The Purpose of this Blog

The purpose of this blog is to write about capitalism and the good that it can do. I am not taking about some sort of heady free for all libertarian version. We need capitalism, and a smart version of it. Where rules are clearly spelled out and the playing field is open to equal opportunity. This does not create equal outcomes, and it never will. Where as people are created equal in a moral sense. We are not totally equal, but different. All of us have different talents and abilities, different strengths and weaknesses.




The point is to create a system and a society where you can try to find yourself and what you are good at and not good at. To keep trying and failing until you succeed. Capitalism provides the best  environment for this so far.

The Capitalist Solution to Medical Care costs in the United States

My experience with health care has frankly been few are far between, only involving one inguinal hernia, and two children. I count myself as one of the lucky ones. The premise for paying for these in modern day America is that insurance will pay most, and the patient will pay the rest.



Medical insurance companies and health care providers work out amongst themselves how much each procedure will cost. With different insurance companies securing different rates for their customers. All the while telling the insurance customer how much they are being “saved”. The customer/patient is left in the dark as to what procedures, medicines, surgeries, etc. will cost until it is time to pay the bill. Only to be hit with sticker shock about how much something costs, when being told that “insurance will cover most of it”. The whole thing runs on the premise of if we pay health care providers more money, they will charge less for their services. As though there is a limit to human greed. However, calling it greed is a little disingenuous. People are motivated by profit and doctors and health care professionals are no exception. They do provide a valuable service to society, and they should be compensated for that service.



Many have spent years to study and train to learn all the medical knowledge that they need to provide a necessary service. Their time and services are valuable, and the should be compensated. However, the existence of health insurance has perverted and distorted the behavior that would normally take place in a healthy competitive market. Customers are left blind because they do not know the prices for the services that they are needing. One can argue that such and such procedure is needed. If someone needs a hip replaced they only need one hip, but is there only one hospital or doctor who can perform it? Of course not. There are a multitude of hospitals in large metropolitan areas, with a multitude of doctors who can perform this operation. This goes for all operations.



The two basic reforms that is needed in health care is getting rid of all health insurance and transparent pricing for all services. No one should have to guess what something is going to cost them at which hospital and at which doctor. If people know the price and the services that were provided the open market would do its job in setting a market price for all procedures.





Now there would be differences in prices and quality of care, but that is normal in a free market. Hospitals and doctors would be driven by market forces to keep prices low and quality high.




Implementing this does create several problems; one, how do people get there money back they put it, two, how can people pay if they have no money, and finally, what about emergency service.



To break up the insurance companies would mean to dissolve them completely. Money given back to shareholders, bond holders and even customers proportionally. Basically, liquidation bankruptcy.



How can people pay that have no money? This was one of the reasons for the start of health insurance. Readers might be surprised to know that insurance is a scam that only works if people put in more then they take out, a Ponzi scheme. However, the solution is simple. People pay for services all the time and medical services should be no different. If people know what they should pay, and they choose to go to have that service. They are more likely to pay the full amount owed when the bill comes due. The health provider should work directly with the patient to come how to pay for the service. Cutting out the middle man of insurance. People could use health saving accounts if they wished to prepare for emergencies or defer medial costs. However, this time they can make an informed decision on how much they need to save, since they would know the prices that they would be paying. People’s resources would be better allocated, and hospitals could work on better services for people since they will be paid directly by them. This isn’t brain surgery… ohh wait it is. People who have 8 to 10 years of education can figure out a way to get paid.



Finally, emergency services. While there are many planned medical expenses, there are those that are unplanned. Here market forces could still be at work. People should have access to how much emergency services would cost. In this way competing ERs can compare amongst one another. This would also drive down prices and increase quality. The same payment structure could apply as planned services.




There is no need to have government be overly involved in this process when it comes to negotiating prices or being the only provider of health insurance. Of course, basic regulations on health and safety should apply. Places should be sanitary and safe, but the market needs to determine how much services cost.

