Social care needs a framework for innovation

From Spain to Canada, and everywhere in between, we have seen the devastation Covid-19 has brought to congregated care settings like nursing homes. Part of the issue is the nature of these settings; with so many vulnerable people in a confined space, it is fertile ground for infectious disease to spread.

This should act as a massive wake-up call for all of us. I hope it will have as far-reaching an effect on our care models as the 2008 financial crash had on banking practices. According to Irish figures, Home and Community Care Ireland (HCCI) recorded a peak Covid-19 infection rate of 0.45% (91 cases) among our members’ 20,000 clients.

Home care should be at the heart of our thinking as we redefine our thinking on how to deliver social care to vulnerable people.

The ASI’s report, Fixing Social Care, is a useful contribution to the debate and helps us to break down the problem. Making insurance costs more viable is important if we are to drive both value and innovation in the sector. Currently, technological advancement in healthcare is focused on either consumer facing wearables or high-tech equipment for hospitals. While there are some companies working on how to incorporate new technologies into social care, these efforts are relatively disparate.

If we are to change the game in social care – and this pandemic should leave us under no illusions that the status quo ante is acceptable – we need to create an innovation framework for the sector. We could start by looking at places like Germany. They take a broad approach, funding a €300 million annual Health Innovation Fund that encourages new models of care and more effective ways to deliver care across a range of healthcare settings, with the private sector closely involved. Although not every country can replicate the size of this funding, they should be able to design a national framework for healthcare innovation that carries with it an annual budget.

Looking to America, MobiHealthNews reported 82 health related funding deals worth $2.9 billion in Q1 2020. However, as you look through them, only one is focused on home care. They are almost all directed towards consumers or the acute hospital system. Talking to one home care entrepreneur in New York earlier this year, he was very discouraged about innovation in social care. His view was that American insurance companies are not yet serious about keeping people at home for longer – the money is in things like surgeries. It will take a considered investor, matched with some entrepreneurs with real vision, to turn the game on its head in the USA. 

Another option for all countries to think about is for healthcare and hospital groups themselves to lead out on providing more care in the home, either themselves or with other provider organisations. For example, the Danes have trialled giving chemotherapy treatments in the home. If this sort of initiative is underpinned by the sort of innovation framework Germany has, we could see a much more integrated acute and community care system that provides continuity of care and the care where it is best for the patient to receive it.

Social care is the beginning and the end for so many people. Whether a sniffle treated by a relative, a healthcare assistant helping with the routines of daily living, to palliative care at the end of life – so much begins and ends at home. If we grasp the opportunity Covid-19 has given us to rethink healthcare delivery, and if we design a framework for innovation that seeks to integrate our care models, we have the chance to build a brighter future for millions of vulnerable people.

Joseph Musgrave is the CEO of Home and Community Care Ireland, the representative organisation for 80 companies that provides home care to 20,000 older and vulnerable people in Ireland. HCCI advocates for the highest standard of regulated home care services to be made available to all on a statutory basis, enabling as many people as possible to remain independent within their homes and community.

Happy Birthday Milton Friedman

On this day in 1912, Milton Friedman was born.

It is hard to imagine today the incredulity with which Milton Friedman’s most well-known views were met when he first expounded them. Ideas which are by many regarded as self-evidently correct were then considered heretical to the Keynesian orthodoxy, rendering Friedman a sort of flat-earther amongst the academic community. More than any other economist, Friedman was at the vanguard of the discreditation of the hegemonic post-war consensus of demand management, with its highly discretionary countercyclical actions and interventions aimed at mitigating recessions or speeding up recoveries.

You wouldn’t intuitively think that such a well-known defender of market economics would have come from such a poor background. The son of Hungarian immigrants, growing up, his father took work wherever he could, and his mother worked as a low-level seamstress. His preciousness was evident from a young age, beginning a degree in mathematics at Rutgers University at the ripe age of seventeen. From there, his academic rise was meteoric, and he found himself doing postgraduate work at the University of Chicago with such scholarly titans as Frank Knight, Jacob Viner and Henry Simons, eventually becoming one of the pillars of the Chicago School of economics.

Friedman’s star as a radical economic thinker began to shine with the publication with George Stigler of Roofs or Ceilings? in which he demolished the idea that rent controls were anything but extremely damaging. There is now widespread agreement amongst economists on this. Assar Lindbeck puts it extremely well when he says that “Next to bombing, rent controls seem in many cases to be the most efficient technique for destroying cities”. But widespread agreement on this most topical issue did not exist at the time of writing (1945).

