The week of August 18, 2025: The economics of GLP-1s, Bolivia, the economy, tariffs, and much, much more.
In a recent post, I quoted Capital Matters regular, Vladimir Lenin describing the way that the Bolsheviks’ surprisingly successful (under the circumstances) New Economic Policy, a desperate turn to a “mixed” economy to bail out the flailing communist experiment, had worked:
The state is in our hands; but has it operated the New Economic Policy in the way we wanted in this past year? No. But we refuse to admit that it did not operate in the way we wanted. How did it operate? The machine refused to obey the hand that guided it. It was like a car that was going not in the direction the driver desired, but in the direction someone else desired; as if it were being driven by some mysterious, lawless hand, God knows whose, perhaps of a profiteer, or of a private capitalist, or of both. Be that as it may, the car is not going quite in the direction the man at the wheel imagines, and often it goes in an altogether different direction.
The mysterious hand strikes again.
And so to semaglutide, a medication first approved to combat the effects of type 2 diabetes. It is a GLP-1 agonist, which works by mimicking a naturally occurring hormone in a way that increases insulin release, and (ah ha) suppresses appetite. But compounds based upon it have, of course, become much better known as a way to lose a few — or more — pounds far more effectively than an earlier generation of weight loss drugs such as Qsymia and Contrave.
This is good news, and yet the reaction in parts of the “health community” has been curiously grudging. In some ways this is reminiscent of the response to the development of vapes and Swedish-style snus. Both snus and vaping are almost infinitely safer alternatives to smoking. Yet snus is banned throughout the EU and its British satellite. If the impact of snus on smoking in Sweden and Norway is any guide, this may be shortening (or have shortened) tens of thousands of lives. Vaping is under regulatory and fiscal assault on either side of the Atlantic. There are no good reasons for this, but one of the bad ones is the perception of smokers as sinners who must be punished. Vaping and snus offered smokers too easy an escape route from their dangerous addiction and, worse, one that was enjoyable.
Similarly, the belief that GLP-1 agonists were too gentle a way out for gluttons, or too undemanding a solution for the vain goes a long way to explaining the unmistakable disapproval with which they were first greeted by some even if for a while that could be masked by concerns over the supposedly obscene profits (Bernie Sanders was quick to fulminate about greed) that pharmaceutical companies were going to make out of semaglutides (the fact that the older drugs could, used properly, produce, on average,about half the benefit for a fraction of the cost went unmentioned).
And indeed, Novo, the Danish company that manufactured Ozempic and Wegovy did so well. By April 2024, its market capitalization was $570 billion (it peaked at $650 billion, making it Europe’s most valuable firm), bigger than the entire Danish economy, and its success meant that Denmark recorded growth of a little under 2 percent in 2023, rather than a small decline.
But the long and expensive route that Novo had to take to get to that spot (and the brevity — as we shall see — of its reign at the top) is yet another reminder that pharmaceuticals is a high risk/high return industry. The search for a new commercially successful product is often prolonged and often ends in failure. Research by Eli Lilly into GLP-1s began in the 1980s, but Byetta did not receive FDA approval (for the treatment of diabetes) until 2005. Novo, however, saw how GLP-1s could be used against obesity, but Saxenda, its first drug to be used for this purpose was not approved by the FDA until 2014.
Fast forward to May 2025 to find that Novo’s CEO has been fired, following some disappointing results from a possible successor to Wegovy and a rapid erosion of the company’s market share as products such as Eli Lilly’s Zepbound (Mounjaro), which combines GLP-1 with another hormone, delivered seemingly superior results. Competition, it’s a thing.
And Eli Lilly is not resting on its hormones.
The Daily Telegraph:
It is now working on a drug which combines three incretins – GLP-1, GIP and another, Glucagon, which can also break down fat stores.
The early results for Retatrutide, a weekly jab, look promising. In trials, participants have registered 17 per cent weight loss within 24 weeks and 24 per cent after 48.
Unsurprisingly, Novo and Eli Lilly are trying to develop versions of their weight-busting products intablet form, as are Roche and AstraZeneca, among others. To repeat myself, competition, it’s a thing
Meanwhile Novo has had to fend off the competitive threat posed by much cheaper compounded(copycat) versions of Wegovy. Compounders were given their break by a federal law that allows them to produce a generic alternative despite patent protections when there is a shortage of the branded product. Novo ran into production problems with Wegovy and Ozempic leading to a shortage in 2022. This has passed, and since April the FDA has no longer allowed the two to be copycatted. But Novo, which istaking what steps it can to protect its rights, estimates that around about one million American patients are still taking compounded semaglutide, a number it had earlier expected to decline to a lower level by now.
