Bad Pharma meets the Good Regulation Fairy. Why the drugs aren't about to start working

“It’s easier to imagine the end of the world than the end of capitalism,” everyone’s favourite Marxist film critic, Slavoj Žižek, once remarked. Perhaps a sudden fleeing of the imaginative capacity explains the strangely brain-dead reaction of the science writer Ben Goldacre to the idea that the pharmaceutical industry should, for the good of humanity, not be conducted on a capitalist basis.

The question, posed by the economist Harry Shutt, whose books have been admiringly reviewed in this blog, was not complicated. Given that the pharmaceutical industry appears totally unsuited to being run on a profit-maximising basis in shareholder-owned companies, Shutt asked in The Observer, wouldn’t its functions be better carried out by non-profit or publicly-owed enterprises?

Goldacre is clearly a very intelligent person, whose Bad Science columns are oases of un-credulity refuting the claims of corporate science. His book Bad Pharma says that drugs companies deliberately put dangerous or useless drugs on the market. He’s no fool and no shill so why did this obvious question precipitate such confusion?

Niall Ferguson has invaded my head

First, Goldacre said he was a realist, clearly implying that he’d like a different way of running the industry but that wasn’t possible. But by the next sentence, he revealed that he didn’t want a “central command state economy” (Help! Niall Ferguson has invaded my head), a very jaded straw man and definitely not what Shutt was advocating. This was followed, most bizarrely, by the assertion that people in the drugs industry perpetuate acts of great evil, not because they are innately evil, but because they work in a badly designed system. This is precisely what Shutt was saying – it’s a badly designed system, its acts are not the “fault” of the individuals working in it, so change the system. As an answer, that lacks something. It’s like saying 2+3 isn’t 5, it’s 5.

Finally, Goldacre says what he thinks should happen – a “competent regulatory framework”. Are you still awake? Don’t worry, the boogie man won’t get you because the good regulation fairy will stop him. Spoiler alert. She won’t.

(Imagine, as an experiment, the reaction if state pharmaceutical agencies were guilty of the foisting dangerous or dysfunctional drugs on the market. There would be immediate and deafening calls for privatisation. You get an insight into the balance of power, intellectual and otherwise, by the fact that critics of the misdemeanours of corporate drug companies call merely for better regulation.)

Let’s set aside for one moment the integral problem that western “democratic” political systems, and frequently the politicians in them, have been bought by corporations so that regulation is not remotely competent or effective. (This is the Jeremy Grantham and Stewart Lansley problem. Just because something should happen doesn’t mean it will).

Regulation/Smegulation

For the sake of argument, imagine an ideal world where the state sits benevolently above the fray and government regulation can do its job unimpeded. What would regulation actually do?

Bear in mind the recent claim by two eminent French specialists that over half of the medicines prescribed in France are either useless or dangerous. 20,000 people die annually as a result, they say. Goldacre’s  book, Bad Pharma, is specifically about the dangerous medicines that shouldn’t be out there, but are. “… for several of the most important and enduring problems in medicine, we have no idea what the best treatment is, because it’s not in anyone’s financial interest to conduct any trials at all," he writes. And that doesn’t take into the account the drugs, that while not harmful, do not serve any medical purpose. “If you can get on to the market by making a me-too copycat drug that represents little or no therapeutic advance and is even less effective than the drugs that it copies, then you will,” says Goldacre.

So competent and effective regulation will, if it does anything, radically reduce the number of pharmaceuticals that are allowed to go on the market. Thereby massively hitting drug company profits (they are currently the darlings of stock markets worldwide because they are so profitable) and, in turn, the number of people they employ.

Thus, you are soon face to face with a fundamental conflict of our capitalist system. An unavoidable collision between the impulse most decent people share for reducing the anti-social effects of capitalism, against the need for capitalism to prosper so that everyone can have good jobs and incomes. We are, whether we like it or not, materially dependent on the system’s success. But a successful system causes results, such as global warming and prescribing dangerous medicines, that are inherently destructive.

Planned Regulatory Obsolescence

If regulation of the pharmaceutical industry were actually competent, as Goldacre wants it to be, it would prevent capitalism from working (actually it’s not working well anyway but effective regulation would be another drag on profits). A 2009 UN report found that a third of the profits of the world’s biggest 3,000 companies would be wiped out if firms were forced to pay for the use, loss and damage to the environment they cause. In other words, truly effective environmental regulation would render capitalism impossible.

So regulation is, quite deliberately, not effective. It allows, as research has found, just enough reform to buy off critics without seriously impeding corporate priorities. In the end, Goldacre’s vision of a “competent regulatory framework” is far more utopian than changing the system so that profit maximization is not the modus operandi of pharmaceutical companies.

And you don’t need to be Albert Einstein to work that out.

Crony Capitalism - the convenient explanation for our evasive times

In Spain they suffer from amiguismo. Greece is fatally afflicted with rousfeti. Japan has never outgrown the effects of keiretsu. In South Korea chaebols have been a perennial blight.

