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On October 20, the Russian state statistical agency, Rosstat, issued a second report predicting that Russia’s population will continue to decline and be down more than seven million people by 2046. Rosstat’s first report came at the end of September and presented estimates that the Russian will decrease significantly in the coming years.
Not including the occupied portions of Ukraine, this report predicted that the population will fall by three million people by 2030 (RBC, October 11; The Moscow Times, October 20). Both projections suggest that Russia’s demographic decline—long predicted by experts—will be far deeper, last longer, and hurt more than the Kremlin has expected (see Russia in Decline, September 13, 2016).
In 2019, the United Nations released an assessment that presented the potential halving of the Russian population by 2100 (The Moscow Times, June 18, 2019). This would lead to numerous problems. A marginalized Russia would lead to some border areas becoming so underpopulated that they might be at risk of being absorbed by others. The decline would threaten ethnic Russian dominance of the country, given that demographic trends among Russians are worse than among many non-Russian, especially Muslim groups.
A significantly lower population would increasingly restrict Moscow’s ability to expand its economy, given its extensive rather than intensive approach, and field the kind of mass army it has traditionally relied on (Noviye Isvesniya, November 2, 2022). Such long-term predictions may turn out to be wrong, but at the very least, they put new pressure on the Kremlin to take the steps necessary to boost birthrates and reduce death rates.
Russian President Vladimir Putin’s war against Ukraine has pulled attention away from this demographic disaster. Putin has remained upbeat on the matter, seemingly convinced that boosting payments to women who have more children and restricting abortions will allow the Russian population to grow again. Russian and Western experts, however, say such an approach is doomed to fail. They argue that only a dramatic improvement in standard of living and a wholesale transformation of societal values can stem this demographic decline. These experts regularly warn that Russians are making a potentially fatal mistake by not focusing on demographics. Yet few Russian politicians believe this is the most difficult problem facing Russia today (Publizist.ru, November 23, 2021; Nakanune.ru, June 16, 2022; Nezavisimaya, January 8; Stoletie.ru, January 24; Tochno.st, June 18).
Rosstat’s two projections could serve to transform these political views. The predictions come at a time when independent Russian demographers are predicting the worst birthrates in decades for the end of 2023 and the beginning of 2024. Additionally, the impact of the decline on the size of the working-age population, and hence the available pool of potential military personnel, is becoming increasingly serious (Nakanune.ru, December 12, 2022; Nezavisivmaya, January 8; Profile.ru, February 21).
The first of Rosstat’s reports was dire but not so bad that it prevented the Putin regime from continuing its upbeat messaging. The state statistical agency announced that the country’s demographic situation is declining at a rate far greater than has been projected as recently as 2020 (RBC, October 11). At that time, Rosstat experts projected that Russia’s population would decline by 2.1 million by 2030; now, they predict the number will likely fall by an additional 50 percent (Eurasia Review, October 15). The report, nevertheless, left open the possibility that the situation could improve in the 2030s. Putin has suggested that the most frightening projections from independent Russian demographers and Western experts can be ignored. By projecting a decline of only three million by 2030, Rosstat also gave Putin the space to continue to claim that Russia’s population will be on the rise by then. The Russian president is not entirely wrong in this if the projected 3.23 million residents of the annexed regions in Ukraine are to be included.
Putin’s claim, nevertheless, is superficial and deceptive, and such complacency could further hurt Russia’s demographics. The Rosstat study makes clear that the Kremlin will achieve only a slight rise, not by improving fertility, mortality, or migration, but through the absorption of new territories (RBC, October 11). For Russia proper, Rosstat reports that the number of births is down, reflecting both a decline in the size of the prime child-bearing cohort of Russian women and a fall in the fertility rate from 1.505 children per woman per lifetime to 1.416, well below the 2.2 rate needed for replacement. Rosstat’s first report did reveal some positive news for Moscow: infant mortality rates continue to fall. This, in turn, allows the Kremlin to make sweeping claims of longer life expectancies. Additionally, immigration, though it has ebbed and flowed in recent years, has helped to fill some gaps.
Rosstat’s second report is far more negative and directly challenges Putin’s claims. The Kremlin leader says that current problems will largely disappear in the 2030s due to his policies and a projected increase in the cohort of prime child-bearing women. The most recent report asserts that Russia’s population, not including the occupied Ukrainian territories, will continue to fall after 2030 and will include 7.68 million fewer people by 2046 (The Moscow Times, October 20). The estimated total is 5.3-percent less than current numbers and is comparable to the population of the Russian Soviet Federated Socialist Republic in 1981. Such a decline means that the number of working-age Russians will presumably decline from 83.47 million to 79.79 million in 2045. Rosstat further projects that, by mid-century, the share of the Russian population under age 18 will decline from 18.5 to 15.6 percent, a trend that suggests the falloff in the number of births will likely continue long after 2046.