 

Why Nationalist China Fell

In 1949 the Guomindang were defeated by the Chinese Communist Party after twenty-three years of intermittent fighting. There are many factors that played a role in the Nationalists defeat. Reasons such as military tactics used by both sides, support that they gained from various allies, and the actions and personalities of the leaders involved, all played a role in deciding who finally won the civil war on mainland China. One factor is how corruption in the Goumindang contributed to its losing the Chinese Civil War. There are many different ways in which corruption contributed to the Nationalists’ defeat. First is how it effected them in the areas of the bureaucracy, and the military. Second, even though corruption had been a part of day to day life in China it had reached intolerable levels during the GMD rule. Next, the presence of corruption contributed to the economic instability of the era. Finally, the CCP was able to defeat of the GMD because the CCP was not as corrupt and had better relations with the Chinese public.

            The Chinese are masters when it comes to bureaucratic institutions. They have always valued highly skilled civil servants that followed Confucian morals. While no dynasty ever lived up perfectly to this standard, there are levels of corruption that people are willing to tolerate and levels that they are not. The high levels of immorality in the Nationalist bureaucracy were at levels that people were not will to accept. One of the reasons for this was the chaos that China was in, because it did not have a strong central government. Since China did not have a strong central source of state power, many small centers of power surfaced. This created a great need for soldiers regardless of where they came from. In a rush to bring new soldiers to the battlefield, many commanders abandoned more discriminating recruiting standards and reduced training, with obvious effect on troop discipline[i]. The Nationalists had to recruit anyone and everyone into their forces, so that they could fight on the battlefield. Chiang Kai-shek did recognize this as a problem. He knew that he had to have a more effective organization if he was going to win the Chinese Civil War. Orders and admonitions aimed at curbing corrupt practices were issued repeatedly. But the local officials responsible for their implementation were in most cases themselves engaged in the very practices the regulations were intended to control[ii]. Unfortunately, the Nationalists were so corrupt that even when they tried to institute reforms their officials did not want to do it. The officials that were in charge of making decisions were benefiting from the corrupt practices that were going on. This amount of illegal activity made reforms impossible to implement.

Since reforms were difficult to conduct the problem of corruption only got worse. The problems spread all the way to the Nationalists elite units. Members of the regiment were involved in the illegal arrest of civilians under the pretext of rounding up traitors, the take-over of privately-owned houses and vehicles, and the seizure of large quantities of essential commodities[iii]. These were the actions of the elite 23^rd regiment of the Central Gendarmerie Corp. They were stealing land and valuables from Chinese citizens throughout Shanghai and other parts of the country-side as well. By stealing from the very people that they were supposed to protect they turned their own people against them. In societies that functioning on a more honest level, people can trust the police or the local officials to do their jobs in a very professional manner. When these people are in need they can call upon those officials for help. People did not look to the Nationalists for help. They know that they would just get robbed when the Nationalists came through. After years and years of this behavior the population began to hate and distrust the Nationalists. People would lock-up or try to hide their valuables when they heard that the Nationalist army was coming through. The constant marauding throughout the country side took its toll on the economy and the people of mainland China. If problems with troops raging across the country side was not bad enough, their were even greater examples of corruption within the officer corp.

High officials with gorgeously gowned ladies drove in chauffeured automobiles through the street of fuel-short Chungking; they purchased perfumes, cigarettes, oranges, butter, and other luxuries smuggled from abroad; they dined extravagant, multi-course banquets[iv]. This was going on while the rest of the population was struggling to feed itself on a day to day base. Food riots in Nanking and Shanghai ended yesterday with the imposition of martial law, but not until, in Nanking, mobs had attacked at least 40 rice shops and restaurants, three persons had been trampled to death, and 11 others had been injured by police using their pistol butts[v]. This report from a newspaper during that time shows the stark contrast between the Nationalist elite and the population at large. The people of the cities would see the well dressed officers riding by in their cars while other families were starving. Even at the end of World War Two American officers that had worked in China complained about the Nationalists. I placed major emphasis in my report on the fact that economic deterioration, incompetence, and corruption in the political and military organizations in China should be considered against an all-inclusive background, “lest there be disproportionate emphasis on defects”[vi]. The United States had to work with Chiang Kei-Shek because he was their best option. However, this made him far from perfect. General Wedemeyer tried to downplay all the negatives about the Nationalists, but they were still there. Even with as bad as the Nationalists were they were still perceived better then the Communists by the Americans. The Cold War was starting after World War II and the Nationalists were the group that Washington was supporting. Unfortunately with the staggering amount of problems that the Nationalists had policy makers in Washington were getting tired of inadvertently helping the Chinese Communist Party. This helped to create an image problem for the Nationalists as a whole.