The monograph was derided as an attack on the ability and authority of politicians and economists to shape the economy according to their benevolently motivated and rationally preconceived ends. Of course, as with much of what Friedman advocated, in the long run, he was right.

Income from Independent and Professional Practise was published shortly after. This was a book length piece of research which drew on extensive statistical analysis to reveal that those who benefited the most from occupational licencing were not in fact the consumers of the services which those professions provided, but rather the professionals themselves (such as lawyers and dentists). By restricting competition by throwing up costly entry barriers, Friedman showed that the general public were merely paying more for worse services. The results of his study reflect a recurring theme in Friedman’s work, which is exemplified by the pithy and humorous quote of Ronald Regan’s:

“Government is not the solution to our problems. Government is the problem”.

Indeed, what Friedman emphasized was that in matters of policy, intentions ought to matter little. Even the best-meaning government programme is useless if its effects are bad in the jurisdiction to which it would have effect. This evidence based, empirical approach to policy making is reflected in his Methodology of Positive Economics, an excellent and very accessible essay (despite its rather wonkish title) in which it is asserted that economics as a science should be concerned with facts, rather than normative judgements. His insights were the apparently obvious contentions that positive economics should produce the facts which inform normative economics, and that the assumptions behind any model of the world matter little, as long as it is capable of accurate prediction. The value of any theory in the social and physical sciences depends on the success of the predictions which can be made with it, and not on the descriptive realism of the assumptions behind it.

Given the last sentence, it will probably not shock you that Friedman was not as preoccupied with touching up complex and highly abstracted mathematical models as he was with testing theories against the facts time after time so to discover the answers to the big questions in economics, which have a very tangible impact on our day to day lives. This led him to study the issue of his day, inflation, and in 1956, he wrote The Quantity Theory of Money, which along with his later book A Monetary History of the United States (co-authored by Anna Schwartz), revealed how, as he was later to say in a quote which has become synonymous with his name, “Inflation is always and everywhere a monetary phenomenon” – that is to say, too much money, chasing too few goods. He went on to demolish the Keynesian critique of this in his Theory of the Consumption Function in 1957.

By the 1960s, he was able to predict the forthcoming combination of persistent high inflation combined with high unemployment and stagnant demand, catchily labelled by Paul Samuelson as ‘stagflation’. Friedman’s monetarism could account for the economic malaise of the 1970s in a way that the Keynesian consensus could not.  

Outside of the academy, his work as a public intellectual was whopping not just in its amount, but also in its scope. He wrote hundreds of newspaper columns, and featured frequently on national television and radio. This is not even mentioning the pop-economics books Capitalism and Freedom and Free to Choose, which together sold hundreds of thousands of copies.

Probably more than any other public thinker, Friedman helped to turn the tide of mainstream thought in economics. Interestingly however, he was not the first person to express many of the aforementioned ideas. His legacy is largely the result of his masterful command of the art of communication. He was able to spin and thread an easy to understand narrative out of complex and deeply thought-through economics, enabling him to communicate with the public in a way which the present Conservative party would do well to remember.

Of course, the man is hardly without controversy. He is often tainted (wrongly, but that is another article in itself) by association with the Chicago University trained Chilean economists who went on to serve under the brutal military dictatorship of Augusto Pinochet. The ‘Chicago Boys’, as they were known, composed a document following the 1973 Chilean coup d’état which was named El Ladrillo, (The Brick) for its sheer size, which served as the template for Chile’s subsequent economic reforms. These reforms, which included the pioneering privatisation of swathes of state-run industries and reforms to the pension system, saw Chile go on to become one of the most prosperous states in South America (the second richest to this day).

Similar programmes of deregulation, privatisation and liberalisation have since had the same effect elsewhere, most notably today in China and India. Because of this, more people have escaped grinding poverty in the last 25 years, than have in the last 25,000 years of human existence. The Nobel Prize winning economist Gary Becker rightly stated that “The person they are most indebted to for the improvement of their situation is Milton Friedman”.

No posthumous birthday hagiography would be complete without a character assessment, and in this area too, Friedman shines. He was known for his warm temperament, his infectious smile and the kindness he showed to all he met.

Both the President and Director of the Adam Smith Institute can attest to this, having had the privilege of knowing the man personally. The economic historian Diedre McCloskey recalls how when she transitioned from male to female, Friedman was particularly understanding at a time when changing gender was less accepted than it is now. Indeed, in McCloskey’s own words “Milton cares for freedom because he puts tremendous weight on the dignity of his fellow humans. Over and over he says: Laissez faire, let the person herself decide for herself”.

