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Governments Make Us More Vulnerable in a Pandemic

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04/17/2020

This article focuses on Canada, but the analysis applies in every country to varying degrees, and in most countries to a very significant degree.

Even before COVID-19, Canada’s socialized healthcare system was characterized by a decades-long failure to make good on a government promise “to make sure that people could get care when it was needed without regard to other considerations.” Hundreds (possibly thousands) of Canadians die each year because they have universal access to waiting lists, but not to actual healthcare.

It is within this context that we should consider the government’s draconian response to the coronavirus pandemic: quarantine orders and business closures enforced by the jackboot of government, which is less concerned about the total number of infections and deaths than it is with spreading those numbers out over a long period. This attempt to flatten the curve to avoid suffocating a healthcare system that was already on life support will likely have the following consequences:

  • More deaths due to longer waiting lists for non-COVID-19 care
  • Stress, anxiety, and despair for millions who are now unemployed
  • Stress, anxiety, and despair for millions who are in isolation
  • More substance abuse, crime, suicides, homicides, child abuse, domestic violence, divorces, and cardiovascular disease due to the effects of unemployment and isolation

Dr. Roger McIntyre, a psychiatrist and professor at the University of Toronto noted:

You lose your job overnight, you lose the security of your paycheque overnight. That is nothing short of an assault to your mental health and well-being. And we already know that being at work is not just a place that one takes away a paycheque, but it's often a very important source of interpersonal connectedness.

Why I find this scary is that we know from a large body of scientific literature that there’s a close relationship between so-called macro-economic indicators, like unemployment and employment, and mental health and suicide.

Prohibited Income

If you are shocked by the extent to which Canada’s various governments have shut down the economy with the onset of COVID-19, you should be more shocked by how much they shut it down before COVID-19. For many decades, the government’s interventionist policies have prevented the vast majority of Canadians from earning substantially higher employment income, which would have put them in a far better position to withstand the economic and financial impact of the current pandemic.

How much income has been denied to Canadians? There is no Canadian study on the subject, but a US study will suffice, because Canada and the United States have similar regulatory environments. The amount of income that has been denied to Americans provides a good approximation for Canadians.

The US study (see here or here), of which I have previously written, estimates that in 2011, each US household was legally denied the opportunity to increase its income by an average of $277,100 (or $129,300 per person). This represents the amount of economic output that was prohibited by all US federal regulations implemented since 1949. Imagine this happening each year, because that is the reality. Moreover, the figure of $277,100 captures data only at the federal level. The figure would be higher if taking in consideration the lower economic output due to prevailing regulations at the state/city/county level.

Regulations are government rules that are intended specifically to modify the economic behavior of individuals and firms in the private sector. Do we need these regulations? No. The propaganda used to justify regulations is that the government must protect consumers. This conveniently ignores the fact that in an environment of unfettered competition, profit-seeking firms who fail to satisfy consumers will lose those customers to competitors producing superior products. For example, a Harvard study showed that consumers care far more about reviews and prices than government-mandated licensing requirements.

When special interest groups (e.g., a corporation or group of corporations) lobbies the government to enact a new regulation, they are the intended beneficiaries, and they often write the regulation themselves. Politicians promoting a new regulation also act out of self-interest, collecting rewards from the regulatory beneficiaries, such as political campaign contributions, corporate jobs after departure from political office, etc.

Regulations reduce the level of competition for the corporations that lobbied for them, because they can afford the regulatory compliance costs but many of their competitors cannot. Thus, many small businesses are unable to compete, not because the entrepreneurs, managers, and workers are not good enough, but because they are compelled to obey authoritarian laws favoring large firms with more political influence. Consequently, many entrepreneurs are forced out of business, while many others are dissuaded from starting one.

Economic production falls considerably when the regulatory state is used to eliminate competitors. Less competition = less wealth creation, which is reflected in higher prices for consumer goods, as well as fewer jobs and lower incomes for the 99 percent. This does not concern the 1 percent, whose objective is to use the power of government to grab a larger slice of the smaller economic pie.

The Government Makes Us More Vulnerable

The government told us that the impetus to socialized healthcare in Canada was that “many poorer people just did not get care when it was needed." In an imperfect world, some people will inevitably fall through the cracks, but the claim that many poor people did not receive necessary healthcare was a complete fabrication by the government. Before the government got involved, people paid cash for routine doctor visits, prices were not outrageous, affordable private insurance was widely available for more serious health problems (just as it was in the US), and poor people often received free treatment from doctors.

The crisis which the government claimed existed under private healthcare did not exist until the government created the it by socializing healthcare. As noted above, numerous Canadians die every year waiting for the government to keep its promise. Thus, socialized healthcare has made people far more vulnerable to sickness and death, a vulnerability that has been compounded by the government’s response to COVID-19.

Absent the government’s regulatory bureaucracy with its perverse incentives, healthcare would be private and affordable. Moreover, if not for the government’s unethical propensity to favour special interest groups by limiting economic growth, the 99 percent would be much wealthier than they are today. Thus, individuals, healthcare providers, and charitable institutions would have ample resources to stockpile personal protective equipment such as masks, gloves, respirators, disinfectants, hand sanitizer, etc. The cost of building and maintaining an inventory of equipment to treat a large number of people during a possible future pandemic would represent a drop in the bucket for this wealthy society. Thus, they would be highly incentivized to make these emergency preparations. In contrast, the Canadian government's insufficient inventory increases our vulnerability to the pandemic.

The government’s failure to stockpile a sufficient quantity of equipment reflects an inability and lack of incentive to effectively plan for emergencies, especially given the experience of recent pandemics such as SARS, swine flu, Ebola, etc. This is a mistake unlikely to be repeated in the absence of the government’s regulatory bureaucracy, where individuals, healthcare providers, and charitable institutions would (a) learn from previous experience and (b) have the ability, incentive, and resources to create and implement their own emergency plans, thus reducing their reliance on counterproductive government bureaucracies.

Conclusion

Throughout the world, governments’ interventionist COVID-19 policies have been rightfully criticized. See here, here, here, here, here, here, here, here, here, here, and here. These articles present compelling arguments against governments’ draconian policies while recognizing the strong incentives of individuals and businesses to voluntarily adopt behavioral changes in response to perceived risk. This is true even in our government-regulated economy. In a non-government-regulated economy, history suggests that those still capable of producing would have sufficient wealth to further mitigate the negative economic effects of a pandemic, thereby lowering their levels of stress, anxiety, and despair.

Author:

Lee Friday

Following a 23-year career in the Canadian financial industry, Lee Friday has spent many years studying economics, politics, and social issues. He operates a news site at www.LondonNews1.com

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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