In a system rooted in cronyism, is there any incentive to solve problems rather than protract them?
May 7, 2017
By: Bobby Casey, Managing Director GWP
The United States’ political class sold its citizenry a bill of goods: that ending war and disease comes with the destruction of Western economy as we know it.
It’s never been said in those words, of course. But it is absolutely spoken through policy and press.
The United States on average has been at peace for about one month out of every year since her inception. Imagine fighting 22 hours a day, every day for 235 years. “Freedom isn’t free” is the bromide typically given in response to such an observation; but while freedom doesn’t come at zero cost, a damn good case can be made that it doesn’t have to come at the cost of $0.52 of every tax dollar received.
The United States went from a country that admonished foreign entanglements, to one that thrives off them. The first and second world wars might have been the tipping point for the US economy. The first precipitated the irrevocable step into foreign entanglements; the second precipitated the economic dependency on said interventionism.
Just the other week, five of the largest defense contractors collectively lost more than $10 billion in value on the heels of the North and South Korean peace pact. Here are just a few:
- Lockheed Martin dropped 2.5% from $352.79 per share to $321.95
- Northrop Grumman dropped 3.4% from $356.67 per share to $321.86
- General Dynamics dropped 3.8% from $222.92 per share to $203.70
- Raytheon dropped 3.6% from $227.67 per share to $204.09
The majority of business for companies like the above comes from the government in one form or another. Despite the hike in defense spending overall, stocks still fell. The power of a peaceful handshake can bring a country built on war to its knees, if it doesn’t adjust accordingly.
But peace no more destroys economies than technology. It simply is a cue to redirect economic energy. Yes, some jobs are obsolete due to technology. Yes, some industries will lose profits due to peace. But it’s a false choice to say that if that job goes away, a net job was lost. In point of fact, more net jobs were added to replace that job. Same would hold true for all the military spending. Those businesses would get into some other line of goods and services, or their business or industry would become obsolete. The wealth and economic efforts once dedicated to those industries would likewise redirect themselves.
Americans are told these are all preemptive and preventive; that if the US didn’t intervene *insert bad thing here*. The Swiss have historically made a good amount of money off wars… not by intervening but by funding. Still, if the world realized peace tomorrow, Switzerland wouldn’t cease to exist or even be reduced to a 3rd world status. There are plenty of other services that country offers the world that keeps it economically sound.
I’m sure you’ve heard the preposterous question: if we ended slavery, who would pick the cotton? If we ended war and stopped criminalizing everything, who would prop up the economy? Absent two of the largest government funded industrial complexes – military and prison – would the United States just collapse into its own footprint like a Twin Tower in summertime? In theory, that wealth would be refunded to the private sector where new industry and wealth could be created.
There are two business models: traffic based and transaction based.
Small ticket items are often the former, while larger ticket items fall in the latter. Having to return to the store for things like food and toilet paper makes sense. This is why those companies don’t deviate too far from their generic counterparts’ price points. Yes, brand is a little more expensive, but not THAT much more because they know they are going to make their money off the life of the customer… not in ONE transaction.
Transaction models are more like cars and houses. The average person doesn’t buy these on any regular basis. They are often very ignorant on the process because of their limited experience. The price points are higher because the durability and sustainability of the product is longer than a roll of toilet paper, plus the actual costs that go into making them is higher.
War and healthcare should not be treated as traffic based models. When you have a government that can tax, print, and borrow to its heart’s content, you get this kind of distortion: where violence and protracted suffering become economically normalized.
War is the violent resolution to a dispute or problem between nations. Once a side wins, the war is over, and resolutions are made. The demand for war services and products likewise ceases. That used to be viewed as a good thing, but is now viewed as an economically bad thing.
Healthcare is a little different, but shares a similar conundrum: people have health problems. The medical industry is charged with fixing or resolving those problems. Once someone is fixed or cured, the demand for treatment ceases. This used to be viewed as a good thing, but is now likewise views as an economically bad thing.
In both cases — war and health — the claim is that these industries aren’t profitable or sustainable if they ever achieved what they set out to do.
The healthcare industry makes more profits off treatment than cures. The defense contractors make more profits off continued conflict than resolution and peace.
Goldman-Sachs issued a report stating the obvious: cures aren’t sustainably profitable. This left many to conclude that the medical industry would not work in the best interests of the patients because there’s little to no profit in it.
Dr. Raymond J. March points out:
“[M]ost medical discoveries do not earn profits. This is especially true of pharmaceuticals where, according to a white paper published by the Biotechnology Innovation Organization, only 20 percent of the drugs that make it to market obtain enough revenue to cover their R&D and FDA drug approval costs.”
It’s not profitable that small pox and polio have all but been eradicated. There isn’t a strong demand in places with plumbing to treat polio. Cures will always be more superior than treatments. If someone came up with a cure for diabetes, insulin producers would be out of business because it doesn’t take a fortune teller to know diabetics will take the cure over management regimens.
Then there is the matter of FDA approval. Remember Samuel Girod, the Amish farmer who faced 12 count federal indictment for selling and distributing his non-FDA approved chickweed salve? That scheme was instituted so small players like Samuel Girod never took a customer away from the establishment players.
Establishment industry players don’t act in the best interests of the patients, but not the way you think. It’s not that they do or don’t want a cure. It’s that they don’t want competition of any sort. So they pay tens of billions of dollars to keep a pay-to-play system in place. If such a system didn’t exist, then you’d see a race to the cure because the cure will always be preferable to maintenance treatments. Finding a cure is the victory in one of many matches, but so many more matches await. For example:
“Consider the case of the biopharmaceutical company Gilead Sciences, whose entrepreneurial insight to purchase and develop an unproven compound became Sovaldi, the only cure for hepatitis C. In 2014, Solvaldi earned over $10 billion in sales. However, two years after making the cure, Solvadi sales fell over 50 percent. Far from suffering from its ‘unsustainable business model,’ the company recently released data on a drug it is developing to help HIV infection.”
There is something in marketing called the “Opportunity Model”. It is an analysis done on products and services that looks at four major factors of a given brand: Credibility, Relevance, Differentiation, and Anticipation (or Stretch). This evaluation is conducted on a regular basis in most large corporations. They stand the most to lose, so they are always optimizing their brand to ensure these four tenets are met or exceeded in some way.
That this is a common practice with most brands says what about sustainable profits in a market economy? It says they aren’t sustainable! It says that without constant optimization, all businesses are unsustainable.
Keeping wars going, keeping people sick, patents and regulations that keep competition at bay… all that is just plain laziness.
Don’t buy into the fear propaganda and hype. The truth is, there IS incentive to cure disease. There IS incentive to end war. The same way there IS incentive to automate: it frees up capital for other more lucrative economic activity. The government just needs to get out of the way and stop “helping”.
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