U.S. Health-Care System Ranks as One of the Least-Efficient

None of these rankings are perfect and neither is this one. But it is clear beyond any doubt that the USA healthcare system is extremely costly for no better health results than other rich countries (and even more expensive with again no better results than most poor countries). It is a huge drain on the economy that we continue to allow lobbyists and special interests to take advantage of the rest of us via the Democrats and Republican parties actions over the last few decades.

We have to improve. The costs imposed on everyone to support those benefiting from this decades old transfer of economic wealth to health care special interests should no longer be accepted.

The top 5 countries are: Hong Kong, Singapore, Spain, South Korea and Japan. The first four have costs about 25% of the USA. Japan costs about 40% of the USA per person cost.

Mylan’s despicable actions with Epi-pen and the direct participation of both political parties in increasing the costs foisted on the health care system by Mylan is just one in hundreds of the individual actions that continue to saddle the rest of USA economy with huge costs.

Related: Out of Pocket “Maximum”, Understanding USA Health Care Costs – Decades Later The USA Health Care System is Still a Deadly Disease for Our Economy – 2015 Health Care Price Report, Costs in the USA and Elsewhere – USA Health Care Spending 2013: $2.9 trillion $9,255 per person and 17.4% of GDP – USA Spends $7,960 Compared to Around $3,800 for Other Rich Countries on Health Care with No Better Health Results (2009 data)

Iskandar is 5 times the size of Singapore and is in the state of Johor in Malaysia. Johor Bahru is the city which makes up much of Iskandar but as borders are currently drawn Iskandar extends beyond the borders of Johor Bahru.

The prospects for economic growth in Iskandar Malaysia in the next 5, 10 and 15 years remain very strong. They are stronger than they were 5 years ago: investments that produce economic activity (theme parks, factories, hospitals, hotels, retail, film studio…) have come online and more on being built right now.

Cooperation with Singapore is the main advantage Iskandar has (Iskandar is next to the island of Singapore similar to those areas surrounding Manhattan). It provides Iskandar world class advantages that few other locations have (it is the same advantages offered by lower cost areas extremely close to world class cities – NYC, Hong Kong, London, San Francisco etc.). Transportation connections to Singapore are critical and have not been managed as well as they should have been (only 2 bridges exist now and massive delays are common). A 3rd link should be in place today (they haven’t even approved the location yet).

A MRT connection to Singapore (Singapore’s subway system) should be a top priority of anyone with power interested in the future economic well being of Iskandar and Johor. Johor Bahru doesn’t have a light rail system yet this would be the start of it. It has been “announced” as planned for 2018 but not officially designated or funded yet.

Transportation within Iskandar is also a big concern. This is good now. I worry they will become as bad as Kuala Lumpur which would be a horrible outcome. JB had the chance to build a good transportation system and avoid the economically extremely costly friction of bad transportation system that KL is stuck with. If JB does this well, JB will be the economic center of Malaysia in 2030. If this is messed up the economy of JB will suffer a great deal.

The health of Malaysia’s economy will also have a large role to play. Overall things are very positive on this front though government and consumer debt are getting to be serious problems.

Economics is often tricky. Externalities (like pollution – essentially externalities are positive or negative impacts that are not captured economically by the market transaction, so economic theory requires government to implement policies to take externalities into account) are easy to ignore, for a awhile). So you have situations like China where huge negative consequences (health risks, health care costs, costs to pay staff to accept unbreathable air…) are taken on and short term economic gains seem better than they are.

Economic bubbles create lots of golden eggs. They are false golden eggs though. They are only available as long as the bubble tempts people to ignore the real economic worth. And cleaning up after bubbles burst is extremely costly and damaging to economies (especially ones that have high debt and are not lucky enough to have a fiat currency that the global market accepts – the USA).

I am extremely skeptical of the boom in luxury housing in IM. I don’t see the boom in very high paying jobs that create a sustainable demand for luxury housing. The transportation links to Singapore are not great enough to allow the jobs to all be in Singapore. Even if they were that is a risky model to be completely dependent on Singaporean jobs for over 50% of the housing being built now in Iskandar. There is likely to be a dependence on Singapore jobs to sustain many of those living in IM but for it to a strong economy there have to be a reasonable number of high paying jobs in Iskandar.

