PHA-Exchange> PHA background paper 1 - electronic version

[Claudio Schuftan]

The Political Economy of the Assault on Health

 Mohan Rao and Rene Loewenson


In  1960, the 20% of the world's people living in the richest countries had
30 times the income of the poorest 20%. Now they command 74 times more. The
richest 20% of the world's population command 86% of the world GDP while the
poorest 20% command merely 1%. More than 80 countries now have per capita
incomes lower than they had a decade ago; 55 countries, mostly in
sub-Saharan Africa, Eastern Europe and the Commonwealth of Independent
States (CIS), have had declining per capita incomes.

Although the world today is richer than ever before, nearly 1.3 billion
people live on less than a dollar a day and close to 1 billion cannot meet
their basic consumption requirements. More than 800 million people lack
access to health services, and 2.6 billion to basic sanitation. Although
people are living much longer today, around 1.5 billion are not expected to
survive to age 60. Indeed life expectancy in some countries of sub-Saharan
Africa is only around 40 years.

Despite population growth, per capita food production increased by nearly
25% between 1990 and 1997. But the overall consumption of the richest fifth
of the world's people is 160 times that of the poorest fifth. 840 million
people are undernourished, including 160 million children. Close to 340
million women are not expected to survive to age 40.


Introduction
The world has never before been richer than it is today. Yet large
populations of the world find themselves without adequate resources to
ensure good health. Despite the unprecedented advances in medical
technology, around 800 million people lack access to appropriate and
affordable health services. While life expectancy has increased-and
mortality in general and infant mortality rates in particular-have decreased
in most countries, the rates of improvement in these indices have declined
in the last two decades. Indeed, in some countries, there has been an
increase in levels of infant and child mortality. In other words, the
increased opportunities for health have been distributed highly unequally
around the world.

Inequalities between and within countries have been widening to levels
seldom before witnessed. Unemployment, landlessness, loss of assets, and
deprivation are increasing in a widening share of the world's communities.
At the same time poverty has spread even within rich countries. Together,
these factors profoundly affect the health of large sections of the
population of the world.

Such factors are not an accident, but the consequence of the way in which
structures of ownership, production and distribution of the world's wealth
have been systematically changed over the last two decades. This paper
briefly attempts to delineate some of these changes while  drawing attention
to the manner in which they impinge upon health and influence health
services organisation.

A recent history of economic policies
Towards the end of the 1970s the long boom of post-war economic growth
ground to a halt. Economists hesitated to use the term 'depression' to
describe this phenomenon since it brought back memories of the 1930s, a
period that had plunged the world into the horrors of fascism and the 2nd
World War, but the 'recession' of the 1980s was similarly widespread and
deep. These changes took place together with the collapse of the Soviet
Union and the state-controlled economies of the socialist world. They also
led to a reshaping of the capitalist world, particularly the pursuit of
market policies and the opening of countries to transnational corporations
(TNCs) through a complex of changes known as  globalisation, privatisation
and liberalisation.

The debt crisis
In the 1970s-and particularly following the rush of deposits in the wake of
the oil-price increase-private Western banks encouraged countries in the
Third World to borrow extensively to finance large-scale development
projects. Indeed, so acute were the problems of uninvested capital that the
banks resorted to bribing politicians and influential officials in the Third
World to make commitments towards these projects, many of which were
otherwise unviable. The projected returns failed to materialise, however,
interest rates rose sharply. By the early 1980s, large numbers of now
heavily indebted countries were unable to pay back their loans.

It was at this point that the International Monetary Fund (IMF) stepped in
to bail out the Northern banks by offering loans to the indebted countries.
The loans were primarily aimed at preventing the collapse of the private
banks; they also served to involve the borrowing countries in a new
framework of regulations in the economy, ostensibly aimed at improving their
efficiency and competitiveness in the world market.  Thus the restructuring
of Third World economies to ensure debt repayment began to drive economic
policy.

Neoliberalism
Over the same period, right-wing economic policies took centre-stage in the
USA and the UK. These policies, described variously as Reagonomics,
Thatcherism or monetarism, reflected an ideological commitment to unbridled
market principles, ignoring the remarkable role in these countries of
state-directed economies. One of the significant lessons of post-war
economic growth had been the singular role that the state could play, and
indeed needed to play, in capitalist countries in order to avoid recurrent
periods of crisis due to falling demand. For instance, state involvement in
public health had been at the heart of the strategy to stabilise the
economies, in a move to help capital growth and technological change. In the
new environment of the 1980s, these policies (Keynesian) came under
systematic attack from neo-liberal economists.

Reducing the role of the state and increasing that of market forces,
irrespective of their social and long-term economic costs, were at the
centre of the new model of economic growth. This was accompanied by the
triumph of the ideology of individualism, competitive wealth-seeking and
conspicuous consumption. Along with the decrease of community values has
become the undermining of public initiatives and institutions, especially
those that serve and protect the interests of the poor.  In this ideology,
public intervention and institutions are necessarily inefficient and
wasteful, and markets the best way to both economic growth and overall
development. Economic growth, it was maintained despite extensive evidence
to the contrary, would trickle down to the less fortunate and thus result in
overall development.

