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The Great Works at the Acton Institute Open House

Thursday, November 4, 4pm - 8pm

A collection of short essays by Acton writers, click a link to jump to that article: 

Importing drugs from Canada won’t reduce U.S. drug prices

Joe Carter, Acton Institute

If you suffer from acid reflux, your doctor may prescribe Nexium. But at $9 a pill, the price is enough to give you a worse case of heartburn. If you live in Canada, though, you can get the drug for less than a $1 a pill.

This price disparity leads many politicians to think the solution is obvious: Americans should just import drugs from Canada or other countries where they are cheaper.

This is a plan supported by politicians ranging from President Donald Trump to Senator Bernie Sanders. Sens. Amy Klobuchar (D-MN) and John McCain (RAZ) twice introduced legislation to allow Americans to order up to a 90-day supply of medicines from a licensed Canadian pharmacy. The Democratic Party even made it a plank in its 2016 platform.

But the reason for the drugs’ price differential is that higher-priced medicines in the U.S. subsidize the creation of drugs for the entire world. According to the pharmaceutical giant Eli Lilly, the average cost to discover and develop a new drug is between $800 million and $1.2 billion, and the average length of time from discovery to sale is 10 to 15 years.

Americans may say that it isn’t fair for them to pay all the fixed costs — and they’d be right. Nations such as Canada and France are free riders that take advantage of the lower costs only because the Americans have already paid the exorbitant fixed costs.

The reason reimporting drugs from Canada cannot work is because once Americans stop subsidizing the drugs for the rest of the world, pharmaceutical companies will not recoup the costs of research and development. If the initial fixed cost cannot be recovered, then no company will spend the money, or the decade of experimentation, to create the product. Few new medicines are produced in countries that have government restrictions on drug prices. And virtually no new drugs would be produced if all countries restricted drug prices. New medications will simply not exist.

Walmart: Corruption’s causes and consequences

Sarah Schwartz, Acton Institute

In June, Walmart agreed to a $282 million settlement with the Securities and Exchange Commission and the Justice Department in order to resolve charges of bribing foreign officials. While company leaders officially committed themselves to “acting ethically everywhere we operate,” reports indicate that Walmart secretly paid intermediaries who used the funds to obtain government permits from officials in China, Mexico, India, and Brazil.

While a $282 million settlement would ruin many corporations, it barely dents Walmart’s profits, which exceeded $100 billion last year. Further, the settlement appears modest compared to others the SEC and DOJ have orchestrated, such as the $1.78 billion paid by Brazilian oil giant Petrobras.

These fines underestimate the impact of corruption on the global economy. Last year, United Nations Secretary-General António Guterres estimated the costs of corruption at $2.6 trillion, or roughly five percent of global GDP.

Authoritarian political regimes exacerbate the problem. According to Transparency International’s Corruption Perceptions Index, sub-Saharan Africa is the most corrupt region globally. Venezuela, finished 168th out of 180 nations.

Freeing markets and increasing democratic participation can combat corruption, liberating resources and imaginative potential for wealth creation around the globe. However, democratic institutions do not suffice to prevent unsavory practices. While they may provide some restraint on unscrupulous actions, Latin America and southeastern Europe show that a level of graft far beyond that of Western Europe can flourish within representative governments. After all, the Petrobras scandal occurred in democratic Brazil. And the United States is not exempt. A recent study by the University of Illinois at Chicago finds that Chicago alone saw 1,700 federal corruption convictions from 1976 to 2016.

Because of sin, economic liberty alone is not sufficient. Only a moral culture, integrated with the rule of law, can channel human action toward creating wealth in an ethical manner.

No, millions of Americans are not living on less than $2 a day

Joe Carter, Acton Institute

Over the past five years, some welfare advocates have quoted an eye-opening statistic: More than three million U.S. households – including 1.65 million households with children – are living on less than $2 a day per person. But this is horrifically misleading.

New research published by the National Bureau of Economic Research (NBER) finds that more than 90 percent of the 3.6 million non-homeless among that number had been misclassified. Shockingly, more than half of all misclassified households have incomes above the poverty line. Several of the largest misclassified groups appear to be at least middle class based on measures of material well-being.

These researchers included government benefits to households, such as the Supplemental Nutrition Assistance Program (SNAP) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). That is important. What we mean (or should mean) when we say “living on” a certain dollar amount is the total amount of goods and services consumed.

The study also found that almost none of the households subsisting on $2 a day included children:

Among the 285,000 households left in extreme poverty, 90 percent are made up of single individuals. Households with multiple childless individuals make up the other 10 percent of the extreme poor. Strikingly, after implementing all adjustments, [none of the surveyed] households with children have incomes below $2/person/day.

That is why income inequality ultimately does not really matter; what matters is consumption inequality. If we care about the poor, we should care about the consumption of the poor, not their income relative to Bill Gates. Ensuring they have an income sufficient to meet their own consumption needs is the ultimate goal. But in the meantime, we shouldn’t obscure the truth by implying our neighbors are being left to starve in the streets because their incomes are too low.

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