Friedman’s ideological foil John Maynard Keynes wrote in his General Theory that ‘The ideas of political philosophers and economists, both when they are right and when they are wrong, are more powerful than is commonly understood. Practical men, who believe themselves to be exempt from any intellectual interest, are usually the slaves of some defunct economist.’ 

Whether you love him or loathe him, it is undeniable that Friedman’s influence and legacy are astoundingly significant. His views have shaped the world in remarkable ways. The former Chairman of the U.S. Federal Reserve Alan Greenspan once remarked about Friedman, that:

“His impact is not only on the 20th century, but on the 21st, and I suspect ongoing”.

Another former Fed Chairman, Ben Bernanke, said of Friedman that:

“The direct and indirect influences of his thinking on contemporary monetary economics would be difficult to overstate”.

As you may have noticed by now (and as former Executive Director of the ASI Sam Bowman has previously stated), in many ways, the work of the ASI is a continuation of Friedman’s. Long may that tradition of freedom continue!

Why appoint a Minister to mess with what works?

A call for there to be a Minister for food security:

Ministers should consider enshrining in law a right to food and must appoint a new minister for food security, according to an influential committee of MPs, after the coronavirus pandemic exposed serious problems with the government’s handling of the food system in a crisis.

Well, largely speaking the government didn’t handle the food system in this recent crisis. Could be why it all worked.

Panic buying – which was often just consumers responding to the need to eat all meals at home – and shortages of some staples in the shops, characterised the start of the Covid-19 crisis after the government failed to communicate properly with the public and the food industry, the MPs on the environment, food and rural affairs committee found in a new report.

The government “appeared unprepared” for the impact of the closure of restaurants and cafes, they said, and was too slow to provide guidance for workers in the food supply sector.

The current, largely free market, food supply system worked fantastically in the recent crisis. Sure, there were empty shelves at times but that was more about time to deliver from warehouses than anything else. There was no significant shortage for any significant period of time of anything. Which shows a certain robustness in that system really. For the system did go through an enormous shock. That switch of tens of percents of the nation’s calories being provided by commercial (restaurants, take aways, sandwich shops, works canteens and so on) to running through the retail and then domestic channels was an immense change.

The system worked though. The only major problem noted was the government’s own rules. Products packaged for that commercial system couldn’t be simply re-routed into the retail because labelling requirements are different. Government thereby reducing the flexibility of the system in that emergency.

A cynic would describe this call for a Minister, for more regulation, as being a cry in the wilderness. If people can indeed through voluntary cooperation sort out major problems for themselves then what purpose government? What need of politicians and their interventions? As it would be most uncomfortable for those questions to be generally asked better get politics involved so as to obviate the query.

A realist would be less harsh. If the food system does actually work that would damage the battle against obesity. So, we need a politician in charge so that we all can become thin.

Isn't this glorious?

Susie Orbach tells us of what ails modern society:

In the 1980s, when low-fat products and desserts flavoured with sugar and artificial sweeteners first entered the market, they were deemed healthier than their full-fat alternatives. But what first appeared helpful caused confusion: evidence showed that the body didn’t metabolise these products in the same way as full-fat alternatives, and people who consumed low-fat foods were likely to replace the lost fat with calories from carbohydrates.

So why did low-fat products storm the marketplace? Because government’s food strategy told us all to eat less fat. Now Ms. Orbach is calling for a food strategy from government which we do think is rather glorious. More policy to correct the errors of earlier policy might not be quite the way to do it though. Bug out and leave us all alone could be closer to a sensible, erm, policy.

Henry Dimbleby also tells us today that:

The poorest people suffer most from this diet, the report says. It notes that 36% of the most deprived people are obese.

The basic human problem, certainly from the beginning of agriculture some 8,000 years ago and near certainly before that - otherwise why would agriculture have arisen? - was gaining enough calories not to die from not enough calories. The entire Malthusian construct - which, recall, was correct right up to the date the Reverend sat down to write - doesn’t work if this were not so. It is only in this past few decades that we have solved that problem down there at the bottom of the income distribution.

We do regard this as glorious. We’re even willing to mull over the idea that there are a few wrinkles that still need ironing out but that basic problem across the aeons has been solved. There’s enough food for all. As to how to do that ironing, see above - those who have been telling us the wrong things for decades might like to bug out. Well, OK, they wouldn’t like to but perhaps we should insist they do.

Why do we want to reduce the tax on landlords and increase it on consumers?

We’ve been watching this campaign to change business rates with horror:

An online sales tax would push up prices for consumers, the British retail industry lobby group has warned, after it emerged that Rishi Sunak is exploring plans for a levy to protect high street shops from mounting competition.

