Posts tagged system

What Greece must do to Survive the Debt Crisis

A frustrated Greek expressing his angry through violent protest

CNN News: Click Here

In action to fight off the increasingly unbearable debt crisis, Greece chose to get financial support from both EU (mainly Germany) and IMF. This might help Greece out of the problem in a short-run, yet they still have to pay back the money they have borrowed from EU and IMF. Now all Greeks must tighten their belt in order to fight off the crisis. There is a list of what Greece must to do recover their economy.

  1. Salary Cuts
  2. Retirement
  3. Increase in Taxation
  4. Reform in Pension System

First of all, all Greeks (at least public workers) will increase a cut in their salaries. Salaries are one of the big factors that take up large percentage of the cost in business and government spending. Though this will arouse some violent protests from the people, there is no other way to fight off the debt crisis without a cut in wages.

With some cuts in wages, many business and governments will want to minimize the number of employees as possible to decrease the money spent. This will result in early retirement of many workers with ages over 60. This will also contribute to the high unemployment rate, however, significantly cut the unnecessary budgets.

Interestingly, the Greek government decided not to have an early retirement for its workers but to increase the retirement. The retirement age was shifted from 61 to 65. It may be that Greece government didn’t want more unemployment and more protests regarding it. I think that the Greece government is tightening the payment of wages so much that they don’t need to cut down its workforce.

Greek people will most definetly exprience the rise in taxation. Greek government said that it was going to raise all VAT’s by 10%. Increasing taxation is one of the key ways that Greece can endure the crisis.

Greeks will also exprience a cut in pension. Unplanned pension system was the main culprits for the cause of Greece’s debt crisis. The government borrowed money, unplanned, in order to fulfil its populistic policy of pension system. The system supported too many people and gave out excess amount of money. So many aged Greeks will exprience this frustrating cut in their pension.

In sum, these were the actions that Greece must implement in order to survive the debt crisis. I think that the government’s determination to get out of the deb crisis is firm, but I think that this determination is not supported by lots of Greeks. Greek people must bear in mind that if they don’t start tighenting their belts, the government’s effort in order to get out of the crisis.

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Disadvantages of Private Health Care

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1. Inequality

People who are low in income will have greater burden of medical fees than those with high income. Also, people with high income usually have medical insurance covered by their employing company. But, people with low income usually don’t have a medical insurance covered by their employers.

Children, students, or those with no jobs will not have a medical insurance. Some companies cover medical insurance for the employee’s children, however, majority of companies simple do not because of its expensive cost. So, children or student are vulnerable to injuries or disease as the medical fee will be so expensive for them.

2. Health Care is is a Merit Good and it has positive externalities.

Health care is indeed a merit good. However, in a country with many privatized hospitals, the consumption or usage of medical service is lower than the optimum consumption. So medical market fails due to under-consumption of medical services. So governments should intervene and support the health care.

Also, many people know that health care creates some positive externalities. A good medical system can contribute to a successful economy. An economy will be improved by people being treated quickly/efficiently which will help the improvement of labor productivity. In free-market system, this positive externality is ignored and therefore the health care market fails.

3. It is expensive.

Private hospitals do have motives to make profit out of medical services. You can quote on Adam Smith that all human beings are motivated by private profits. So, usually privatized hospitals charge its patients higher than government-owned hospitals. It is because the medical fee is not supported by the government. Also, they must have marginal profit so they would have raise the medial fee.

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Some Ideas for the Seminar

Seminar Question: : Is capitalism so deeply flawed that all attempts to ensure the public good are doomed to failure?

Definitions:

Capitalism: An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

Public Good: A good that is non-rivalrous and non-excludable. A good or service that is provided without profit for society collectively.

Examples of Public Good:

  • Health Care System
  • Military
  • Police
  • High Road

Health Care System in North Korea

N Korea healthcare ‘near collapse’: Click Here

Main Point: North Korea’s healthcare system has failed. It does not have medicines in hospitals to cure its patients. Also, it lacks sufficient medical instruments.

North Korea’s health care system charges their people no fees. It is totally free. It is surely a great contrast from United States, which only started to debate whether they should have laws related to health care passed or not. However, there’s a big flaw in North Korea’s medical system. It simply does not have enough medicine and medical instruments to take care of the patients. Virtually, there is no point in going to the hospital because there simply are anything to cure with.

Health Care System in Cuba

Wikipedia: Click Here

Unlike North Korea, Cuba’s health care system is well-developed. It has advanced medical support for its people free of charge. Cuban hospitals are advanced as any other hospitals in United States or Europe. But, they provide medical surgeries with low fee compared to the hospitals in United States or Europe. So it attracted many health tourists for 20 years.

Sum: The example of North Korea’s medical system seems to imply that communist countries cannot provide medical service. However, looking at Cuba’s example, it contradicts to this idea that communism cannot support medical system.

<Pure Capitalism-Mixed System-Pure Communism>

There aren’t countries with pure capitalism or communism in the world. Even North Korea isn’t a pure communist country because it allows South Korean factories to do business in their ‘special economic district.’ Most countries are in the middle part where they mix a little bit of capitalism and little bits of communism.

US, which is the closest to pure capitalism, has failed to support medical services. Its citizens have to pay medical fee on their own. Pure capitalisms always fail to ensure public goods. Socialist (a capitalism but has some aspects of communism) countries such as France has successful medical system. It takes 40% tax on its citizens and use that tax on the public goods. Capitalist countries often have low taxation on its citizens to ensure their economic freedom. However, it makes it difficult for the country to establish a good medical system. As it has low taxation, it’ll be hard to provide government-owned hospitals. Instead, privatized hospitals dominate the medical market of the country and charge extremely high price for its medical service. Even though North Korea would have 100% tax on its people, as its economy is extremely feeble, it does not have any money to do anything. It’ll virtually have no money to establish hospitals and buy medicine even though it taxes its citizens 100%. So public goods can only be supplied when the economy has a firm foundation. However, even though the economy is strong, like US, the tax rate is so low that it cannot support medical services. So it is very important for countries to be communistic when it comes to public goods. However, not so communistic that you end up being like North Korea.

Capitalism is the best thing out there for growing markets ands economy. However, it does not ensure public good to be provided to the people. It is wise for countries to change their economic system to socialist system as soon as they achieved the goal of well found economy by capitalism.

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