Right now, it seems to me (I would really need to have much more data to be more certain as I don’t have nearly enough data now), that there is a bubble in luxury housing in IM. I think the government is wise to take bubble suppressing steps. Doing so is never easy. Getting it exactly right is very hard. I think they waited to long, which then means the bubble has inflated and makes taking the right steps even harder.

On the good side of things, real estate prices were extremely low 10 years ago. So while prices have increased a great deal they are still not exorbitant compared to other desirable areas (Singapore, KL, Penang, Bangkok…). Of course, JB hasn’t been on comparable terms with those locations. I truly believe IM has the potential to do so, and thereby justify even higher prices going forward. But that is dependent on maximizing the Singapore location benefits and while lots of good things are happening on that front, more is needed. And more is needed quickly.

The riskiest area for IM is a huge oversupply of luxury housing. It would be foolish of the government not to address this risk. Wether the steps taken are correct or not, I am not sure, but I think they are a reasonable guess and basically are wise. Things should be watched and adjusted as needed. The policy change I like the least is the 1 million MYR limit (I would do no more than 750,000 MYR if it were up to me).

What I see as the top priorities

• reducing speculation in luxury housing in Iskandar
• reducing government debt levels
• reducing consumer debt levels
• increasing the number of high paying jobs in IM – focus on health care is good (I more could be done there I would try), finance is another good target, manufacturing is decent but I seriously doubt IM will have huge numbers of high paying/high skilled manufacturing jobs (some yes, but limited). I would also target high tech, software development etc. I would work closely with organizations in Singapore and KL. I would focus a significant amount of effort on this area). Education is good (and worthily of continued effort) but provides limited high paying jobs. If engineering and entrepreneurship programs can be developed that integrate with high tech business community that is the path to huge success for JB (pretty much everywhere else on earth would like to pull this off so there is lots of competition – JB has better than average potential with Singapore next store and the Malaysian economy and efforts such as IRDA and decent English language skills for students – improving English would help).
• increasing the tax base (sales taxes make sense), hotels and retail are great (especially when they attract tourists and you get tax dollars on others – not just your citizens)
• transportation – MRT, busses in JB, roads, taxis… Should be worrying about JB’s own MRT system (even if that is a long term issue, planning should be done now, building should likely begin within 5 years – beyond just the initial few stations linking to Singapore, it should be over 12 stations in JB by 2025 – likely a north/south line and east/west). Should likely also plan on 2nd and 3rd link MRT connections to Singapore by 2025 would be nice, but certainly by 2030 I would think?
• increasing number of jobs overall – this seems to be fairly well done but looking down the road 30 years the issue is going to be raising the pay level (lots of retail and tourist related jobs are good at first but they are low paying jobs in general)

Related: The Growing Market for International Travel for Medical Care – The Potential of Iskandar is Very High but Investing in Iskandar has Risks (2011) – Iskandar Housing Real Estate Investment Considerations – GDP Growth Per Capita for Selected Countries from 1970 to 2010 – Channel News Asia Report on Iskandar

Wahid Says Ringgit Too Weak as Growth Improves: Southeast Asia

India and Indonesia have experienced large stock market declines and currency devaluations recently. The Malaysian Ringgit has declines 10% against the US $ in the last 3 months. Malaysia is holding up ok, but is venerable as these international loses of confidence often sweep over countries (and move from country to country).

The main foreign exchange earner recently seems to be selling property, that isn’t a good way to be earning foreign currency (selling assets). It is ok to do this to some extent, but relying on large inflows this way is very risky (and self defeating over the long term if it is too large). Even though palm oil and rubber exports are declining a bit, I believe they are still strong sources of foreign currency so that is good.

I agree completely with his last statement. The issue is fixing the fundamentals. The statement can also be made that if you don’t fix the fundamentals short term market declines are the indication of the beginning of long term market declines. The critical point is fixing the fundamental problems and in Malaysia the most likely top of those fundamental issues is reducing debt levels (for the government and consumers). Fix that, at the other strengths of Malaysia’s economy will likely create a very positive future.