Demography is destiny, but only over the long term. Even so, the speed and size of Russia’s demographic collapse under Putin creates real chokepoints for the domestic economy and the war against Ukraine. If the Kremlin does not change course soon, those chokepoints will continue to narrow, prompting at least some Russians to begin demanding change.
This article was published by The Jamestown Foundation’s Eurasia Daily Monitor Volume: 20 Issue: 164
By Patrick Barron
Before delving into the dangers of eliminating cash and mandating that all transactions be conducted by digital means, let us briefly discuss the legal aspects of money. In the United States, as in all economies that have legal tender laws, only cash is recognized as money. Some may think that the balance of their bank accounts is money too, but that is not quite the case. Your bank balance is one step removed from legal money.
All banks must maintain minimum balances of reserves, in cash held either in their vaults—a very small amount—or in their “reserve accounts” with their local Federal Reserve Bank branch (there are twelve of them). These reserve account balances may be converted to real money, or cash, at your bank’s discretion. However, the total cash in our economy also includes cash held outside the banking system, such as the money in your wallet, cookie jar, or personal safe deposit vault.
The total of bank reserves plus cash held outside the banking system is known as the monetary base. The monetary base is not the same as the money supply. Most of the money supply is composed of bank credit not backed by reserves. When banks make loans, they credit your account, which becomes bank credit money. Yes, this money was created by the bank out of thin air. Notice that the banks did not create reserves, only credit money, which is not the same thing.
As of July 2023, the monetary base in the United States was $5.5 trillion, whereas M3—the total bank credit money—was $20.9 trillion! So, if everyone demanded real money (cash), the banks would be able to honor only about one-fourth of the requests. The possibility of your bank failing is real. Over nine thousand US banks failedduring the Great Depression of the 1930s.
Risks of Electronic Payments
Your ability to hold real cash, not just bank balances accessible by check or electronic means, protects you from the inevitable infrastructure problems associated with any electronic system but also from the instantaneous seizure of at least some of your money. Cash is anonymous whereas a bank account is not. If something happens, you will still be able to function to the limit of the cash you happen to have on hand.
Now, let’s say that cash has been eliminated by some legal means and that you have angered the powers that be for some reason—probably for opposing them and asking others to oppose them too. All the banks must do is to freeze your bank account or eliminate it entirely. There are two examples of this very thing happening in the recent past.
First, the government of Canada froze the bank accounts of all those participating in the Canadian truckers’ general strike plus those who helped them. Second, British politician Nigel Farage had his accounts closed for political reasons and found that no other British bank would serve him. Without the means to use money, Farage came very close to emigrating. Just think about that for a moment. You could not fuel your car, buy groceries, pay your rent, or do a hundred other things without access to a bank account.
Risks of Central Bank Digital Currency
All of the world’s major central banks are drawing up plans to institute digital currencies that they themselves control. This is very dangerous for our civil liberties. Now the government would not have to seek the cooperation of the banks to freeze your accounts or “debank” you entirely, as the British banking system did to Nigel Farage. At the stroke of a keypad, you would not have access to your financial accounts—no fuel for your car, food for your family, or heat for your home.
No one should be allowed to hold such enormous power, which really is a life-and-death issue. Naturally, digital currencies are being promoted as efficient and modern. They are no such thing. This is a civil liberties issue and needs to be stopped.
About the author: Patrick Barron is a private consultant to the banking industry. He has taught an introductory course in Austrian economics for several years at the University of Iowa. He has also taught at the Graduate School of Banking at the University of Wisconsin for over twenty-five years, and has delivered many presentations at the European Parliament.
Source: This article was published by the Mises Institute
The New York Times ran an article with the unfortunate headline, “Ozempic and Wegovy don’t cost what you think they do.” The article goes on to explain that the drugs’ manufacturer, Novo Nordisk, gives discounts and rebates to the pharmacy benefit managers that purchase the bulk of prescription drugs, so the actual price paid is considerably less than the $900 to $1,300 retail price for a monthly dose. The article also tells readers that a number of other companies are developing drugs for obesity, so competition should be driving the price down further in the near future.
The True Cost of Ozempic and Wegovy
There are several important points that are overlooked in the article. First, these drugs don’t “cost” anywhere near what Novo Nordisk is charging, even after taking into account the discounts and rebates. In fact, they likely only cost around 1.0 percent of the retail price.
Novo Nordisk could probably cover the cost of manufacturing and distributing these drugs, and make a normal profit, if they sold them for $9-$13 dollars for a month’s dosage. Contrary to what is claimed in the headline, the NYT article is not referring to the drugs’ cost of production, it is referring to the price charged by Novo Nordisk.
The reason for the large gap between the price Novo Nordisk charges and its production costs is that the government has granted the company a patent monopoly. The government will arrest any company that manufactures Ozempic or Wegovy without Novo Nordisk’s permission.[1]
There is an enormous amount of money at stake with patent monopolies and related protections in the drug industry. We will spend over $600 billion this year on prescription and non-prescription drugs that would likely sell for around $100 billion in a free market without these protections. The difference of $500 billion comes to more than $4,000 a year per family. It’s roughly five times what the U.S. spends on food stamps each year.