Beyond the superficialities of debt, bank collapse, and government bail-outs, these are the real causes of economic distress. In a London Observer article last week, John Carlin explained the Spanish “infantile” attitude to work and rampant “amiguismo” – “friendism” – were the “root cause” of economic collapse and an unemployment rate in the mid-20s.

In English, this malaise is known as crony capitalism.

The “Spanish disease”, Carlin said, is an economic system where advancement depends on who you know. Greece is similarly benighted by “rousfeti”, which means according to a 2011 BBC article, “political favours and cronyism”.

In Italy, so says the Wall Street Journal, even emergency room doctors get promotion on the basis of their political affiliation. Apparently, “one routinely finds highly intelligent people employed in menial jobs while mediocre people often hold distinguished positions,” (which actually sounds like bog standard capitalism).

Like a receding tide, economic recession has merely exposed these countries’ integral failings, the argument runs.

Crony capitalism and Europe’s economic miracle

History is good at placing contemporary explanations in perspective and Tony Judt’s 2010 Postwar: A History of Europe Since 1945 systematically exposes the truth about crony capitalism. Unfortunately there is scant solace for believers in the cancerous effects of crony capitalism. Because if history is any guide, as far as capitalist economic health is concerned, the cronier the better.

Judt explains how Austria was governed in the 1950s and ‘60s, a system known as “Proporz”. “At almost every level jobs were filled, by agreement, with candidates proposed by the one of the two dominant parties [People’s party and Socialists],” he writes. “Over time, this system of ‘jobs for the boys’ reached deep in Austrian life, forming a chain of interlocking patrons and clients who settled virtually every argument either by negotiation or else through the exchange of favours and appointment.”

Judt is clear this arrangement didn’t just apply to public services and the media, but “much of the economy” as well.

In Italy, the story was similar, possibly even more extreme. “Jobs and favours were created and delivered proportional to local, regional, national political clout,” Judt tells us “…. From the point of view of Economic Man the system was grossly wasteful, and inimical to private initiative and fiscal efficiency.”

What were baleful economic effects of this grossly wasteful system? Well, in Austria, Judt relates, per capita (per head) GDP rose, between 1950 and 1973, from $3,731 to $11,308. GDP per head in France grew by 150%. “The Italian economy, starting from a lower base, did even better.” Spain, then labouring under the time-warp of Franco’s clerico-Fascist dictatorship as well as doubtless rampant amiguismo, saw GDP increase from $2,397 to $8,739. These were, for all their sclerotic cronyism, “golden years” economically.

At the end of the twentieth century, in the wake of the East Asian economic crisis, the same underlying “reasons” were uncovered. And they made as much sense then. South Korea chaebols – family-owned corporations where “the managers are brothers and cousins and in-laws who steer business one another’s way and cover up mistakes”, according to the New York Times in 1998 – were blamed for an “outmoded form of crony capitalism”.

But this outmoded system had, prior to the 1990s, produced the highest rate of economic growth of any country in the world for three decades.

Infantile attitude to work

In his Observer article, Carlin says the Spanish “infantile” attitude to work is behind the country’s dreadful economic situation. Young Spaniards, he says, have flocked to London, where “pure merit” is rewarded. But, disaster! A similar malaise is eating through the work ethic in the UK. Most people, according to the new breed of Tory MPs, would rather spend half the day in bed obsessing about celebrities, that do a decent day’s wealth creation. This regrettable attitude explains poor productivity. Britons should be more like hard working East Asians, who doubtless have been victorious by now in banishing the predations of crony capitalism.

The trouble is, celebrity obsessions aside, things were even worse in the past. To return to Tony Judt, Britain’s economy, in the post-war era, suffered from the blights of innumerable craft unions each demanding separate pay rate and demarcating activities, terrible labour relations, and mediocre management that would not invest in research and development.

But despite these impediments, economic growth was much more successful. The British economy grew at an average annual rate of 3% between 1950 and ’73. After 1980, when the power of trade unions was destroyed, the rate has been 2.2%. Productivity growth – output per worker – has been 1.9% between 1980 and 2008. Between 1961 and 1973 – an era of awful labour relations and frequent strikes – it was 2.95%. In the three day week of 1974 production hardly declined at all.

Dissolve the people and elect another-ism

As far as I can see, three conclusions are possible from an honest appraisal of this comparative economic performance. One, attitudes to work and crony capitalism make absolutely no difference to economic success. Two, post-1980 changes, the war against trade unions, privatisation, the dominance of finance, have, despite eliminating inefficiencies in production, damaged the economy. Three, capitalism as an economic system is declining. It is simply less able to deliver economic growth, jobs and prosperity for most people.

But rather than face these issues, the right-wing (and not just the right-wing), unconsciously echoing Bertolt Brecht’s desire to “dissolve the people and elect another”, blames people for just not being good enough for the demands of the economy. The real tragedy is that, while this agenda dovetails perfectly with the corporate desire for a more efficient and obedient workforce, it obscures the causes of economic distress, which annoyingly, will not go away.