Thoughts on economics and liberty

What Would I Do If I Became India’s Prime Minister? #8

Health care

Health care can be split into two elements – basic health and hospitalization. Unlike higher education, basic health does form part of the requirements of equality of opportunity. However, to the extent that people should meet the costs of their visits to doctors and medication from their own savings or through insurance, this is a usual part of living and no extra effort is called for to equalize the playing field. The poverty line for purposes of NIT would include a buffer to allow for such routine costs to be incurred by the poor.
However, for major medical matters, things can become complex. Ideally, each free citizen should take private insurance or self-insure. However, people who have not self-insured but land up on the doorsteps of a hospital once they fall badly sick or get badly injured cannot be turned away in a free society, just as no one can be allowed to starve.Therefore the concept of voluntary insurance or self-insurance breaks down for hospitalization and emergency care. Major health care therefore becomes a public, not a private, good, being non-excludable. It calls for compulsory insurance. In the manner we pay for roads, defence and police, i.e. in proportion to our incomes and not in proportion to our use, hospitalization and emergency care will be provided by the government to every citizen by charging taxes which will form acompulsory insurance premium. People will be free to take private insurance at levels beyond this coverage for ambulance services, designer spectacles, a private hospital room, treatment at a hospital of choice or by a doctor of choice, use of experimental medicines or medical techniques not available for general use, early booking of elective surgery, or cosmetic surgery.
Having collected the hospitalization premium, the government will not directly deliver the service, but get it delivered. The country’s geographical area will be carved into reasonably sized zones which will then be put out for tender. Private health consortiums wanting to provide prescribed health services of a prescribed standard, to all people living in these areas, will quote a single, flat price on a per-personbasis. This quote would take into account the local costs of living including the difficulty of appointing doctors to remote areas. The lowest (or fittest) bidders would be awarded 30-year exclusive contracts for these geographical areas and paid the agreed amount each year for all people living in that area (the amount would change as population changes). This money would enable these consortiums to establish hospitals or to otherwise negotiate with private hospitals in that geographical area to ensure that appropriate services are provided to all people in that geographical area. Further, except for emergencies, people would be allocated specific hospitals for treatment in their living zones.

The health regulator will monitor the delivery of services. Stiff penalties for non-compliance with agreed standards will be imposed. By the end of the third year, when this system would have been fully implemented, the system of government primary health centres and hospitals will be shut down. Where possible, the lands and assets of these facilities will be sold to relevant private health consortiums which will also be required to take responsibility for the public health and hospital staff for up to five years.

Some Important Non-Core Functions

There are some non-core functions that a government can also perform, if funds so permit. I am focusing only on environmental sustainability here. Many aspects of environmental sustainability are core functions, being a part of justice.

Environmental Sustainability

We have seen that the fundamental cause of poverty in a society is the lack of freedom. The size of a country’s population has absolutely nothing to do with it. Free countries are rich no matter if they have a high population density (31 countries have a higher population density than India’s, including countries like Hong Kong, Singapore, Taiwan, South Korea, Netherlands, Belgium and Japan) or low (such as with Ireland, United States, Sweden, New Zealand, Canada, Australia). On the other hand, low levels of freedom invariably lead to a large, poor and illiterate population. I have explained why India’s large, illiterate population can be directly attributed to Nehruvian socialism in the Online Notes.[i] The explanation uses a conceptual model which formed the basis of my doctoral research. Therefore, had India not followed Nehru’s socialism, its population would have been much smaller and significantly richer today. The diagram below summarizes the reasons and shows how freedom keeps the population size low and motivates parents to send their children to school.



But while population size does not cause wealth or poverty, it impacts the environment significantly.India’s large population has without doubt had an adverse impact on the environment, such as on our wildlife. In addition to creating a large population, Nehruvian socialism has also added to the depredations on India’s environment. Our socialist pirates – Ministers and officers charged with the responsibility of protecting forests and the environment – have personally looted our forests and connived with polluting industries to damage our environment.

