It does not raise the dependency concerns that dependency theory so clearly delineates. As hinted in chapter 1, medical tourism in the countries under study tends to be high tech and state of the art; the facilities are sophisticated and clean; the service is impeccable. Medical tourism is not sold to cruise passengers on a land package, like handicrafts at a port stall. It is not sold on the world markets through large Western multinationals that control the entire vertical production process. It is not a cash crop extracted from the land. Indeed, none of the five characteristics of dependency theory described by Dudley Seers are applicable to medical tourism. The foreign capital and technology that was transferred did not play a negative role on the receiving regions.
In the case of medical tourism, internal policies (discussed in chapter 4) are more important than international forces. While it is too soon to judge what the benefi ts of medical tourism will be for development on a national level, there is no doubt that income is being generated and that there are spillover effects throughout the economy. Moreover, the role of international capitalism is not large as most investment in the medical part of medical tourism comes from domestic sources (this is different for nonmedical tourism such as hotels and rental car businesses). Lastly, the development of medical tourism does not block economic development and prevent industrialization. It might be argued that the development is distorted since it fosters health care for rich foreigners and away from public health, but that is a preventable possibility, entirely in the hands of the public sector policy.
The above aspects of dependency relate to the big picture and the sweeping effects of foreign capital on third world countries. Honing in on the markets for the goods produced by those countries will shed further light on why medical tourism is not like peanuts. The issue of elasticity of demand, both price and income, is crucial.
Simply put, in the colonial and post-colonial periods, many developing countries produced cash crops for export while importing manufactured goods. The terms of trade worked against them because of different elasticities of demand for agricultural and manufactured goods. The global demand for primary products is characterized by relatively low income elasticity of demand—in other words, as incomes across the world rise, the demand for agricultural products will not rise proportionally (people will not buy signifi cantly more peanuts just because they have more money). Income elasticity of demand for manufactured goods is high since people will buy more cars, music systems, and refrigerators as their income rises. With respect to price elasticity of demand, again there is a difference between agricultural and industrial goods. Price elasticity for primary products such as food is low while it is relatively higher for manufactured goods.
Then tourist interest in the developing world exploded. It was rare to have an abundant factor of production (natural capital) whose demand was growing across the world. In other words, tourism has a high income elasticity of demand, as it is a service whose demand is very responsive to increases in income. For that reason developing countries rushed onto the tourism bandwagon. Just how lucrative could this new business be? That depended on the elasticity, so numerous studies of tourism set out to calculate income elasticity.61 One study found the income elasticity of demand for foreign travel to be 3.08, implying that when income rises, demand for foreign travel rises faster. Another study found that, although travel demand is elastic, there is a difference between short distance and long distance travel.
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