Large foreign ownership of debt is also risky, as those foreigners can pull out investments quickly. Investment sentiments change quickly and it is easy for fearful investors to overreact (especially with funds they have invested in other countries).

Related: Malaysian Economy Continues to Expand, Budget Deficits Remain High – Pursuing a Growing Economy While Avoiding the Pitfalls That Befall to Many Middle Income Countries – GDP Growth Per Capita for Selected Countries from 1970 to 2010 (Malaysia, Singapore, Korea, Indonesia…)

GDP in USD for countries

I just picked countries that interested me and seemed worth looking at. I looked for some around the starting position of Singapore and close to Singapore geographically. And looked at Panama as the closest match to Singapore (for Singapore’s main 1970 asset, convenient for shipping lanes, and very close for GDP per capita).

Malaysia and Singapore were 1 country after independence (from 1963-1965).

I can’t imagine more than a couple countries could reasonably be argued to have had better economic performance from 1970 to 2010 than Singapore (Korea? China? Who else?). Singapore had very little going for it in 1970. They had a good location for shipping and that is about it macro-economically. No natural resources. No huge storage of wealth. No preeminence in science, technology or business.

It seems to me that Singapore actually did have 1 other thing. A government that was to preside over a fantastic economic growth success. You won’t find many textbooks talking about the way to economic success is a very well run government. And there is good reason for that, I believe. Relying on a very well run government will nearly always fail. In some ways Singapore was like Japan but with significantly more government influence on the way economic development played out.

I was surprised how poorly the USA has faired. It isn’t so surprising that we lagged. People forget how rich the USA was in 1970. The USA is still very rich but bunched together with lots of other rich countries instead of way out ahead as they were in 1970. And in 1970 the lead was already contracting, for what it had been earlier. But even knowing the relative performance of the USA had lagged, I was surprised by how much it under-performed.

I was also surprised with India. I knew they have done poorly but I didn’t realize it had been this poor. The failures to greatly improve infrastructure, education and the stifling effect of their bureaucracy have been causing them great harm. They have been doing some good things in the last 10 years especially but still have a long way to go. Their premier education is actually pretty decent. The problem is the other 90% of the education is often poor and many people (especially women) hardly have any education at all. It is very hard to get ahead when you fail to take advantage of the talents of so many of your people.

Related: Singapore and Iskandar Malaysia – Chart of Largest Petroleum Consuming Countries from 1980 to 2010 – Chart of Nuclear Power Production by Country from 1985-2009 – Top Countries For Renewable Energy Capacity

** I made an adjustment which distorts the data a bit but seems fine to me. I adjusted the 1970 figure provided by the source using the US Fed price deflator. I took 24 for 1970 and 111 for 2010. Then I divided 111 by 24 = 4.625. So I multiplied the 1970 figure by 4.625 so that the 2010 and 1970 figures are reported on an equivalent basis (so $10,000 in 1970 column = $10,000 in the 2010 column). Then the percentage increase are not having inflation inflating the percentage increase. Also it makes the 1970s figure more easily understandable (it is hard to appreciate that $2,500 is a high figure for GDP per capita).

*** many of the 2010 figures are IMF forecasts

An interesting survey shows USA investors have become much more interested in relocating in the last two years (the data they show though has tremendous volatility over time, so I am not really sure this means much). I wonder how much of it can be explained by investors wanting to get a deep understanding of very promising markets. I wouldn’t image the actual number that do this is huge, but maybe the number considering it is significant. Billionaire investor, Jim Rodgers moved to Asia because he sees Asia as key to the future. One of the reasons I moved to Malaysia this year was to get a in depth understanding of what South East Asia is like (it is not a deciding reason, at all but maybe the 4th or 5th reason).

I believe the globalization of the employment market is a long term trend that will continue – especially for “knowledge workers.” The USA rested on the post WW II economic domination for nearly 50 years. The policies also helped this continue: investing in science and engineering, favoring entrepreneurship… But other countries have realized the value of these things (and the USA is slipping – not investing nearly as much in science and engineering and favoring large corporations that give politicians large amounts of cash over innovation – see things like the incredibly outdated “intellectual property” system, SOPA, favoring huge financial institutions…

The combination of long term policy weakness, the inevitable decline in the USA to world ratio of economic wealth, and the financial crisis caused by the policy weaknesses have seemingly greatly accelerated the trend. The next 2 or 3 years will determine if that is a permanent acceleration or if we go back to a slower pace – but on the same path. My guess is that we will stay on this path but the pace will not follow the level surveys might indicate (showing interest in such a big change is far different from actually moving).

