Health care reform? Mumbai's too busy building the future.

As India develops into a 21st-century power, the US strains to tweak a 19th-century welfare model.

“When you visit India…and I suppose it is true when you visit China or Brazil too…you don’t even notice at first…it’s not so much a thought…but more like a feeling…”

We were explaining to colleagues why it’s the end of the world as we have known it.

Back to that in a minute…

The Dow rose 102 points yesterday. If this keeps up we’re going to have to amend our view.

In our way of looking at things…we are still in a prolonged bounce following the big drop of ’08-’09. Stocks have yet to realize that the economy is in a depression. Yes, we know it doesn’t seem much like a depression. Even we have stopped using the term…

Now we’re calling it “The Great Correction”…in which we’re expecting a number of things to get sorted out – including the stock market boom from ’82-’07…the post-’71 dollar-backed monetary system…and the huge credit expansion that goes all the way back to 1946.

But that’s not all. It could be that this period will correct the whole, extraordinary surge in Anglo-Saxon power that began in the 17th century. English speakers have been on a roll since Sir Francis Drake defeated the combined armada of Spain and France in 1588. Soon after England began putting together her empire…and then, the industrial revolution turned Britain and America into economic powerhouses.

In addition to reducing asset prices and de-leveraging the economy, The Great Correction could be reducing the relative power and influence of the English speaking peoples. We don’t know…but that’s the way it looks now…

Returning to our conversation…

“Of course, things are a mess in Mumbai…I mean, the traffic is terrible…the heat is appalling…there are people who look like they haven’t eaten in a month…

“But you can’t help but notice that India is moving forward. It’s chaotic; it’s uncomfortable; it’s unpredictable…but it is going ahead. People are young. Buildings are new. There are new cars on the road…and new shops opening up.

We saw a couple of Tata Motors’ new Nano cars – cute little cars that sell for only $2,500. But there were dozens of car varieties we never see on American or European roads.

“You can’t help yourself…you begin looking into the future…and imagining what it will be like when they finish a bridge or complete a road…or demolish a slum…or find new ways to do things…new ways to get along with one another…and new ways to run the country…

“Then, when you come back to France or America, you’re suddenly back in the past. It’s a relief, because everything seems familiar and orderly. Like a museum. But it’s a let-down too…because you’re back to dealing with old problems…old people…and old institutions. While the emerging economies look ahead…the developed ones look back.”

What is this health care bill? Is it a new way of making the future better? Or is it an old solution to an old problem? The feds first considered a takeover of the health care industry during the Roosevelt administration. They’ve been working, planning, plotting their way towards the same objective ever since – for 80 years.

And what they’ve finally gotten is yesterday’s bad solution to yesterday’s problem.

The nation state was invented by the French at the beginning of the 19th century. By the middle of the 19th century, Otto von Bismarck added the refinements that we know today as the modern welfare state.

And now…as every welfare state in the world faces decline and bankruptcy…America has completed its collection of welfare state essentials – with a national health care system.

Why are the old welfare states going broke? Because the payoffs to the past have become too great. There are too many old people who expect pensions and health care. There are too many old industries that, like patients in a mental hospital, need to be cared for. There are too many bailouts…too many subsidies…too many protections…too many safety nets.

Every society is a pact between the future and the past. A new society looks to the future. An old one looks back at the past. As a successful economy matures it owes more and more for things that have already happened. China builds new high-speed railways, for example, while in the US we’re still paying Amtrak’s losses of the last 40 years.

Over time, more and more special interests, anglers, parasites, leeches and lobbyists get a grip on a financial system. They find ways to take advantage of it…to exploit the system for their own ends. Trade unions, business groups, the rich, the poor, the middle classes – everybody wants a benefit.

The health care act is not a bold new initiative that will lead the country forward into a new era. It is 2,400 pages of payoffs to old interests – payoffs to senators and congressmen for supporting the bill, payoffs to the pharmaceutical industry, payoffs to organized labor and insurance companies…payoffs to groups that were set up many years ago.

The benefits go to the past; the costs go to the future. Even if the economy were running at normal speeds, the deficits of the world’s leading welfare states would still be increasing. Only 10% of current deficits are related to “stimulus” efforts. The rest is payoffs… To organized interests representing the past.

In the US, Federal debt is expected to reach 140% of GDP by 2014. In the G7 countries as a whole, debt-to-GDP will go over 100% just two years from now.

The welfare state model is no longer the model for the future. It’s a model for the past…that will soon be defunct.

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