Novo also failed to file a nominal patent renewal fee for semaglutide in Canada, which could cost the company billons, and will doubtless give a needed boost to the American tourist trade to the reluctant 51st state when generic semaglutide becomes available up there next year. As if that were not enough, semaglutide goes off patent in China in 2026.
Novo’s market capitalization has now dropped to around $195 billion, but Eli Lilly’s too is off its peak.
The Daily Telegraph (August 6):
“It is really quite exciting at the moment,” says Prof John Wilding, who leads clinical research into obesity, diabetes and endocrinology at the University of Liverpool. He points to the increasingly widespread adoption of weight-loss drugs as a turbocharge for innovation in the industry.
“Once you’ve opened Pandora’s box it becomes much easier to tweak [a formula], design it and change it. I’m told there are more than 100 different drugs in development for obesity,” says Wilding, though he adds “probably less than 10 per cent will ever make it to market.”
As if treating type 2 diabetes and the fat-busting were not enough, these classes of pharmaceutical are showing potential in other areas, whether related to weight loss or otherwise, as treatments for liver disease, cardiovascular disease, certain cancers, alcoholism, opioid addiction, and, indeed, addictive behavior generally as well, possibly, as Alzheimer’s.
But that has not been enough to diminish the tut-tutting surrounding the use of Ozempic, although few have descended to the levels of absurdity reached by a reporter over at Bloomberg’s scold central, who fretted about the plastic waste associated with Ozempic treatment:
[O]nce injected, their applicators instantly become trash — mountains of it, bound for incinerators and landfills. As the obesity market reaches close to $100 billion a year by 2030 (as Bloomberg Intelligence predicts), Novo acknowledges the pile of plastic will only grow.
The horror, the horror…
Nanny-staters would prefer the overweight and the vain to eat less (and better) and work out more, a decision they would be helped to make by sugar taxes, restricting two-for-one meal deals, banning “junk” food advertising and the like. This is not only not something that a government that knows its place should not do, but it is also something that, however good in theory, will not work in the real world. GLP-1 based treatment, however, does.
Writing in the Financial Times in October last year, John Burn-Murdoch, noted that, although obesity rates have been rising in much of the world for years, this appears to be going in reverse in the United States, yes, the United States:
[W]ith mass public usage taking off — one in eight US adults have used the drugs, with 6 per cent current users — the results may be showing up at the population level.
While we can’t be certain that the new generation of drugs are behind this reversal, it is highly likely. For one, the decline is steepest among college graduates, the group most likely to be using them…
In Denmark, home of Ozempic and Wegovy creator Novo Nordisk, 3 per cent of adults were using the new drugs by the end of 2023. The decades-long climb in the obesity rate slowed to a crawl that same year, and declined among several age groups.
Burn-Murdoch:
[T]he contrast in mechanisms behind the respective declines in smoking and obesity. The former was eventually achieved through decades of campaigning, public health warnings, tax incentives and bans. With obesity, a single pharmaceutical innovation has done what those same methods have repeatedly failed to do.
The combination of human ingenuity and capitalism has, it seems, come to the rescue once again. But the scolds won’t go away anytime soon. Bariatric surgery looked and doubtless felt like the punishment that gluttons “deserved.” By comparison, injections and some possible side-effects look like soft options, and, if an anti-fat pill becomes available, well…
There are other factors at work too, of which one of the most important is the way that health campaigns can degenerate into exercises far removed from their originally benign purpose. As the scientific evidence of smoking’s dangers mounted, a powerful case emerged for making smokers or potential smokers aware of them, and, of course, for keeping tobacco out of the hands of children. But campaigners against smoking did not stop there. Instead, they adopted an increasingly coercive approach. In many cases, there were reasonable (if not necessarily convincing) arguments for many of the measures taken, but, at some point, it became evident that a once well-meaning campaign had become more about the exercise of control and virtue-signaling than health, an operation made more (in some cases literally) toxic by the money to be made by tobacco-control’s rent-seekers, governments not excepted.