There don’t seem to be any decent estimates of Americans living abroad. The US State Department claims releasing their estimates would be a national security risk? And the Census bureau says it would cost too much to try. Wild guesses seem to be between 4 and 6 million.

Related: I want out (subreddit) – Why Investing is Safer Overseas – USA Heath Care System Needs Reform – Copywrong

Manuel De Jesus, miller and farmer in El Salvador, will use his loan to buy parts for this milling euipment.

There is a great deal focus recently on the “99%” (via occupy wall street and the like). The truth is these are mainly about the 5% or 10% (those rich, but not quite as rich as the richest 1% – and much further from the richest than they were a few decades ago). As I have written before, most of those in the USA (also Europe, Japan…) are rich (though this is changing, a greater percentage of the USA is not rich, looking globally, than maybe any point since the 1930s).

We get confused because many near us are even richer and think that means the rest of us are very poor. But those in the USA are often in the 5% or 10% – not the 30% or 60% or 90% they seem to think they are. $50,000 in annual income puts you in the top 1% globally. $25,000 puts you in the top 10%.

I agree with the desire to reduce the political and market corruption, as I have written for years.

For the 99% (or the 90% anyway), I really think the best things are government policies that reduce corruption and increase market forces. Letting actually capitalism work instead of political and corporate cronyism failing to let markets work as they should. Also giving education and the chance to build a better life for yourself are important. Thankfully many countries have been doing very well on this front: Singapore, Korea, Brazil, Ghana, China… That doesn’t mean there are not huge issues to still address for most of the 90%, there are.

Microfinance in general, and Kiva in particular, are one great way to help. Again it isn’t perfect. And those getting the loans are not given an easy life. They are given a chance to try and build there business to improve there economic condition. This isn’t a certain success. And I do worry that taking on too high an interest rate, or loan amount, can leave people worse off than before. But when looking at the system of microfinance I really like the opportunity it gives people, who haven’t been given many.

Those getting loans have to make smart personal finance and business decisions. If they do well they can greatly improve their financial situation. I made several more loans today, using money repaid by previous borrowers. I try to find loans where I am able to help fund a investment that will improve capacity (but that isn’t always possible) – a new machine that makes them more efficient for example. I also try to avoid loans where the interest rate is over 30% (which might seem very high, but rates below 20% are very rare given the economics of these loans – they are very costly to service). What Kiva does is provide the funds people like me lend as interest free loans to the partner banks. The idea is that this allows partner banks to provide more capital for loans (obviously) and at a lower rate because the bank isn’t having to pay interest on the funds.

My loans today went to: Mali, Honduras, Senegal, Ecuador, Togo, Philippines and in the photo above El Salvador. The Curious Cat Kivans group has now lent $12,925 in 320 loans. We now have 11 members, join up and help give people an opportunity to improve their economic condition.

Related: More Kiva Entrepreneur Loans: Kenya, Honduras, Armenia… – Using Capitalism in Mali to Create Better Lives – Funding Entrepreneurs in Nicaragua, Ghana, Viet Nam, Togo and Tanzania

The chart shows the leading oil producing countries from 1999-2009. The chart created by Curious Cat Investing and Economics Blog may be used with attribution.

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The chart show 3 clear leaders in production Russia, Saudi Arabia and the USA (with the USA firmly in 3rd place). Those 3 were responsible for approximately a third of the total oil production in 2009. Russia greatly increased production. During the last decade world production increased from 72 million barrels a day to 80 million barrels a day. Russia accounted for 51% of the increase, close to 4 million barrels a day.

The next 11 countries are pretty closely grouped, with slightly increasing production over the period as a group. Brazil, the last country with over 2 million barrels of production a day in 2009, has the largest percentage increase in the period, producing 79% more in 2009 than they did in 1999. Russia increase production 62% over the period. The other countries ranged from a 23% increase (Canada) to a 25% decrease (Norway). The USA increased production 7% and China increased production 18%. World production increased 11%.

