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Nothing Is Free!

Entry 1302, on 2011-05-31 at 16:41:39 (Rating 4, News)

What's so great about the "free market"? The phrase sounds great because it has the word "free" in it and everyone knows that's good. Plus there's "market" and we all know that markets are a natural and efficient way to get things done, don't we? As I said, it sounds great in principal but there is one small matter to consider: is the free market real, and even if it is real is it the best solution?

The reason I have chosen this subject is because of a free trade deal our government is currently considering with the US and it looks as if one of the casualties of this miracle of modern economics might be New Zealand's drug buying agency, Pharmac.

Pharmac was set up to coordinate the purchase of drugs for the country's hospitals and other medical institutions, to find the best price for required drugs, and to decide which drugs should be subsidised by the state. It has saved the New Zealand taxpayer one billion dollars per year but the drug companies don't like it of course, because it interferes with their corrupt and immoral profit taking at the expense of everyone else.

So they are dredging up the old nonsense of "free markets" saying that Pharmac interferes with this process. Maybe it does and in that case many free market zealots would say it should be removed to preserve the purity of the free process. But as I have said many times before: the free market doesn't work now, it never will work, and anyone who bothers to look will see it hasn't worked in the past either.

Sure, it sounds like a great idea in principle. After all, who doesn't want "freedom"? The problem with the type of freedom pushed by libertarian fanatics is that it isn't real. By transferring control to the market all we have done is hand control of our fate from politicians and bureaucrats to corporations and CEOs.

For example, in the case of Pharmac we have a bureaucratic organisation ultimately controlled by the government which decides how the country's drug purchasing should be organised. That doesn't sound that attractive but consider the alternative: pricing and availability being controlled by big foreign corporates and their CEOs.

I know which I would prefer. At least the local bureaucrats and politicians are under some sort of control by the voting public. Large, mostly American, corporations are totally beyond our control. And what is the prime motivation of these differing systems? The corporations are clearly after profit and very little else while Pharmac has no real profit motive and while it may be a bureaucracy at least it is one with the best interests of the country as it's central reason for existing. When Australia stopped using their similar agency (after pressure from America) they paid billions per year extra in drug costs.

The libertarian dogmatists will answer this with the assertion that the free market will sort it all out. If a drug is deficient in some way (including price) when sourced from one company then people will just buy it from a competitor. Yes, in principle that might be true, but in practice it rarely is. Corporations are expert at using political pressure, collusion with their supposed competitors, and questionable marketing techniques to maximise their own profits and this bypasses the markets some people have so much faith in.

It's no surprise that the libertarian movement is anti-science in many ways (for example libertarians often reject the reality of global warming) because their ridiculous beliefs would never hold up to examination by the scientific method. It's easy to claim that markets always create efficient systems where the consumer wins but I don't see a lot of empirical evidence supporting that idea.

I will agree that sometimes the market does work fairly well. In areas where there are many alternatives, no monopolistic control, and minimal influence from companies on politics the "free" markets can work adequately. But I would never trust them for something that really matters.

We can survive in the situation where consumer goods come from a market-driven system with all of it's inefficiencies and problems but there are things which are too important to leave to the market and health would probably be at the top of the list. I would also include other important infrastructural items such as education, electricity, water, and communications. I would also prefer to see these controlled by a government bureaucracy rather than giving big corporations control.

We have a drug purchasing system in New Zealand which works quite well (unlike a lot of other aspects of our health system) and it would be unfortunate if this government threw that away purely for ideological reasons. Unfortunately, that is probably exactly what they are going to do.

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