It is easy to see signs of something similar at work in the debate over the anti-obesity drugs, which, if they find a large enough market, threaten large swaths of the nanny-state and its preachy and greedy hangers on. There is even a corporate villain to be reviled — Big Pharma, rather than Big Tobacco. It doesn’t seem to make much difference that this particular C-suite Satan will be saving lives rather than shortening them. An extra twist comes — this is the era of the ludicrous RFK Jr. — from the fetishization of the “natural” (running off those pounds, eating kale, and so on) despite how little “Nature” has done to earn it. If we left our healthcare to this most lethal of “mothers,” most of us would already be dead. Thankfully, our species (collectively, anyway) has a keen enough sense of self-preservation to ensure that the grave-huggers will not win out. If this category of drugs can tackle obesity, become available in oral form, and their side-effects are manageable, they are likely to become, for many, a staple (and that’s before considering the other uses to which they be put).
So long, that is, as they are affordable. That seems to be where they will end up at the collective as well as at the individual level, although the math may not be straightforward. Even if price of these medications falls a long way, the demand for them is likely to be enormous, meaning a potentially very high bill for insurers or the state even if the price per dose is modest. One way to control that cost will be to limit the eligibility of, say, Ozempic for reimbursement. This (so far) appears to be what is happening with Medicare, Medicaid (mostly), and many insurance plans, where GLP-1s may be reimbursed when prescribed for type 2 diabetes, but not for weight loss. A lot of money is at stake (there are estimates than Medicare spending on the top ten diabetes drugs — a category that includes GLP-1s — could top $100 billion next year, four times the level of just five years ago). The Trump administration is reportedly considering extending the eligibility of reimbursement for GLP-1 use to some categories of anti-obesity treatment.
It seems reasonable to think (putting firm numbers on this is next to impossible) that GLP-1s will, over time, represent a saving for healthcare systems (even more so if some of these drugs’ other applications work out) in that their cost may be offset by the decline in healthcare costs incurred in keeping, say, the obese in, so to speak, shape (around $173 billion in 2023 according to the Centers for Disease and Control). Obesity’s indirect costs to the economy are a multiple of that, although the benefit of reducing that load will not go to public or private insurers.
However, these savings will take a while to emerge on a scale sufficient to offset the upfront costs of that daily pill/shot, even if competition and demands by the Trump administration will cut those costs more quickly than once anticipated. Of course, any estimates of costs (and benefits) will include a large amount of guesswork. For instance, we can only speculate how many people will take these drugs or for how long. Some patients may have to take them every day for the rest of their lives, others may take them at regular intervals, and for others one course may suffice. And, if GLP-1s are able to tackle more than obesity and type 2 diabetes, the savings (over time) in these other areas should, once again, not only be confined to medical bills. Thus reductions in addictive (or even sub-addictive) cravings for alcohol or narcotics should mean lower crime, greater workplace productivity, higher workforce participation rates, and less family breakdown. Overall, the cost of addiction (another guesstimate) to the U.S. is thought to be over a trillion dollars.
But craving is part of what drives the American economy. The spread of GLP-1s may prove to be a difficult headwind for liquor companies, tobacco businesses, the gambling industry, and — appetite suppressants are what they say — restaurants. Supermarkets will not be immune. Revenues from snacks have already fallen in the last year by six percent (sweet) and one percent (salty), and there are suspicions that GLP-1 consumption is at least partly to blame. And how about compulsive shoppers?
Pause for a moment to think of the bewilderment of a central planner confronted with all these unknowns — and these are just the known unknowns.
Then there is the long-lived elephant in the room. When the (not particularly generous) first U.S. Social Security Act was passed in 1935, average life expectancy for white men and African Americans was below 65, the retirement age that only an average white woman could expect to reach. Today, average life expectancy is 76 and 81 for American men and women respectively, but Social Security’s retirement age has barely moved, only reaching 67 for those born in 1960 and after, something that helps explain some of the coming social security crunch.
Healthy life expectancy has increased by less. That discrepancy will matter. Increasing the retirement age past the point when people’s health is crumbling is unlikely to be productive. Healthy life expectancy at birth in the U.S, averaged around 62 in 2021, but it’s more useful to look at how many years of reasonably good health Americans can expect once they have made it to 60. The data are, appropriately enough, rather elderly (2016). At that time, 60-year-old Americans could expect to live (on average) to 83 but remain relatively healthy until the age of 78. That reinforces the case for delaying the retirement age faster and further than is currently contemplated, something that will also be useful if those panicking about a labor shortage brought about by a birth “dearth” are correct.
The economic consequences (and affordability, as a society) of the semaglutide clan will be heavily affected by the extent to which they extend average life span, healthy life span, and whether they narrow or widen the gap between the two.