            There has always been a certain level of corruption in all governments, but if it gets out of control it can hurt the health of an organization. Problems occur when the corruption is so bad that the government can not function. This is what happened to the Nationalists in China after the Anti-Japanese War. They had certain types of corruption that contributed to their down fall. The third condition recognizes the importance of parochial corruption (Scott 1970) or the building of “social capital” (for example “guanxi” in China, Tanzi 1995) through misuse of power[vii]. Guanxi has been common throughout Chinese history, and even the Nationalists practiced it. To the Chinese this would not be considered corruption, but the way that things are done. Some level of corruption had always been a part of Chinese society, but with the GMD it had become intolerable. In terms of public legitimacy, official corruption therefore had a generic negative effect – it presented the state as unjust, and it prompted the regime to take highly unpopular actions to add to its income[viii]. People in China believed that one of the signs that a ruling power had lost the Mandate of Heaven was excessive corruption. Since the GMD was excessively corrupt they were losing the right to rule. Typically in Chinese history, once the Mandate of Heaven begins to slip there is no turning back[ix]. Once the ruler had lost the Mandate of Heaven it was time for someone else to take over. The actions that the regime did take to help restore its rule over the people added to their unpopularity and gave the people even more reasons not to support them.

The Chinese citizenry were being taxed very highly by the Nationalists as well as having their private belongings confiscated. This created a kind of double taxation that the Chinese people had to endure. Even in the United States, which had know about the corruption of the GMD,  their started to be changing attitudes towards Chiang’s regime. The complete ineptness of high military leaders and the widespread corruption and dishonesty throughout the armed forces could, in some measure, have been controlled and directed had the above authority and facilities been available[x]. Officers on the ground were either selling their guns and ammunition to others or just leaving them on the battlefield to be taken over by the communists. Of the $2 billion in military aid, it was estimated that 90 per cent had been eventually acquired by the Communists, either through sales by corrupt officials or by capture[xi]. American aid was being wasted in China. So high a percentage of the arms provided by the United States have fallen into the hands of the Communists without ever inflicting serious battle damage on them that this country has been inadvertently arming the enemies of the Nationalist Government[xii]. The tides of public opinion begin to shift away from the Nationalists and Chiang Kai-shek. The American people and their government started to see how bad things were really going in China and wanted to end the aid that they had been giving. The evidence of corruption hurt the Nationalist cause. During World War II when the Nationalists were needed in China by the American government, they could afford to over look their weaknesses. However, after the war had ended there was no strong reason to keep wasting money on a failing regime. This shift helped to weaken the Nationalist stance in China. It might be argued, of course, that corruption in China was not greater, only more conspicuous, than in some Western countries[xiii]. For the most part this could be considered true, because there is a degree of corruption in all nations. China was like any other nation in the fact that while it had many good people in its government, it also had some who were less then honest. The debilitating factor for the Nationalist was that they had to rely on foreign aid. They had to rely on the US air force to get around the country effectively. They also relied on money in the form of aid that could be used to fix their economy that had been debilitated by years of war. When the American’s saw that the aid that they were giving the Nationalist was being wasted, they stopped giving. This put the Nationalists in an even worse position then before. They had gone from being with aid and misusing it, to having no aid at all. This continued to put more strain on an already exhausted Chinese economy.

