China's two-in-one fix to improve public health

For the new Chinese government, a task in these times of global economic slowdown will be to match job creation with the growing number of job seekers looking for gainful employment. Here the health-care sector can be of major help.

An economy is basically a set of people doing favours for one another. Some of these favours are done outside the formal market, such as care and support within families, among friends, or as voluntary work within communities. But the bulk of the favours are traded in the marketplace in exchange for money, the store of value. Spending on those favours then counts as part of the gross domestic product.

It is often overlooked that the health-care sector is the setting for some of the most important exchanges among human beings, exchanges that promote better health, or even save lives. Yet, remarkably, many seemingly wise commentators lament health-care spending as a drag on the economy. To any straight-thinking economist, that simply does not make sense.

It is poor health that is a drag on the economy, not spending on improving health, which yields value added and an increase in national wealth, if "wealth" is properly defined and measured. The added wealth that timely and appropriate health care can produce comes in two forms.

First, in the wake of the "reform and opening up" that began in 1978, China's health-care sector was left to fend for itself in a market economy and millions of Chinese citizens fell into poverty due to illness or were unable to escape poverty because of ill health. Workers in poor health are not productive or must stop working altogether. Avoiding that problem through good health care can add directly to China's gross domestic product and monetary wealth.

Second, there is clearly high value in greater longevity and a higher quality of life. Economists have tried to define such value in monetary terms and to estimate how much added imputed wealth can be attributed to greater longevity and health spending. They have come to startling conclusions.

In their book, Measuring the Gains from Medical Research: An Economic Approach, for example, Kevin Murphy and Robert Topel of the University of Chicago conclude that growth in longevity since 1950 "has been as valuable as growth in all other forms of consumption combined" and that medical care that reduces mortality from cancer and heart disease by 10 per cent alone would add roughly US$10 trillion in national wealth in the US, or roughly the value of America's GDP in 2003.