Wednesday, 7 September 2016

It's More About 'How' It's Done Than 'Who' Does It

Supermarkets provide a good illustration of why it's not who controls the company that matters it is the company's effectiveness in the free market that matters most. Supermarkets like Sainsbury's, Tesco and Morrisons are public limited companies traded on the stock exchange, whereas with Waitrose the workers have mutual ownership, and the Co Op is a consumer cooperative consisting of more than 8 million members having mutual ownership.

What this shows is that it doesn't much matter who runs supermarkets, what matters is how they are run in terms of creating market value. What's creating market value for shoppers is that all these supermarkets are driven on by competition - which is why we get multi-buy deals on food, shopper saving incentives, and the ability to have our groceries delivered to our door if we wish.

The NHS follows a similar heuristic - as long as it is being run most efficiently, and remains free at the point of delivery, it doesn't matter whether it is public services running it or private services. That's because, like supermarkets, market qualities are about efficiency not ownership. For those who want the NHS to be free from the more efficient private services due to an almost religious attachment to its state-ownership, here is a question they need to answer. If they believe state-ownership is the most efficient way to create value why do they not want food nationalised too so that supermarkets are under public ownership?

They'll usually argue that health is different and that you can't subject something as important as health to the markets. But it shouldn't escape their notice that food is pretty important too. Without it we'll die. Why is public ownership better in the case of health but worse in the case of food? No one seems to be able to say, which is the classic sign of it being merely an emotional bias divorced from evidence and reason.

The arguments against the market are too often short-sighted or illogical. The Pope made a similar mistake in a recent encyclical - arguing that water is such a precious resource that it shouldn't be privatised. His logic is backwards: resources that are scarce, precious and valuable need to be guided by market forces of supply and demand, because it is the free market that most efficiently allocates scarce, precious and valuable resources, not governments or private interest groups. Around the world you'll find water shortages are horribly exacerbated by wealthy interest groups benefiting from water subsidies.

Like water, health is scarce, precious and valuable. It's scarce because there is huge demand and limited supply. It's precious because good health is one of the most vital things about being alive. And it is valuable because our health is what enables us to work, function and progress in society. Like all things scarce, precious and valuable, society doesn't need our health services being misallocated or uncompetitively costed or frivolously managed under the guarantee of taxpayers' money.

The introduction of more private run services isn't going to impinge on the NHS's free at the point of delivery ethos, so there is no reason to bemoan private health services at all. With an aging population there is ever-increasing pressure on the health service to greatly increase its efficiency and reduce public spending - and that's only going to happen with market forces replacing state involvement.

So please don't panic - market forces won't affect our ability to have health care readily available, nor will there be any danger of anyone being turned away due to inability to pay (unlike the USA). But mark my words, if the British public don't begin to dismantle the alter before the golden calf of our NHS religion, we are going to be in serious trouble.