            Corruption had a very negative effect on the economy of China. The problem started with the large deficits that the Nationalists had been running to finance the war. These large budget deficits had to be financed one of two ways; an increase in taxes or seigniorage. The Nationalists chose to go with seigniorage, which is the process of the government printing money to pay for things. However, this created a new problem called inflation. The government continued to print money to pay its debts as the value of the currency continued to drop. Inflationary pressures later spread to the household and business sectors[xiv]. This created an environment where honest people could not make enough money to purchase the things that they needed. Civil servants and soldiers alike were not being paid anymore as inflation continued to rise. Their wealth and real income shrank as prices rose. The trouble with all of this is that it was completely man made and was completely the fault of the men who were in power. They were the ones who were running the government's press and it was them alone who could stop them. However, the government did not stop printing money. The lack of adequate administrative machinery and personnel and the inflation-induced moral weakness of the officials in charge of the various control programs further contributed to the ineffectiveness of the controls[xv]. Over the years government officials had come to rely on extortion and kickbacks to make up for lost income, so they had no intention of carrying out reforms. The problem in the late 1940’s, simply put, was that few of the basic incentives for growth were present, and that official corruption prevented some of these incentives from being formed[xvi]. The increases in inflation made it harder for legitimate business to be conducted. Add to that the fact that people’s property was being confiscated made it almost impossible for people to make an honest living. People would just try to extort more money from each other, so that they could cover the costs of living. There is a clear distinction between what the Nationalists tried to do and what the Communists did do.

            The Chinese Communist Party took a totally different approach well dealing with the Chinese people at the local level. The main strategic issue for CCP decision-making during the civil war was land policy[xvii]. The communist understood what was important to people, so they went on a public relations campaign before the Red Army would go into an area. Newspaper reports from the time state how successful that these efforts were at the local level: There has been a successful drive against illiteracy; careful cultivation of small-scale industry and agriculture; and measures against inflation[xviii]. These efforts helped to increase the reputation of the Chinese Communist Party relative to the Nationalists. They were seen as actually doing things to help people. The country is overwhelmingly agricultural and the peasant has always been the victim of the landlord, the tax-collector, and the money-lender[xix]. The Chinese Communists saw this as a problem and went to meet it head on with land reform. They divided up land according to the size of people’s families. There, according to the report, 3,000 mou (500 acres) of land had been allotted to the poor peasants, each person receiving four mou (2/3 acre) while a family with only two members received three persons’ shares[xx]. People were receiving and able to work more land, so they were able to produce more food. This small rise in production was able to make families living in communist controlled areas better off. The Communist troops did not steal from the people like the Nationalist troops did, so people were able to keep what little extra that they were able to produce. This extra savings helped to contribute to families having better lives in the communist controlled region. This Communist victory is attributed to the farsighted planning of the leaders of international communism and their control and guidance of the Chinese Communist party[xxi]. This account from a paper during that time gives some what of an exaggerated image to the CCP, but it is not totally wrong. Mao Zedong did have a fairly well developed plan about what he wanted to do. It was formulated during his time in Jiangxi province and was later reformulated as the CCP held up in Yunnan province during the Sino-Japanese War. He had tried other policies before and therefore knew what worked and what did not. The CCP was eventually able to control all of northern China to the Yangtze by April 1949. The probable reason for the Communists’ stalling is believed to be a desire to mop up points held by the Nationalists in north China, bringing everything from the Yangtze to Manchuria under a unified Government at Peking[xxii]. The communists had control over most of northern China. There they started to institute the reforms that Mao Zedong and his group of cadres had designed. Many of these reforms were able to be implemented because the communists had less corruption on their side then the Nationalists did. It could also be said that the corruption on the communist side was less obvious because Chiang Kai-shek and the Nationalists were the official face of China on the world stage. The world’s media paid attention to them therefore people were able to see their faults. In time the CCP was able to oust the Nationalists from power, however, they were still unable to totally implement their policies. Unlike other areas of China that had been “liberated” before the CCP formally took power in 1949, Yunnan, Sichuan, and Guizhou had been under GMD control until very late in 1949 and early 1950, and as a result had very few CCP officials capable of implementing central state policies[xxiii]. This would change as the CCP consolidated its power over mainland China, but the days of Chinese Nationalist rule over the mainland were over.

