Grassroot Perspective – Aug. 8, 2003-The Myths of Canadian Health Care; Latin America's New Deal; Why Differential Pricing Helps the Poor?

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”Shoots (News, Views and Quotes)”


– The Myths of Canadian Health Care

A Seniors Issues and Answers from CAHI and United Seniors Association

Many politicians and advocacy groups are touting the Canadian health care system’s ability to provide quality health care to all residents, for significantly less than what is spent in the U.S., where we still have millions of uninsured. The untold story about the Canadian model – and all government-run health care systems – is the story of price controls and rationed care. Get the full story at

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Above article is quoted from The Cahi Institute, Cahi’s Issues and Answers

– Latin America’s New Deal

By Alvaro Vargas Llosa

Latin American statism is taking a new turn toward an old direction.
Hoping to bring prosperity to countries troubled by hyperinflation in
the 1980s and by often poorly structured pseudo-privatizations of the
1990s, Latin American reformers — led by Pres. Luiz Inancio “Lula”
da Silva of Brazil and Pres. Nestor Kirchner of Argentina — are
embarking on policies inspired by Franklin Roosevelt’s New Deal
programs during the Great Depression.

Unfortunately, because da Silva and Kirchner misdiagnose the
underlying causes of Latin America’s economic malaise — and
misunderstand the effects of the New Deal — their policies will
likely fall far short of their target, according to Alvaro Vargas
Llosa, research fellow at the Independent Institute.

Latin ‘New Dealers’ assume, mistakenly, that the ‘New Deal’ saved
U.S. capitalism. In fact, it hurt private investment and employment,
and postponed recovery,” writes Vargas Llosa in a new op-ed.

“According to economists Harold L. Cole and Lee E. Ohanian,
employment should have been back to normal levels by 1936 and wages
by 1939,” Vargas Llosa continues. “But, in real life, by 1939
unemployment was still very high and real output was 25 percent below
trend. Economist Robert Higgs argues that the damage done to property
rights retarded long-term investment until 1941…. The New Deal took
the size of government to an extreme — roughly one third of GDP —
from which it never turned back.”

Vargas Llosa cautions that Latin American leaders must better
understand the reasons of their countries’ economic maladies before
proposing reforms that could lead to more economic hardship.

“Latin Americans are missing the point about underdevelopment,”
writes Vargas Llosa. “In both Brazil and Argentina the government
expropriates a large share of the wealth of their citizens and,
through institutional privilege, hinders society from producing more.
The government devours 40 percent of GDP in Brazil and 39 percent in

“A system based on privilege keeps 40 percent of wage earners outside
of the legal economy in Argentina, and Brazil has more people in the
informal economy than the combined number of public sector and formal
industry employees! It takes a quarter of a year simply to
incorporate a start-up business in both countries.”

Unfortunately, da Silva and Kirchner’s New-Dealesque programs are
likely to lead to the oldest dead-end public policy of all — higher

See “Latin America’s New Deal,” by Alvaro Vargas Llosa (6/27/03)

The above article is quoted from The Independent Institute, The Lighthouse 7/14/03

”Roots (Food for Thought)”

– Why Differential Pricing Helps the Poor?

By Merrill Matthews

It’s called “differential pricing,” and it is
widely accepted in just about every sector of
the economy-except in the market for
prescription drugs.

What Is Differential Pricing? Differential
pricing is the practice of charging some
customers or clients more, while charging
others less, for the same product or service.
Virtually every industry and most companies
engage in some form of differential pricing.

For example, the airlines have a range of fares
they charge customers based on when and
how they make their reservation, whether
they want to fly first or business class or
coach, or whether they are willing to stay over
a Saturday night. And many passengers fly
free by using frequent flier miles.