Last year I posted a chart showing oil consumption by the top oil consuming countries over the last 2 decades; showing all countries using over 2 million barrels of oil a day. The USA consumed 18.7 million barrels a day in 2009. Only China was also over 5 million barrels, using 8.2 million in 2009. Japan was next at 4.4 million.

Related: Increasing USA Foreign Oil Dependence In The Last 40 years – Manufacturing Output as a Percent of GDP by Country – Government Debt as Percentage of GDP from 1990-2008: USA, Japan, Germany…

In 2009 the next largest producers (after those in the chart) were: Algeria (1.8 million barrels a day), Angola (1,784), Kazakhstan (1,682), Libya (1,652) and the United Kingdom (1,448).

Data from BP Statistical Review of World Energy 2010 (8 Mb pdf)

Related: Great Time for a Vacation – Travel guide books – Traveling To Avoid USA Health Care Costs – Travel Photo blog

Chart showing manufacturing output, as percent of GDP, by country was created by the Curious Cat Economics Blog based on UN data* (based on current USA dollars). You may use the chart with attribution.

For the 14 biggest manufacturing countries in 2008, the overall manufacturing GDP percentage was 23.7% of GDP in 1980 and dropped to 17% in 2008. I left India (15% in 1980, 15% in 2008), Mexico (20%, 18%), Canada (17%, 13%), Spain (25%, 14%) and Russia (21% in 1990 [it was part of USSR in 1980], 15%) off the chart.

Over the last few decades Korea, and to some extent China, are the only countries that have increased the percent of GDP from manufacturing. China has not only grown manufacturing activity tremendously but also other areas of the economy (construction, mining, information technology). The countries with the largest manufacturing portions of their economies in 2008 were: China 32%, South Korea 25%, Japan and Germany at 21%. The next highest is Mexico at 18% which declined slightly over the last 15 years (with NAFTA in place). Globally, while manufacturing has grown, other areas of economic activity have been growing faster than manufacturing.

The manufacturing share of the USA economy dropped from 21% in 1980 to 18% in 1990, 16% in 2000 and 13% in 2008. Still as previous posts show the USA manufacturing output has grown substantially: over 300% since 1980, and 175% since 1990. The proportion of manufacturing output by the USA (for the top 14 manufacturers) has declined from 31% in 1980, 28% in 1990, 32% in 2000 to 24% in 2008. The proportion of USA manufacturing has declined from 33% in 1980, 29% in 1990, 36% in 2000 to 30% in 2008. While manufacturing output has grown in the USA it has done so more slowly than the economy overall.

Related: The Relative Economic Position of the USA is Likely to Decline – Manufacturing Data, Accuracy Questions – Top 12 Manufacturing Countries in 2007 – Manufacturing Employment Data: 1979 to 2007 – USA Manufacturing Output Continues to Increase (over the long term)

* I made edits to the 1980 Brazil manufacturing data and 1980, 1985 and 2008 China manufacturing data because the UN data only showed manufacturing data combined with mining and utility data. And I am using older UN data that had manufacturing separated from mining and utility figures for China in the other years.

The economies of India, China, Brazil, Mexico, Thailand, Vietnam… are still a fairly small fraction of global GDP but their share continues to grown. And the next few years look to continue this trend. Keys to how quickly they grow their share of global GDP are avoiding bubbles (which then burst), avoiding excessive government debt, continuing to build strong infrastructure for continued development and to what extent growth slows in Europe, USA and Japan due to the credit crisis and excessive consumer and government debt.

The emerging economies have done a good job avoiding the credit crisis failures visited by the large banks on the wealthiest economies but the dangers of slipping up are large and costly. The largest economies have lots of wealth even after allowing bankers and wall street to siphon off huge amounts for themselves. Less wealth economies will suffer much more than the wealthiest countries if they fall prey to the same political and economic failings. And those special interest (crony capitalism) favors are no less (I would say even more, in fact) likely in those countries than they are in the richest countries.

Related: The Relative Economic Position of the USA is Likely to Decline – Easiest Countries for Doing Business 2008 – Why Investing is Safer Overseas