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Sunday, April 21, 2013

Why the academic and research world needs a healthy growing economy;

We have spent a great deal of time recently discussing the impact of budget sequestration. Academic medicine is remarkably dependent upon Federal dollars, whether it be through grants or Federal health care dollars, and the effects of Federal cuts are significant in the short term. However, whatever effects we might need to deal with now are likely trivial compared to the effects we will see if we continue with our present business model.

I previously wrote about the crowding out effect of entitlements spending on biomedical research, the latter being squeezed as part of the shrinking discretionary pool of dollars.(Entitlements and Biomedical Research)
What I wrote back then stills holds now, perhaps even more so. If academic medicine and university based research is going to be heavily dependent upon federal research support, being aware of and supportive of policies which are conducive of a growing economy and tax base is essential for any long term prospects. Presently, that is not the case.

We need only to look across the Atlantic Ocean to see what happens when demographics and uncontrolled entitlements place a squeeze on economies. They have attempted to build states with rich social support packages upon the backbone of shrinking and aging populations and hope to address the growth and revenue shortfalls with higher taxes and creative debt. They have been able to hold on as long as they have since they have relied on the US military shield and they have borrowed recklessly. Western Europe has become militarily irrelevant and it is on the way to becoming economically irrelevant.

Europe continues to trail behind the US in terms of support of research funding.
(EMRC statement on medical research in the EU)
Both in absolute and relative (to GDP) terms, the US spends more on health care (about 6400 € at purchasing power parity exchange rates). Moreover, about 50% of all public US money for research is going to medical research and that translates to their public spending for biomedical research being about 3.5- fold higher per capita ( 143 € for 2009) than is the case in Europe.
And it is only going to get worse as the wealth generating machinery of Europe becomes consumed by its debt and entitlement supporting functions. To have an enduring and robust bio-medical research presence, we need a growing economy and manage entitlement growth in the long term. Sequester is impactful but it is just a small taste of what we face if we do not get the diagnosis right.

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