineral resources are abundant in this scenario family because of rapid technical progress, which both reduces the resources needed to produce a given level of output and increases the economically recoverable reserves. ”

The IPCC, you will recall, is the world’s largest, most complete, ever, attempt to look into the future. It the attempt that tells us that climate change will be a problem for example.

http://www.grida.no/publications/other/ipcc_sr/?src=/climate/ipcc/emission/

They say that faster economic growth increases resource availability. Who am I to argue with that?

Tim@28: So what your saying is, basically, the only way to advance the world is to add virtual value to a artificial market system that we humans created. If you create more stuff, you lower the value of it. If you create less stuff, you raise the value, right? I may not be a trained economist, but I know when somebody tells me that the way to increase growth is to make fewer things, but make them more expensive, what he actually means is “FUCK YOU MATEY, I’M OK, SO BOLLOCKS TO THE REST OF YOU! Do’nt forget to kiss your poster of Gordon Gecko before you go to sleep. Hannah, good piece. I think I get your drift, why are we pumping money into making things that people simply want because everybody has one, rather than making the effort, and investment, in making long term decisions now, knowing the long term social/environmental benefits will negate the original financial costs. Ufortunately, the world is run by people who have the above sentiment ingrained as their mantra. The current system suits their needs, they wo’nt give it up for love OR MONEY.

You’re right, you’re not an economist.

“If you create more stuff, you lower the value of it. If you create less stuff, you raise the value, right? I may not be a trained economist, but I know when somebody tells me that the way to increase growth is to make fewer things, but make them more expensive, what he actually means is “FUCK YOU MATEY, I’M OK, SO BOLLOCKS TO THE REST OF YOU! Do’nt forget to kiss your poster of Gordon Gecko before you go to sleep.”

So, what produces more value for you?

50 grammes of copper in a coal scuttle you don’t use any more? Or 50 grammes of copper in the motherboard of the comuter you’re using to read this thread?

Still using 50 g of Cu remember, same number of atoms, just adding more value to it.

So, adding more value to the resources we have available is one way of growing the GDP, one way of growing the economy.

A good riposte to those who claim that economic growth can be ‘decoupled’ from resource usage: http://www.energybulletin.net/stories/2011-03-29/energy-efficiency-rescue

Tim@32: I take your point about the greater value if it’s built in to a CPU, but 50 grammes of copper is worth bugger all unless the coal scuttle is antique. If it is antique, the value can be high in cash terms, but that was my point, it’s all artificial. We created the economic system as a way of trading with each other, originally a good idea. Something went wrong and a good idea became a weapon, used against the weaker, less well-funded in the world. We are fools to ourselves for buying into it, but that, as they say, is how the world works. As for the argument around decoupling, it COULD be done, unfortunately it would require everybody, everywhere to disregard the economic structure of the ‘global market’, choosing instead to pool all resources, share them out, share the benefits they offer and stop trying to be top dog over each other. A nice idea, sitting on a fluffy cloud, I know. Maybe one day we will evolve to that level of trust and cooperation. Maybe one day, Port Vale F.C. will top the prem’, christians, jews and muslims will agree that they all basically want the same thing and the existence of a higher power will be proved beyond doubt, but I doubt it very much.

@30 – thanks, the IPCC report is very interesting, although it seems to be to be astoundingly optimistic in the formulation of ‘scenarios’ and telling of ‘stories’. Would you say that the history of futurology has been especially characterised by success, by the way? Entertaining as it is, I don’t think this is particularly useful.

(And note that they deliberately exclude outliers, yet ‘expect the unexpected’ has proved a remarkably useful rule throughout human (economic) history.)

I still think a ‘Judge Dredd’ future is most likely.

“They say that faster economic growth increases resource availability…”

But, presumably, not the overall quantity of resources? I don’t see how this helps, although we’ll find out who’s right and who’s wrong a lot sooner.

I think a lot of the solutions proposed are like the ‘green revolution’ in that they appear to solve certain issues whilst creating far bigger problems – kicking the can, in other words.

@32 – “Still using 50g of Cu remember, same number of atoms, just adding more value to it.”

But as you say, you’re still using 50g of Cu. The use of that copper is determined by the maximum profit that can be extracted from it, not any ‘social utility’ – and, as a result (as the author points out), economic growth has favoured the wealthy at the expense of the poorest and the environment.

The most compelling argument for GDP growth is the positive impact this has on employment and job creation, but there is little or no elaboration of the areas of the economy in which that growth should take place, and the broader social outcomes this might deliver.

I am not sure I follow what this means – I assume it means the author thinks growth is bad unless the Nice Man in Whitehall determines where it takes place and whether or not it is in the national interest. Is that right?

I can think of no worse claim. The great thing about economic growth is that it is unpredictable and uncontrollable. Which is why it does things like raise up northerners as in Britain’s Industrial Revolution. Frightfully common don’t you know. Had it been controlled by the government no doubt it would not have been allowed at all, but if it did, it certainly wouldn’t have given money and power to oiks from Liverpool or even worse, Quakers from the Black Country.

But at a point at which the world is fast approaching numerous environmental tipping points, mainly due to over-consumption of the earth’s natural resources in developed countries, and whilst inequality remains shamefully high both globally and within a UK context, it is more important than ever before to ask ‘to what end?’.