  • One of my earliest battles against corruption, in 1985–6, was an attempt to stop illegal felling in beautiful dense forests found in the Hojai subdivision of Assam. Trees were being cut illegally with the connivance of forest department officers, and possibly (almost certainly) of the Minster.
  • One of my friend’s wealthy acquaintances in Delhi confided to me in the early 1990s how he made his wealth by illegal harvesting of native timber from Nagaland. The method he used was that of paying off Nagaland Ministers.
Socialism has also meant that we are a very poor country without the money to clean up our rivers and lakes, or to rehabilitate our denuded forests. Finally, the justice system in socialist India does not hold people to account for the pollution they cause. Under today’s socialist dispensation, polluters invariably pass on the costs of their pollution to the society without any recourse available to citizens. Our environmental situation is very precarious as a result.
On the other hand, freedom leads to a good and sustainable environment. The relationship is depicted in the diagram below. There are three pathways to a good environment: (a) building greater awareness of environmental problems, (b) greater technological capability to deal with pollution, and (c) enforcing accountability firmly – a free society holds polluters to account.
Unfortunately, the transition to freedom is always a time of great pollution. With even a slight increase in income arising from greater freedom, the use of energy, transportation and chemicals tends to rise steeply. Given our large population, things are therefore likely to get very bad before they start getting better. We have to brace ourselves for environmental disasters as the economy opens up.
To avert such disasters, my government will face this challenge head on and put in place the mechanisms of accountability and justice necessary for a clean environment. While wealth and the consequent capability to deal with pollution will take time to build, awareness building and enforcement of accountability will be the main pillars of my government’s strategy to protect the environment. My government will also rapidly phase in, through regulation, the world’s highest standards in the use of non-polluting technology wherever such technology exists. Without these steps, given the large population size bestowed by Nehruvians and the wealth generated by capitalism, the environment will be completely laid bare.
Accountability of Polluters
Accountability or justice is the foremost value in a free society. Passing on costs to the rest of the society and the environment cannot be tolerated. Polluters will be made to pay, if necessary with deterrent levels of penalties. The following strategies, discussed in detail in Chapter 2, will be adopted:
  • Cost recovery: To the extent that polluters can be individually identified, external costs will be recovered from them directlyand polluters will be forced to repay the affected community. This can include mandatory requirements for polluters to clean up toxic spills, failure to do which would lead to imprisonment for extended periods.
  • Pigovian taxes: To the extent that polluters cannot be individually identified, Pigovian taxes will be imposed on the activity that approximates most closely the activity undertaken by the polluters. A range of incentives-based solutions, such as trading of permits within limits to pollute, will also be used. In particular, carbon taxes will be imposed in a phased manner on electricity produced from coal. The revenue so collected will be used as follows:
    • to provide (compensatory) subsidies to companies to increase plantations and forests. These subsidies will be paid based on the actual growth of these forests confirmed through satellite imagery;
    • to fund Indian investors to build nuclear power stations while meeting the world’s highest standards of safety and security under international supervision; and
    • if funds remain, to fund industry and universities, based on demonstrable results, to increase research in non-polluting technology.
(Note dated 4 June 2011: I'm reviewing my earlier position on the concept of Pigovian taxes. It is possible, according to my current position, that these taxes are not an appropriate way to reduce negative externalities. See this.). 
In the Online Notes[ii] I have also discussed the international ramifications of carbon pollution and how the West will be asked to deploy carbon taxes both to increase the developing world’s forest cover through private plantations (see Chapter 2 on how this can be done) and also to significantly increase their own forests.
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There are numerous other things that the blueprint would include, including things like enhancing innovation and increasing transparency which I have not included here for want of space.[iii] By implementing this blueprint, each of our 113 crore people will be enabled to use their minds freely and innovatively for the first time ever in India’s history. India will then be transported into the open spaces of endless beauty that Tagore spoke of in his Heaven of Freedom (see the first chapter of this book). I can visualize thereafter, not very far away, possibly in a few decades, the Indian economy becoming at least three times larger than that of USA, and its people being able to balance the needs of self-development, environment and the economy.
We cannot run after wealth as a nation, though, if we wish to be a great nation. We must only seek freedom. We must seek to live as individuals who are free to think for themselves. Wealth cannot be our objective; it will follow naturally from our freedom. In doing such things, these policies of freedom will make the India of tomorrow the world’s greatest country in many more ways than the size of its economy. And wouldn’t that be something that Gandhi, Tagore and Nehru would have been genuinely proud of?
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