Against a backdrop of rising retail job losses and store closures triggered by the coronavirus crisis, the chancellor is looking at taxing internet shopping for England as a potential replacement for business rates, the levy on companies based on the premises they occupy.

The horror stemming from the fact that the entire debate is based upon an assumption which is wrong. Known to be wrong too. It isn’t the retailers, the occupants, who pay the business rates, it’s the landlords.

Sure, the financial incidence is upon the tenant. But the economic incidence - whose wallet really gets lighter - rapidly switches to it being the landlords. There is the IFS paper on this:

These results suggest that much of the burden of business rates is shifted on to property owners in the long run.

And the Regeneris report which was actually prepared for - and presumably read by - the British Property Federation:

The evidence suggests that over period a period of two to three years approximately 75% of the value of business rate change is capitalised into rents.

That last rather understates the effect as the average rent review is only every three years and clearly, when rents are already set changes in rates won’t affect them.

This is something we know. Rates are paid ultimately by landlords, not tenants. Therefore a change in business rates is a change in the taxation of landlords, not tenants.

A sales tax is of course a tax upon consumers.

So, the proposal is that we should tax landlords less and consumers more. Why would we want to do that?

Sure, we grasp this from the landlord’s point of view. They’re a concentrated interest and so are more interested - and thus work harder at it - than the dispersed one of all of us consumers out here. But other than that what’s the point of this change?

Or rather, by what logic should we desire this change? Given that we can’t see any wider benefit we’re against the change. What horrifies us though is that everyone in the debate either does or should know where the incidence lies. So why isn’t there more opposition. why are we the only - as far as we can see at least - voices crying in this wilderness? Perhaps more to the point why hasn’t someone pointed this out to the Chancellor?

We welcome the conversion even if it's a little late

Will Hutton tells us how things must change in this life after coronavirus:

The irrationality of all the institutional and intellectual failures of the last 40 years – excessive administrative and political centralisation,...(...)...We celebrate the NHS but know...(...)...Suddenly, it is obvious to all that a resilient, decentralised public health system, supported by a vibrant network of suppliers, is the cornerstone of a functioning economy and society. Witness Germany....(...)...the measures lack coherence, consistency and, above all, scale.

We have indeed picked and chosen there. But to a purpose, obviously.

The example of Germany is that a thriving ecosystem of private, public, for and not for profit providers of a good or service is the way to have a robust and efficient system.

We agree.

We have been arguing that this is more generally true of the NHS and near everything else done by the state in the provision of goods and services for many decades now. Nice to see Hutton coming around to our point of view.

Except, of course, if we asked directly, well, shall we have more contracting out and devolution down of the decision making level - effectively, the NHS becoming a financing method for health care, not a provider of it - we would be told to stop being ridiculous. For the NHS as is is the Glory of Our Isles, as any fule kno.

It’s a bit of a problem when reasonable analysis gets canned as a result of bumping into a shibboleth, isn’t it?

Jobs are still a cost, jobs are still a cost

We are not mariners but would claim sufficient maturity in years to stoppeth one in three to insist that jobs are a cost, not a benefit, of doing something:

Joe Biden’s $2tn plan to eliminate all greenhouse gas emissions from the US electricity grid within 15 years has been applauded by climate campaigners, but the enormous overhaul will have to pick its way through a minefield of community as well as lobbyist opposition.

The presumptive Democratic presidential nominee has touted millions of new jobs in a clean energy economy where electric vehicles, retrofitted buildings and renewable power generation help phase out emissions from fossil fuels.

It’s those millions of jobs that are to be created. These are costs of the plan, not benefits of it.

Yes, agreed, there are costs to the use of fossil fuels. Even for those not all that worried about plant food the other noxious emissions are indeed a cost. But their benefit is that we get the energy to power a civilisation through the use of less human labour. That’s exactly why we’ve a problem about either the noxious or the plant food parts. Because the use of that less human effort is a benefit to us as a society, even as it has its own costs, those emissions.

Do note that we’re not, here at least, arguing about whether we all should or shouldn’t move to renewables or not. We just want to insist that we balance the credits and debits the correct way around as we consider the decision.

Needing more human sweat and grunt work is a cost to a plan, not a benefit of it. Thus claims that millions of jobs will be created by this or that path are righteously costs of that idea, not benefits of it.

It’s worth noting that the more important we - or you - think climate change is then the more vital it becomes to consider the matter clearly. The more the insistence is that this is a civilisation threatening event the more we do have to make sure that we’ve our costs and benefits the right way around. To do otherwise would to be of sense forlorn, would it not?

