Money and Markets: Essays in Honor of Leland B. Yeager

The legacy of Bismarck 247system, but as pointing out that it is incomplete. I suppose most people would notwish to include prostitution and provision of dangerous drugs as part of the nationalincome even though they do consume resources and provide satisfaction to somepeople. Fortunately this article is devoted to the work of Bismarck, so the mattercan be forgotten here.The second great “contribution” of Bismarck was government-financed healthcare.We should here distinguish between providing health facilities for the poorwhich had always been done from providing a sort of generalized insurance foreveryone. Since the program came to the United States late, and I’m fairly old, Ican remember how it was before we got the Bismarckian health programs. InRockford when I was a boy, the city maintained a hospital which was free for thepoor. This does not mean it was a poor hospital. Indeed, it was the best hospital inthe city and expensive doctors sent their patients there. Nevertheless, it was governmentprovided and it did provide free hospital care for the poor. The doctors alsohad a policy of not charging fees for poor people. Thus the system did providesomehow for the poor.The Bismarckian system in which everyone was taxed part of their salary, withthe salary somewhat lower than it otherwise would be because of the tax on theemployers, systemized this thing. In the early days it seems likely that the middleand upper classes were principal beneficiaries and not the poor who already hadgovernment provided health services. Indeed, in England when they switched overto their present system there was actually an increase in the death rate among thepoor. In the old system the poor and the wealthy received very good medicalattention, but the middle class did not and had a higher death rate. With theestablishment of the present system, much in the way of medical facilities wereshifted to the middle class, with an increase in the death rate among the middleclass and, of course, also among the wealthy. It happened to be the 1930s whenmedical progress was extremely fast, so that the effect rapidly dissipated.When Bismarck first inaugurated the system it is likely it actually increased thedeath rate. The germ theory of disease was at the time very new, and sanitationtended to be careless. Entering a hospital was not necessarily a good thing for an illperson. One doctor in Vienna discovered that childbirth fever was caused bydoctor transmission of the germs and he was practically thrown out of the professionas a result. But this problem of the deathtrap hospital was rather rapidly cured andby the time I was a boy the hospitals were the center of almost pathologicalsanitation. This did not mean that going to hospital benefited you very much.Before the medical revolutions of the 1930s, doctors had little which would actuallycure diseases. Thus Bismarck may have not been the benefactor that many peoplethink he was. He arranged for the government to pay for largely ineffective medicaltreatment. The advance of science has changed all of this and a very sharp increasein life expectancy has resulted.Paying for medical attention, however, is another matter. Granted the fact thatwe all can predict that we’re likely to become ill, and have no idea of when or howseverely, insurance is obviously called for. Private health insurance was more or lessinvented in the United States in the 1930s. This was long after the inauguration of