Health care providers historically have also
engaged in differential pricing. Doctors
charged most patients their standard fee for
care, but poor patients often paid a reduced
amount-if they paid anything at all. Such
doctors weren’t criticized but commended for
their charity and public service because
consumers get products and services at lower
prices and companies make higher profits-a
win-win for both companies and
consumers-unless, of course, you
manufacture and sell a product that is
politically sensitive, such as brand-name
prescription drugs. For instance, the media,
many politicians and special interest groups
have come to believe that differential pricing
helps the drug companies while hurting the
poor. In fact, eliminating differential pricing
in prescription drugs would only hurt the

Differential Pricing as a Social Benefit.
Differential pricing permits companies and
individuals to make their products or services
available to people in a wider range of

Case Study: Airlines. The airlines want to sell
as many tickets to as many people as possible.
Their most lucrative business model is to sell
rather expensive tickets to business travelers
who expense the costs and so are less sensitive
to the price. But many people without such
expense accounts are not willing to pay that
price. Since the plane is making the trip
anyway and the “marginal cost” of adding
more passengers is virtually zero, the airlines
devised a way to identify pleasure travelers by
requiring a Saturday night stay-which many
business travelers don’t want to do-thus
allowing millions of people with lower
incomes or no expense account to travel to
see family and friends.

Pharmaceuticals and Differential Pricing.
Like most industries, pharmaceutical manufacturers
engage in differential pricing. And
like most industries, differential pricing has
allowed lower-income people, both here and
abroad, to have access to drugs they never
would have gotten otherwise.

In this country, drug manufacturers provide
billions of dollars in free or drastically
discounted brand-name drugs to states and
programs that seek to provide care to the poor
and indigent. In addition, several drug
companies have implemented discount cards
for qualified low-income seniors. Pfizer and
Eli Lilly went a step further by allowing all
qualified low-income seniors to purchase any
drug they sell for $15 and $12 per month,
respectively. By identifying low-income
seniors, drug companies are able to segment
those who need help the most.

Differential Pricing and Other Countries.
Drug companies are often criticized for
selling bulk quantities of prescription drugs
to foreign governments, especially Canada
and Mexico, for prices lower than many
Americans can purchase them.

However, such practices are common and
well-accepted in other industries, and make
sense from an economic standpoint. Canada’s
per capita GDP is about two-thirds that of
the U.S.-$19,170 vs. $29,240 (1998, U.S.
dollars). Mexico’s is a mere $3,840.
Even automakers sometimes sell their cars for
less in Canada, and some Americans have
been crossing the border to buy those cheaper
cars-spurring a backlash from U.S. auto
dealers who lose sales as a result.

But when drug companies discount their
products or give them to impoverished
countries, critics claim that such practices
prove the companies are charging Americans
too much and so they clamor for price

They ignore the fact that the only reason
doctors can afford to provide free services to
some low-income people is that many others
are willing to pay the full price. If no one pays
the full price, no one can get a deeply
discounted price.

Who Does Differential Pricing Help? If a
company that sells a product for several
different prices were told by the government
it could only sell at one price, the company
likely would no longer be able to sell the
product for the current lowest price. Higherincome
people who are willing and able to pay
more would pay lower prices. And lowerincome
people would be forced to pay more-
precisely the opposite of what lawmakers
intend by single-price legislation.

Differential pricing helps low-income people
get a product they could not otherwise afford.
If Congress were to do away with differential
pricing in the market for prescription drugs-
for example, by forcing a drug company to sell
to every purchaser at the lowest price paid by
any purchaser-it would ensure that lowincome
people all over the world would pay
more or could no longer get the drugs they

Conclusion. Providing the widest possible
access to a product means permitting-even encouraging-differential pricing. Eliminating differential pricing ensures that low income people will have little or no access to the newest, life-saving drugs. It’s a death warrant masquerading as social do-goodism.

Dr. Merrill Matthews Jr. is a Visiting Scholar at the Institute for Policy Innovation.

Above article is quoted from The Heritage Foundation, The Insider May 2003

”Evergreen (Today’s Quote)”

“The great law of culture is: Let each become all that he was created capable of being: expand if possible, to this full growth.” — Thomas Carlyle

”’Edited by Richard O. Rowland, president of Grassroot Institute of Hawaii, 1314 S. King Street, Suite 1163, Honolulu, HI 96814. Phone/fax is 808-591-9193, cell phone is 808-864-1776. Send him an email at:”’ ”’See the Web site at:”’