Well, yes, this is a significant part of the point

A lament over the easing of planning permission:

“The new legislation fundamentally undermines the notion of a democratic, professional and accountable planning system,” says Dr Ben Clifford, professor at UCL’s Bartlett School of Planning, who co-led the research. “Not only will it continue to produce more tiny flats with poor living conditions, but it also means the developers are not required to provide any affordable housing or make any contributions to local infrastructure, like parks and playgrounds. It’s placing a huge burden on local communities, while at the same time making more profit for developers.”

That democratic, professional and accountable planning system is incapable - as the number of houses not being built shows - of producing the dwellings the nation desires in either number or type. Thus the idea that perhaps we should change it.

For example, if we desire housing to be built then perhaps we shouldn’t make permission to do so subject to having to bribe for the issuance of the permission. Sorry, we mean promises to build affordable housing and build local infrastructure.

One of the joys of the experiment being conducted at present being that house building numbers are going up as we dismantle that professional planning system. Of course, this will disgruntle those whose position relies upon the continued existence of the restrictive and counterproductive system - say, those who are professors in teaching people how to constipate the economy through planning - but the rest of us might rather like having more housing, at better prices, in the form people desire to live in in places people would like to live.

Why is the US getting so tetchy about Big Tech taxes?

The general and public view of the taxation of the Big Tech giants is that upon their profits made here in Europe they pay no tax at all. Therefore lots of people are in favour of their being taxed by us here in Europe. Thus such things as digital services taxes and so on.

There is also some surprise when the US demurs and starts shouting:

America’s quest for technological supremacy has been mainly focused on punitive actions against China. But European attempts to boost tax revenues from the most successful Silicon Valley companies means this battle is now spreading to its allies.

Many Western countries believe they can overcome Washington’s resistance to taxing tech giants such as Google, Apple and Microsoft because it seems fair and just. But this underestimates the importance of Silicon Valley to Washington’s geopolitical ambitions. The US will not back down and tariffs on European goods are looking more likely by the day.

Silicon Valley behemoths are the front line in America’s battle for technological supremacy in the 21st century. China has already developed equipment for 5G systems that is superior to that produced in the US – and it appears to be getting ahead of Western nations on smart cities and other ways to exploit the “Internet of Things”. America has a fight on its hands.

The US Senate finance committee warned Britain this week that its digital service tax on American technology companies could put a post-Brexit trade deal at risk. However, the toughest action is likely to be taken against the European Union.

This is less than perceptive. For the American taxation system changed back in autumn 2017. Those European profits which pile up in tax havens are now not untaxed inside the United States. Instead they are taxed when earned. At special rates to be sure but they are still taxed.

The importance of this being that for a US corporation its American tax bill is whatever is the righteous amount to be paid minus foreign taxes already paid. So, if the EU, or European countries, or the UK, levies another tax upon the Big Tech companies this then just gets knocked off (not exactly but this is the net effect in the end) that US bill due.

The only purpose of going into politics is to get to decide how to spend great gobs of other peoples’ money. Thus American politicians are more than a little miffed that cash they think they should righteously spend is going to get spent by some bunch of foreigners.

We have no comment - here at least - upon the justice of either the practice or the general complaint. Rather, we just want to point out why the shouting is so intense. This isn’t about, any more, whether those profits should be taxed at all. It’s about who gets to spend the revenue from having done so.

However anyone dresses up their arguments that’s all it is about too. Uncle Sam is threatening a trade war and Tante Europa might well join in over which group of baby kissers gets to spend 0.05% of the economy. We can’t help thinking that there are more useful, let alone important, things for us all to be doing.

As we've mentioned before there's no good argument for public sector pay rises

There are plenty of bad current arguments for there to be public sector pay rises at present. One being used is that public sector workers have been able to keep their jobs during these difficult times and therefore should have more money. We don’t find that all that convincing an argument to be honest.

There’s also an extremely good argument against public sector pay rises at present. It’s actually used, to be merely dismissed, in a piece advocating such wage increases:

Here it warned that “we must exercise restraint in future public sector pay awards” to ensure “fairness” and “parity” with the private sector, where, the Treasury helpfully points out, wages have fallen 1.2% in the year to May 2020.

If everyone else’s pay has been falling - we are in something of a recession you know - then it seems fair to us that everyone’s pay falls.

Yes, we’re aware of the Keynesian argument that government should spend more in such times and while we don’t hold that much truck with it this isn’t what we’re talking about. A permanent addition to the incomes of state workers is not the same, in any manner, as a time limited boost to demand in the economy to deal with a recession.

Right now the economy is some 10 to 15% smaller than it was in January. Why should those employed by the government now claim a larger share of that smaller amount?