Given the wide range of diseases against which GLP-1s may be effective, there is a decent chance that they could increase healthy life expectancy by even more than general life expectancy, offering the possibility of even longer working lives. This breadth of potential is, if realized even partly, critical, in that it represents a change from the typically uneven pace of medical progress.
This unevenness is a key reason why increases in healthy life expectancy lag increases in overall life expectancy. As a doctor who had witnessed the shifts in his patients’ cause of death over a half-century of practice once told me: Something will kill you. The only question is what and when. The extra years gained by keeping someone’s heart disease at bay are good news, but they will give cancer more time to take its shot.
The most significant example of this today is probably Alzheimer’s and other forms of senile dementia. We have gotten better and better at keeping the body going, but the brain is proving to be more of a problem. Over seven million Americans are currently thought to have Alzheimer’s, compared with (at a very, very rough estimate) 1.5-2 million in 1980. Absent improved treatment, that total is forecast to rise to over 12 million by 2050. Alzheimer’s is a progressive disease, mild, at first, typically worsening the longer a patient lives. Logically the greater longevity generated by GLP-1s will lead to an increase in the number of people affected by Alzheimer’s, more of whom will live long enough to develop a severe case. On top of the human misery, the financial and societal implications of that could be very difficult to manage, which is why the possibility that GLP-1s could either cure Alzheimer’s or delay its onset or progression would crown the revolutions that these drugs seem close to be setting in motion.
Faster, please.
The Capital Record: Sound & Vision
We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which is hosted by financier David L. Bahnsen makes use of another two formats to deliver Capital Matters’ defense of free markets. The original podcast continues, but if you want to watch David talk, please click on the YouTube link.
The 250th episode: (Podcast/YouTube)
It appears from media reports that SiriusXM is done with their long-term, nine-figure (annual) relationship with Howard Stern, the former FM radio shock jock turned woke, politically correct bore. On today’s Capital Record, David walks through how the two Howard Sterns were both perfect encapsulations of the undermining of a free and virtuous society, only each Howard Stern did this in a totally different way. This is an unconventional Capital Record with a perspective you’re unlikely to hear anywhere else.
The 251st episode: (Podcast/YouTube)
David takes on the state-capitalism idea that the right has been rightly critical of in China for many years (market forces that are highly directed by the state), but takes this cogent criticism to the idea of Nvidia revenue shares, Intel equity ownership, CEO selection, and other mystifying things that if a leftist president were doing the right would be losing their ever-loving minds over.
The Capital Matters week that was . . .
Economic Statistics
Earlier this month, President Trump fired the head of the Bureau of Labor Statistics (BLS), generating a large response of economists coming out in her support. But the firing raises a larger substantive issue: The reliability of the government’s data has been deteriorating, and the best way to improve it is by using the economic incentives implicit in “data markets” that drive economic statistics…
Bolivia
Since 2006, Bolivia has been governed by the Movement for Socialism party. Former President Evo Morales, in office until 2019, became a darling of the international left, moving the Bolivian economy to greater state control and moving its foreign policy against the U.S. and toward Venezuela, Russia, and China. “Capitalism is the worst enemy of humanity,” Morales has said.
After seeing capitalism’s alternative firsthand for two decades, the Bolivian people seem to have decided capitalism isn’t the absolute worst.
The Economy
History is likely to harshly judge the Trump 2.0 administration’s handling of the economy in its first six months of office. Seldom before have so many basic macroeconomic policy mistakes been made in so short a space of time. This is more than likely to have serious adverse consequences for both the economy and the financial markets in the run-up to next year’s midterm election…
One curious point stands in the way of Trump’s narrative: Interest rates are not high by any historical standard. They may certainly feel high to many Americans who are taking out mortgages and business loans at pricier rates than they could a few years ago, but that perception is due to a lack of perspective. Extend your scope back 70 years, since the Fed began keeping track of the rate at which banks lend to one another, and you’ll see the reality: Current interest rates are slightly lower than the historical average. The near-zero percent rates people experienced after the 2008 financial crisis and the Covid-19 pandemic were aberrations. And the highest interest rates in living memory were about four times higher than they are today…
Fiscal Policy
The NYT included this incredible quote: “‘They’ve really upgraded the quality of the show,’ said Mark Fehrs Haukohl, an art collector who uses the title ‘sir’ and was wearing a purple double-breasted suit jacket.”
