National Health Care as Economic Advantage
Toyota is opening a new plant in Canada, bypassing southern states like Alabama and Mississippi which offered as much as $250 million in subsidies, in favor of Canada.
Ironically, tightening trade rules increasingly disfavor direct government subsidies to industry-- the US and the EU are fighting before the WTO, arguing that US federal and state subsidies of Boeing and EU financing of Airbus are both illegal under trade agreements. The WTO just declared US subsidies to the cotton industry illegal under trade agreements.
Which means that providing national health care (like a strong education system) may emerge as one of the few legitimate subsidies governments can provide to encourage industry to locate in their countries. And the United States is increasingly finding itself in a terrible economic disadvantage internationally because it refuses to create a national health insurance system.
I've always felt that subsidies were legal bribery and extortion. The big corporation gets a free manufacturing plant, paid for out of the taxes of his smaller competitor.
But health care is an important issue. I think it's a big part of the reason that there is so much outsourcing. A manager who looks at his costs, and workers get maybe 2-3 percent raises a year, he can look 10 years into the future and plan for that. But when health care grows exponentally year after year, he can't plan for that kind of cost growth. It's like a hyperinflation.
So, he has two choices. Get out of the business of providing health care, or outsource the work. If he has a unionized workforce, of course, he faces a major pushback. So, the path of least resistance is to outscource. Canada is actually profiting from this. A company that believes in fairly compensating its workers can move the work to a place with all the strengths of the American system, without the worry of out-of-control costs.
Of course, the answer is not to shift costs onto the worker. There's no way they can afford it. I think we can all agree, health care will destroy our economy if something is not done. Yet this administration will do NOTHING!
I would hope our unions will join with others to push for national health care NOW!
GoU
July 10, 2005 8:20 AM | Reply | Permalink
Agreed. I believe health care is the ONE issue that can unite both unions and corporate executives. The fiscal advantages of getting business out of the health care business are enormous.
I have said it before, and I will say it again and again and again if need be, this IS the Democratic platform in 2006, 2008 and beyond. Americans are truly concerned about both their fiscal and physical health because of our out of control health care system.
Great post.
July 10, 2005 9:23 AM | Reply | Permalink
Can we back up here a minute? I really don't think this has as much to do with health care per se, as it does with overall government subsidies.
You mentioned the $250 million the US states were willing to pony up for this plant alone. It probably would have been fair to also point out the $125 million Ontario is shelling out, as this tidy sum is not a rounding error in the total equation. Mix in about $400 million for the entire Canadian auto sector (parts suppliers, etc) in the province, and it would appear the Canadians were the highest bidding government to buy the plant location.
This is not a blueprint for building a long lasting economy if replicated throughout every industry. Ultimately the average taxpayer loses out when the government gives up tax revenue. Remember, the costs don't go away - the bill is just paid by someone else. Toyota stockholders are richer today due to Canadian generosity.
One last note. I don't know if Toyota agrees with your assessment that our education system is all that substandard. If it did, it probably wouldn't be breaking ground on its new San Antonio Tundra plant this year.
July 10, 2005 11:08 AM | Reply | Permalink
I'm not arguing that Canada doesn't do regular economic subsidies, but pointing to the fact that as trade deals make such subsidies legally vulnerable under international law, health care and education spending will end up as the core economic advantage in plant location that government spending can effect.
July 10, 2005 11:27 AM | Reply | Permalink
My union has had no luck convincing any corporations in climbing aboard any type of coalition for health care. It seems they are too scared of bucking the administration at a time when they are reaping all kinds of contracts and de-regulation from a very business-friendly bunch.
They'd rather keep on the Bush good side, because they've seen what happens to anyone who crosses them. So, for business to climb aboard, it'll take a new administration.
GoU
July 10, 2005 12:33 PM | Reply | Permalink
Currently, the US healthcare gets the least bang for buck among industrialized countries -- we spend the most on healthcare per person in the world, yet 45 million people remain uninsured in this country. Think about it: one out of every seven people in this country does not have health insurance. No wonder companies are beginning to migrate away from the US, despite our top-notch infrastructure and historical penchant for attracting innovation, to other countries where they can maximize labor productivity without worrying about overbearing health expenditures. Just look at GM. I don't remember the exact figure at the moment, but the company spends an obscene amount of money per vehicle on worker health insurance. And prior to their employee discount for all vehicles, their car sales had been lagging far behind Japanese companies. If US labor productivity and industrial output is to remain at the vanguard, we must reform the system.