Patent monopolies are also a big part of the story of upward redistribution in the U.S. over the last half-century. Patent and copyright monopolies likely shift more than $1 trillion a year from the rest of the population to the people in a position to benefit from these government protections.
It is often claimed that technology has been largely responsible for upward redistribution. In fact, it is our rules on technology that led to this upward redistribution. If the government did not give out patent and copyright monopolies, the gains from technology would be far more widely shared among the population. People like Bill Gates, who got incredibly rich from the patents and copyrights granted to Microsoft, would be far poorer with a free market.
There is a widely held myth that somehow people can’t be innovative if they work for a salary instead of the hope of getting rich by owning a patent monopoly. It’s not clear where this myth originated, but it is bizarre on its face.
There have been a huge number of great innovations from people working on salaries without any realistic hope of benefitting from a patent monopoly. According to a piece in the New York Times, Katalin Kariko, who just won a Nobel Prize for pioneering work in developing mRNA technology, spent most of her career going from lab to lab where she was supported by government grants. According to the piece, she never made more than $60,000 a year. While she has likely made a very substantial sum since the pandemic, due to her work with the German firm BioNTech, it is implausible that the expectation of this late-career bonanza was the motivating factor behind her earlier work.
Of course, the other major mRNA vaccine was developed by Moderna, operating under a government contract. (Incredibly, after paying for the development and the testing of the vaccine, the Trump administration also gave Moderna control of the vaccine, but presumably there was a sum that would have been sufficient to get Moderna to do the work without also giving them control of the vaccine.)
Government-granted Patent Monopolies Lead to Corruption #54,271
We just got another example of important work being done for pay when the American Prospect reported on how a former NIH employee appears to have developed a potentially important new cancer drug while working at the NIH. The scandal here is that Christian Hinrichs, the former NIH employee, appears to have established a company with a patent monopoly on a drug that he developed with NIH funding, which apparently also supported Phase I and II clinical trials of the drug.
This both demonstrates again the fact that people have no difficulty being innovative when being paid a salary, and also the sort of corruption that we see when the government grants patent monopolies. The second point should be apparent, but for some reason, it is never mentioned in major news outlets.
Every person who has been through an Econ 101 class can explain how a 25 percent tariff leads to corruption, since it raises the price of a product above its marginal cost. The same story would apply to patent monopolies, except by raising the price of drugs twenty or thirty times above the free market price, or even one hundred times the free market price, they are effectively tariffs of several thousand percent.
A patent monopoly encourages drug companies to push their drugs as widely as possible, even for uses where they might be inappropriate. It also gives them an incentive to conceal evidence that they might be ineffective or harmful. This a substantial part of the story of the opioid crisis, where the major manufacturers concealed evidence that the new generation of opioids was highly addictive, as they encouraged doctors to prescribe them.
Patent monopolies can also lead to waste in research. As the NYT article notes, several other drug companies have obesity drugs in the pipeline, which presumably will be available soon. While this competition is beneficial in a context where drug companies have been granted patent monopolies, it would make little sense if drugs were being sold in a free market.
It is good to have multiple drugs to treat a condition, since not all people react the same way to a drug. Also, some drugs may not mix well with other drugs a patient is taking. Nonetheless, we will generally be better off devoting research to finding drugs for conditions where effective treatments do not already exist than developing multiple drugs for the same condition.
If we paid for research upfront, we could require that all results be fully open, so that researchers can quickly build on the research done by others. If there is a major breakthrough in a specific area, other researchers can then build on it and bring it to fruition more quickly.
They may also be able to identify pitfalls that could prevent researchers pursuing dead ends. For this reason, publicly funded open-research can potentially be far more efficient than patent monopoly supported research. Instead of encouraging secrecy, it would require openness.
Eliminating patent supported research could also put the pharmacy benefit manager industry out of business. If drugs sold at their free market price, it would make no more sense to have pharmacy benefit managers than to have paper plate benefit managers. These businesses survive and profit based on the large gap between the patent-protected price and the free market price. As this gap collapses, there would be no room for the industry to make profits and no need for the industry.
Drugs Are Cheap, Government-Granted Patent Monopolies Make Them Expensive
People who favor small government should be opposed to government-granted patent monopolies. The problem of high drug prices is caused by government interference in the free market. It would be much better for the economy and everyone’s health if we paid for the development of new drugs upfront and then let them be sold without protections. Unfortunately, the pharmaceutical industry is so powerful, it is almost impossible to get alternatives
Notes
[1] To be precise, Novo Nordisk would sue a company that produced these drugs without its permission. It would then get an injunction ordering them to stop production. If the company continued to produce the drugs in violation of the injunction, it would face criminal sanctions for violating an injunction, not for infringing on the patent.
This first appeared on Dean Baker’s Beat the Press blog.