            History remembers the victors and tends to forget the losers. However, it is important to remember the losers and why they lost. Sometimes the lessons from losing can be more important then the ones from winning. The Nationalists fall into this category. They had started with just a small group of military officials, but were able to get to the top by cutting deals with warlords and international power brokers. They had tried to stamp out their opposition, but had been undone by their own shortcomings. There were many things that contributed to the Nationalists losing; poor policies, nearsighted goals, and appalling military tactics to name a few, but corruption played an important role as well. Corruption was one of the key factors of how the Nationalists lost the Chinese civil war. It contributed to their down fall in several ways: the different views of corruption between Chinese and Western culture, the fact that they were corrupt, the ability of people to see their corruption, and finally the economic factors that contributed to their corruption. All of these things helped to show how corruption contributes to the Nationalists lose.

---

[i] Diana Lary and Stephen MacKinnon, Scars of War: The Impact of Warfare on Modern

 China (Vancouver: UBC Press, 2001), 25.

[ii] Suzanne Pepper, Civil War in China: The Political Struggle 1945-1949 (Berkeley:

            University of California Press, 1978), 21.

[iii] Suzanne Pepper, Civil War in China: The Political Struggle 1945-1949 (Berkeley:

            University of California Press, 1978), 21-22.

[iv] Lloyd E. Eastman, The Nationalist era in China 1927-1949 (New York: Cambridge

            University Press, 1991), 158-159.

[v] “Big Battle for Nanking,” The Times, 11 November 1948, p. 4.

[vi]Albert C. Wedemeyer, Wedemeyer Report (New York: Henry Holt & Company, 1958), 393.

[vii]Arvind K. Jain, Economics of Corruption (Boston: Kluwer Academic, 1998), 18.

[viii] Odd Arne Westad, Decisive Encounters: The Chinese Civil War, 1946-1950 (Stanford:

            Stanford University Press, 2003), 73.

[ix] John F. Melby, The Mandate of Heaven, (Toronto: University of Toronto Press, 1968), 50.

[x] “U.S. Gives Account of Total China Aid,” New York Times, 6 August 1949, p. 3.

[xi] “Climax in China,” New York Times, 24 April 1949, p. E1.

[xii] “U.S. Gives Account of Total China Aid,” New York Times, 6 August 1949, p. 3.

[xiii] Freda Utley, The China Story (Chicago: Henry Regnery Company, 1951), 59.

[xiv] Shun-hsin Chou, The Chinese Inflation 1937-1949 (New York: Columbia University

            Press, 1963), 186.

[xv] Kia-ngau Chang, The Inflationary Spiral: The Experience in China, 1939-1950 (New

            York: The Technology Press of Massachusetts Institute of Technology, 1958),

243.

[xvi] Odd Arne Westad, Decisive Encounters: The Chinese Civil War, 1946-1950 (Stanford:

            Stanford University Press, 2003), 73.

[xvii] Odd Arne Westad, Decisive Encounters: The Chinese Civil War, 1946-1950

(Stanford: Stanford University Press, 2003), 115-116.

[xviii] “Work of Communists in North China: The Yenan Administration,” The Times, 25

            January 1945, p. 3.

[xix] “The China Communists: Mao Tse-Tung’s Campaign Against Feudal Survivals.” The

 Times, 4 December 1948, p. 5.

[xx] Frank C. Lee, “Land Redistribution in Communist China,” March 1948 [jstor];

available from http://links.jstor.org/sici?sici=0030-851X%28194803%2921%3A1%3C20%3ALRICC%3E2.0.CO%3B2-P; Internet; accessed 27 March 2008.

[xxi] Tang Tsou, “The China Story,” June 1953 [jstor] available from

http://links.jstor.org/sici?sici=0043-4078%28195306%296%3A2%3C296%3A%22CS%3E2.0.CO%3B2-I; Internet; accessed 27 March 2008.

[xxii] “Climax in China,” New York Times, 24 April 1949, p. E1.

[xxiii] Diana Lary and Stephen MacKinnon, Scars of War: The Impact of Warfare on

Modern China (Vancouver: UBC Press, 2001), 175.