July 10, 2005 1:20 PM | Reply | Permalink
Very true, about GM (as well as the rest). So why can't you get GM to join the unions to lobby for National Health Care? Because they are afraid of the Bush Administration.
GoU
July 10, 2005 1:35 PM | Reply | Permalink
From the article:
This was probably the part that sickened and/or frightened me the most in the article, because while health care costs are just an economic issue, poor eductaion can create fundamental and long-lasting problems. Good public education doesn't have immediate, tangible benefits, and since education has relatively little political power, it's easy to cut. But if we find ourselves a nation of (even more) illiterates 20 years from now, it will take a huge effort and a couple of decades to un-screw ourselves if we're lucky.
It's encouraging in some sense to see a place where ethical and economic aims align; we'll see how many business leaders see this, and how many aren't fobbed off with cheap standardized testing.
July 10, 2005 3:11 PM | Reply | Permalink
Scrap NAFTA and WTO, and one part of the problem is solved instantly.
However, national health care is even more important. The two tie in together, though.
Why should a corporation support national health care? Now that is a good question. The first answer that pops into my head is that corporations are generally against government regulation. Therefore they may not want to go down that slippery slope. They could be thinking national health care is only a few steps away from, god forbid, environmental regulation, a minimum wage increase, stricter worker safety laws.
Now big business can't have all that...
Sure, there should be a single-payer national health care system in the United States. But so long as these trade agreements allow corporations to pick and choose where their factories are located without regard to anything but the bottom line, the corporations have no incentive to stay here.
The same can be said for the subsidies. Corporations can relocate overseas, pay no tax, exploit cheap labor, avoid any regualtions, and still come out further ahead than if they accept a few million bucks up front.
Not to mention, without these agreements, would states (and the country) be in a bidding war for factories/jobs. Why should taxpayers have to bribe U.S. corporations to stay in the U.S.?
Until this free trade hysteria is at least reigned in, big biz will never get behind national health care, because they know they will share a brunt of the bill. They would prefer to have their cake and eat it too, yet we continue to bake the damn cake and clean up the mess.
July 10, 2005 7:38 PM | Reply | Permalink
Just this week, I went to a town meeting with my Republican senator, and people spoke out about their concerns about health care. Now if the corporations and expecially small businesses would get behind the health care issue and realize that it is in their own self-interest to have a better system, then I think we would have a deal.
This is an issue the Dems should pursue with vigor. Even people with health care are worried about losing it.
July 10, 2005 7:47 PM | Reply | Permalink
Who pays the health care bill in canada? Is not there some kind of tax on businesses such as Toyota? Is that factored into the $5 per hour savings?
July 10, 2005 8:04 PM | Reply | Permalink
CNBC whenever they discuss the problems of the auto companies say American firms have an added $1,500.00 per car due to health care costs.
July 10, 2005 8:53 PM | Reply | Permalink
Sorry I'm short on details, but I'll try to find the permalinks I need.
This was covered in another blog a while a ago, and it turns out the comments in the article were sourced from a pro-Canadian lobby, not Toyota. New factories are being built in the American south.
I think is is a no-brainer that national health care is a significant competitive advantage, and I'd like to see it. But it is only one factor. Detroit is getting killed by pension costs as far as I know, health care is a distant second. Nothing is more heartbreaking than to hear that the government has allowed a big company to cut and run on their pensioners, but thanks to the recent airline ruling I'd bet that Detroit will follow suit when push comes to shove.
Also, it's not like Canada is so advanced in general ed they threw a dart at a map. The town chosen is a depressed auto manufacturing town where a large portion of the unemployed worked in the auto industry, so that population has a lot of talent to apply to the narrow need.
And hey, I've got pictorials in all my IKEA directions, should I worry?
July 11, 2005 4:43 AM | Reply | Permalink
I'm all for universial health care, but is it really the main issue that unions and management can agree upon?
Schools were headlined as the main reason for the choice. Managers and line workers have the responsibility of parenting in common as well, with a vested interest in strong public school systems.