And, lo and behold, they raised $1.4 million, more than making up the difference from the disappearing federal grant…
Electric Vehicles
While the courts have yet to have their say, one of the Trump administration’s most important accomplishments, perhaps second only to his successful crackdown on illegal immigration, may turn out to be the restoration of vehicle choice in a large swath of the country. A total of 17 states (including my home state of New Mexico, which, as a large, poorer, and empty state, is not a natural market for EVs) had previously signed on voluntarily to California’s Advanced Clean Cars II regulations. These regulations (if continued) would have required automakers to increase the proportion of zero-emission vehicle sales year by year, with a 43 percent mandate starting in 2026…
Electric vehicles’ “fast” chargers are not so fast as some people seem to assume. It can depend on the car, and, of the course, the weather, but, according to the Department of Transportation, it can take “just 20 minutes to 1 hour” to charge an EV to 80 percent.
“Just.”
But it appears that they are not so clean as some might hope, either. According to the authors of a recent study, they are a source of air pollution.
Tariffs
Trade is not a special case where Americans should trust the experts in Washington, D.C., to order their lives for their benefit. When Democrats want to use taxes and incentives to with the U.S. energy supply, conservatives rightly see the dangers of unintended consequences and decry the insufficiency of government planners’ capability to reorder the economy in the national interest. It is no different for trade. If an administration led by a protectionist president and fully staffed with protectionists can’t pull off a coherent protectionist strategy, who could?
I said global markets are indifferent to their distribution among nations. Dominic correctly says that they are partial to producing them where there is the greatest return to capital. These are two ways of saying the same thing. Production follows profits, but the most profitable global distribution of goods, resources, and skills may not conduce to any one nation’s political health or geopolitical power. Perhaps the confusion is that Dominic thinks I’m saying markets are indifferent to locating anywhere, when I plainly say that on principle they don’t consider politics or nationality in location.
Countries that have stable institutions, strong protection of property rights, better trained workforces, and a variety of other things that are favorable to profit-making are more likely to be trading partners than countries that lack those things. When a U.S. business decides to source components from another country, it is never indifferent between countries. It is partial to the country where it can best make profits by sourcing from there.
Americans should want American businesses to be profitable and to grow. And sure enough, Americans are really good at international commerce: More than 60 of the world’s 100 most valuable companies are American. And America is the richest country in the world. This ought to be a source of national pride…
His essay exemplifies the myth of American manufacturing decline, alluding to “the dangerous trajectory of deindustrialization” and “extensive and well-documented losses in U.S. industrial capacity.” Not so according to the data. In terms of real value added, the fourth quarter of last year and the first quarter of this year were the two best quarters for American manufacturing ever. The sector’s real output is only 5 percent below record highs and more than 30 percent greater than during the Uruguay Round, which Greer derisively calls “our recent experiment in global hyper-integration.”
Climate
Masley’s dissection of the British government’s advice is a joy to read, but I doubt if those telling Brits that this is what they should do will care. Britain’s “drought” problem (in reality, a not-building-reservoirs-at-a-time-of-strong-population-growth problem) is, of course, something that the government wants to link to the climate “crisis,” a narrative of existential doom that is, regardless of the reality of climate change, just another millenarian cult, one of the latest in a long miserable parade. One of the ways that such cults work is through finding “sin” (and thus the need to cure it) in almost everything, however insignificant. And so, keeping that old photo online is transformed from a small pleasure into an instrument of guilt, a teaching moment to keep the faithful in line.
What could be more straightforward? Just watch the wind, and the sun, and the wind and the sun. Spoiler: there’s not a lot of sun at night.
Pre-modernity is a bargain, a bargain, I tell you.
Office Property
Interestingly (and ominously), loan maturities “are peaking,” meaning that it’s going to be increasingly difficult to, as the phrase goes, “extend and pretend.” In other words, more borrowers and lenders are going to have to deal with the consequences of what the properties they own (or are relying upon as security for the loans they have made) are really worth…
Labor
The Department of Veterans Affairs terminated most of its collective bargaining agreements earlier this month, as part of the Trump administration’s efforts to reduce public-sector unions’ influence in the federal government. The VA contracts were some of the most generous in the federal workforce, according to union leaders and the Biden officials who approved them…
AI
After declining rapidly between late 2022 and late 2024, tech employment in the San Francisco Bay Area has stabilized slightly above 2019 levels. Ongoing corporate efforts to gain efficiency by trimming programming staff are now being offset by the employment growth in companies participating in the local artificial intelligence boom. But now, San Francisco’s state senator, Scott Wiener, is proposing state regulation of AI. If enacted, the new regulatory framework could push the AI business out of the Bay Area to other states with more permissive regimes, reducing local tech employment further…
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