Buying votes

In August 2005, Raghuram Rajan, at the time a virtually unknown economist at the University of Chicago’s Booth School of Business, predicted the financial crisis^[1]Larry Summers vs. the long-termers. He was at a conference of high-powered economists who had convened in part to honor Federal Reserve Chairman Alan Greenspan. Larry Summers^[2]Served as 71st United States Secretary of the Treasury from 1999 to 2001 and as director of the National Economic Council from 2009 to 2010. He also served as president of Harvard University from … Continue reading dismissed Rajan as “misguided”. It turns out that Rajan was right, and Summers is the one who was misguided.

In his book Fault Lines, Rajan explains how one of the primary drivers that led to the financial crises of 2008 was the growing Income Inequality in the United States, and how this was being suppressed using easy credit to makes homes affordable to people in the lowest income brackets – essentially buying acquiescence to a system that is still broken.

We all know what happened after that. A financial crises of proportions similar to that of the Great Depression, solved only through a masterful central bank intervention called Quantitative Easing (QE). That led to a decade of historically low interest rates, and we have yet to feel the full impact of that.

In Switzerland we have another form of bought acquiescence.

This morning I went to visit the offices where they handle the subsidies for health insurance, to give them formal notice of my intention to commence a hunger strike on 1 May, if my 2018 subsidy remains unpaid^[3]Hunger strike.

The woman at the counter was appalled that this foreigner (I’m Swiss, but don’t speak French), had the audacity to complain. After all, his health insurance is being subsidised. Except that it’s not if I’m not getting the money, but that is not the point.

The reality is that if the subsidy did not exist, there would be electoral rebellion that would change the status quo of politics in this country. And there needs to be a rebellion, because the way that the healthcare is funded in this country is fundamentally flawed.

In the article Why Insurance wastes money, I point out how premiums should reflect the risk, and that is not the way that health insurance premiums in Switzerland are calculated.

The people who look after their health are subsidising those who do not. There is absolutely no incentive to adopt a healthy lifestyle, and this contributes to the soaring cost of healthcare.

To make matters worse, people are making life decisions because of the cost, including the number of children that they have. That will become a problem in the future, as Switzerland’s dependency ratio^[4]The dependency ratio: it is changing governments starts to bite.

For a long time Switzerland has had a solution to the dependency ratio problem – Gastarbeiter (guest workers). In the 1950s they were people from Turkey, then refugees from Kosovo (who were allowed to become citizens), and workers from Italy, Portugal and Spain. That’s only a solution while those countries remain in trouble. It is not a long term solution, and neither is the subsidisation of the health care insurance. 

The reports from the Federal Office of Public Health clearly set out the compromises that people have to make with health care decisions^[5]The Federal Council’s health policy strategy 2020–2030. Quality of life suffers, and in one of the wealthiest countries in the world, many people just exist, because their health premiums are being subsidised, and they really have no right to complain.

Until they do.