Tipping points which remain a matter of religious belief rather than scientific evidence. Nor is there any evidence that over-consumption of anything is a problem for anyone. Except maybe hydro-electric dams in China. Inequality globally is rapidly shrinking. This is a good thing, right?

Take two industries that contribute significantly to UK growth – arms and pharmaceuticals. Both industries create jobs, at face value a good thing. But what about their wider social and environmental value? Growth in UK arms manufacturing is predicated on increased conflict and threats to peace and security elsewhere. And the pharmaceutical industry is often driven by a short-term profit motive instead of seeking positive long-term health outcomes.

Britain, as a matter of law and policy, does not sell weapons to, well, anyone who might need them. As a result it would be hard to think of the last time a British weapon was used to kill anyone. I know Mugabe was sold some trainers back when everyone thought he was like Mandela. Which he then used to kill some people. As did Indonesia. Both in violation of their pledges. The British arms industry is dying, but in so far as it still exists, it does not rely on conflict or even threats to peace. They are not allowed to sell to such places.

As for the pharmaceutical industry, well of course they are interested in short term profits. Any evidence that there is the slightest conflict between curing all the major diseases of the West and our long term health? It is true they do not invest in salad-based diet plans but they don’t work anyway. The fact is our pharmaceutical industry has produced a massive improvement in health out comes not just for us but for much of the world. The greatest gift to humanity in the history of the human race. We ought to be thankful.

Some of these outcomes could be shorter working hours, more green spaces, less air pollution, reduced child poverty. People’s priorities will differ, but they will be united in being able to engage with this conversation with more enthusiasm and commitment than with abstract references to percentage points of GDP.

Or better yet we can give people the tools they need so they can choose their own damn goals without being bullied, corralled, harassed, harnessed and bossed around by some second rate sociology graduates in Whitehall. Like, for instance, a lot more money. Then they could work the hours they liked for instance.

“unfortunately it would require everybody, everywhere to disregard the economic structure of the ‘global market’, choosing instead to pool all resources, share them out, share the benefits they offer and stop trying to be top dog over each other.”

We have an eonomic system that does that. It’s called a market economic system.

We have the division and specialisation of labour, then the trade of what is produced, This is how people cooperate to share the resources available.

If I grow the apples, you make the cider and we get drunk together that is division and specialisation of labour plus trade in the final product.

There is no difference conceptually between me writing fluff for the internet which is read by some worker in China and he making flip flops for me to wear (one piece I have written was recently quoted on the internet in China in Chinese) and this set up with the cider.

That’s just how we cooperate, in markets.

“The use of that copper is determined by the maximum profit that can be extracted from it, not any ‘social utility’”

Bollock,s entire bollocks. I asked which use do you value more? Not which made more money for the bloke who sold it to you. Your valuation in use of that 50 g is exactly and precisely the social utility.

Blimey, if you want to play economics please at least get the terms right.

Isn’t this an attribute of looking only at results rather than causes? GDP is made up of multiple parts only two of which would lead to job creation. It would be possible to increase it simply by raising prices thus increasing household consumption. With the government attempting to cut its spending the only creational part left is investment and there seems to be a lack of incentive in that.

To give a micro-example empty industrial units used to be rates-exempt. If you owned land it made sense to erect such buildings; with large numbers competition ensued that buildings were up-to-date and maintained and that plenty of businesses could find premises. As a knock on effect making stuff increased exports and cut reliance on imports.

They are no longer exempt. Rent’s dropped to almost zero in some cases; no money to pay maintenance, no desire to build more modern units. So many areas are being razed with housing being placed in there stead. We need housing, but past the initial purchase they’re not exactly wealth producers.

With the pharmaceutical companies, they’re businesses and as such they’ll only invest in substances that will make money. If a million people suffer from disease X but they have no money no-one is going to invest in a cure except a charity or government and then with the expectation that any profits accruing return to the company.

Companies can’t be blamed for this they simply produce what we want to buy at a price we’re willing to pay; therefore any attempts to produce a “good society” has to be led by us. Sadly with ‘us’ being so nebulous that means the government who still seems to take a hands-off approach to things.

@ Torquil Macneil

“That does clarify but a ‘for example’ would help more. What would a pharma industry that did seek ‘long term health goals’ look like? Would it have kept viagra from us? statins? retro-virals for management of AIDS? the HPV vaccination that has just made cervical cancer a thing of the past for women in the UK?”

To give one example, it would produce drugs that actually assist in healing rather than force the user to consume huge amounts in a form of chemical cosh.

Example: MDMA (Ecstacy) – what limited research that has taken place has shown positive signs that use of this drug in small amounts over the short term coincident with therapy can greatly assist in the treatment of PTSD.

However, Big Pharma aren’t interested in pursuing this research because it would adversely affect the sales of Prozac and similar drugs that are meant to be taken in large quantities over the long term.

This is the way to stop those cravings for economic growth:

UK population must fall to 30m, says Porritt
http://www.timesonline.co.uk/tol/news/politics/article5950442.ece

Start with building those Harold Shipman Centres to get rid of pensioners, which will surely help George Osborne to rein in the budget deficit by reducing the payout of state pensions and cutting NHS healthcare costs.