Perhaps the true test of what's important to Toyota would have been whether they would have located in Ontario if, rather than Mississippi, the $250M subsidy had been offered by Minnesota.
Not that the State of Minnesota would have...it's leaders are (most of the time) too smart to do that, and the state's economy is doing pretty darn good without those kinds of bribes.
July 11, 2005 4:53 AM | Reply | Permalink
Sure, business pay some of the cost of healthcare in Canada through taxation, but the burden is spread across everyone, so it still works out in the business’s favor. Instead of being responsible for 100% of their employees’ health costs they may be stuck with, say, %25 of the bill.
July 11, 2005 6:48 AM | Reply | Permalink
Go U
If your premise is true, and it may very well be true, then it makes it even more critical for the Democratic Party to make this their issue in 2008 to assure that they take back the White House. Then business won't be so fearful of payback and join the cause of universal health care.
July 11, 2005 8:51 AM | Reply | Permalink
Since Canada spends less state money on health care than the U.S., your premise is incorrect. Single-payer doesn't require more tax revenue that the exceptionally inefficient American system, and Canadian corproate taxes are not particularly high.
July 11, 2005 9:02 AM | Reply | Permalink
If the Repubs try to nationalize healthcare they will surely screw up the healthcare system more than it already is.
July 11, 2005 9:33 AM | Reply | Permalink
I'm not sure I had a premise.
I am reality-based enough to understand that health care is not free, not even in Canada. I am just curious where the money comes from and if Toyota may actually be paying for it indirectly through their taxes and the published savings did not reflect that.
July 11, 2005 10:09 AM | Reply | Permalink
Also Ignorance serves the Republican party. How else do you get working class people to vote against their interest. A better educated peonage might vote democratic.
In short: A BROKEN SYSTEM CAN'T FIX ITSELF.
Thus do we descend.
July 11, 2005 10:14 AM | Reply | Permalink
As a defense to my home state of Alabama I would like to state that the allegations from the Canadian auto industry are not true. The Honda plant that was talked about in the article was up and running quite ahead of schedule and they are currently in the process of doubling the capacity. Spokespeople from the Honda plant have stated that the only pictorials that have been used are the same type that have been used in any other automotive plant and are not due to a lack of education for the Alabama work force. See this article here: http://www.al.com/search/index.ssf?/base/business/112098713811379
0.xml?birminghamnews?cbund&coll=2
I know it can be fun for some folks to kick the south, but at least stick to the truth.
July 11, 2005 10:38 AM | Reply | Permalink
If you're getting high-tech manufacturing equipment from IKEA, then yes, you should worry about those pictorials.
You make some fair points - as it states in the article Nathan links to, the remarks about the low educational level of AL/MS workers comes from "Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, whose members will see increased business with the new plant", not from Toyota. But then, Toyota is a multi-national corporation which hopes to do business in many areas in the future and cannot afford to take public swipes at the workforces/consumers of entire American states.
And it can't be a coincidence that these same southern states have pitifully low tax rates and consequently pitifully low investments in education. There's a reason why conservative Republican Bob Riley tried to revamp the Alabama tax structure a few years ago so business would pay its fair share
July 13, 2005 8:53 AM | Reply | Permalink
I am a Canadian who has has the great good fortune of working in Oregon for a couple of years. My contract had my employer paying for my healthcare: over $350.00 a month. In the two years there, I needed to see my doctor twice and both times I had huge co-payments.
A major part of the reason I was happy to come home was health care: there is a value, far greater than just economic, to knowing that all of us are going to be treated when sick or injured, regardless of personal wealth or poverty.
Also, having our drugs bought in bulk by the provinces means we pay far less for our prescriptions than you folks do. The economic drain of profit-driven hospitals, over priced drugs and other service providers is a direct and profound economic disadvantage, both to the workers and to the employers.
Occasionally, the bogeyman of "well, in Canada you can't get the care you want because the state tells you what you are entitled to" is dragged out. Tell that to the one in seven Americans who have NO health coverage, and to the countless others who are underinsured.
Less of our GDP goes to health care than in the U.S., and yet we have a better overall standard of care, especially for those least able to afford it.
October 3, 2005 2:36 AM | Reply | Permalink