The contradiction between the prescription to the third world and the
economic success stories

'The great post-war economic success stories of capitalist countries, with
the rarest exceptions (Hong Kong), are stories of industrialisation-backed,
supervised, steered, and sometimes planned processes managed by governments:
from France and Spain in Europe to Japan, Singapore and South Korea. At the
same time, the political commitment of governments to full employment and-to
a lesser extent-to the lessening of economic inequality through. a
commitment to welfare and social security explains part of the success

'The greatest of neo-liberal regimes, President Reagan's in the USA, though
officially devoted to fiscal conservatism and "monetarism", in fact used
Keynesian methods to spend its way out of the depression of 1979-82 by
running up a gigantic deficit and engaging in equally gigantic armaments
build-up. So far from leaving the value of the dollar entirely to monetary
rectitude and the market, Washington after 1984 returned to deliberate
management.'

Structural Adjustment Programmes (SAP)
At the height of her economic and political power in the new unipolar world,
the USA- assisted by the Bretton Woods institutions (World Bank and
International Monetary Fund)-found a way out of the impasse of falling rates
of profit and increasing unemployment by opening-up potential markets in
Third World countries.

The debt situation of these countries became the vehicle for introducing a
set of policies brought together under the rubric of structural adjustment
programmes (SAPs). Future loans from international financial institutions
and access to other donor funds and to markets, became henceforth linked to
accepting this broad package of macro-economic policies.



The structural adjustment programme (SAP) package comprises essentially the
following measures:
? trade liberalisation removing the protection to local industry;
? reduction of import-export-tariffs;
? deregulation of the economy with fewer or no controls on foreign
investments;
? abolition of price controls;
? removing the protective barriers to outflow of funds;
? cuts in government spending including funding  of social sectors;
? devaluation of currencies to achieve export competitiveness;
? deregulation of labour laws and retrenchment of workers;
? cuts or removal of social subsidies; and
? public sector enterprise 'reform' typically through privatisation


It was believed that by adopting this package of policies, indebted
countries would not only attract foreign investments but would also be in a
position to pay for them by increasing their exports of primary commodities.
The free flow of funds across borders, it was believed, would facilitate
this process. At the same time, removing public subsidies and cutting public
spending would enable indebted countries to mobilise larger funds for
investment. Providing a stimulus to the private sector by loosening
regulations and controls would provide the necessary stimulus to this sector
to act as the engine of economic growth.

SAP, liberalisation and privatisation measures were applied in a uniform
manner across three continents, beginning with Latin America and Africa in
the early 1980s and in Asia in the late 1980s.

In the agricultural sector this led to a reinforcement of colonial patterns
of agricultural production, stimulating the growth of export-oriented crops
and reducing the production of food crops. The problem at the heart of this
pattern of production was that it reinforced the pre-existing international
division of labour and that it was implemented when the prices of primary
commodities exported by Third World countries were low as never before. The
more successful the countries were in increasing the volume of exports, in
competition with other Third World countries exporting similar products, the
less successful they were in raising foreign exchange to finance their
imports. Thus many countries shifted backwards into being exporters of
unprocessed raw materials and importers of manufactured goods, in keeping
with the saying 'produce what you don't consume and consume what you don't
produce'. Indeed as the range of products consumed by households in the
South shrank, the acronym SAP increasingly came to be given new meanings:
'See And Pass' or 'Suffer And Perish'.

In the industrial sector, where the countries had been striving to break out
of colonial patterns of dependent development, the withdrawal of state
support plunged many enterprises into crisis. Such units were then allowed
to close or were privatised or handed over to TNCs, typically with
significant losses in employment. Just as the state reduced its  commitment
to critical sectors such as education and health, so also the free flow of
capital across borders in search of labour, raw materials and markets
weakened the state. Further, over this period, capital across the globe was
increasingly being concentrated in fewer and fewer hands with an explosion
of mergers and acquisitions.

Together these policies and processes increased indebtedness, increased the
rate of exploitation of low-income communities across all countries, and
shifted wealth from productive to speculative financial sectors where boom
and bust became the order of the day. Many countries opened
export-processing zones (EPZs) to attract foreign investment, driving down
their own labour costs and forgoing tax revenues. Usually exempt from
national labour laws, EPZs employed women in low-paid jobs, while tax
concessions made it difficult for national governments to meet the long-term
social costs of production incurred in these zones. Thus these policies also
led to a significant increase in casual, poorly-paid and insecure forms of
employment, and led to the collapse of already weak and underfunded systems
of health, education and food security. They increased poverty in already
poor countries even as a few people became richer and the middle and upper
classes obtained access to consumer products manufactured in the rich
countries.

Changes in food prices induced by SAP: Bolivia 1975 and 1984.

Food item           Hours worked to purchase 1,000 calories in
                        1975 1984
Barley             0.07   0.59
Sugar             0.16   0.40
Corn               0.17   0.64
Wheat flour    0.21   0.52
Dried beans  0.22   3.47
Rice               0.22   0.48
Bread            0.28   0.51
Oil                  0.28   0.59
Dried peas   0.29   1.38
Potatoes       0.76   2.35
Onions          1.02   3.22
Powdrd milk 1.05   3.95
Source: Susan George, A Fate Worse Than Debt : The World Financial Crisis
and the Poor , PIRG, New Delhi, 1990, p.152

One consequence of these processes has been commonly described as the
feminisation of poverty, as females increasingly had to strive to hold
families together in various ways. More women entered the paid labour force,
typically at lower wages and with inferior working conditions than men.
Simultaneously, the extent of unpaid labour in households (predominantly
performed by women) increased as public provision of basic goods and
services declined. Young children, especially girls, were increasingly
withdrawn from school to join the vast and underpaid labour market or to
assist in running the household. The involvement of children and adolescents
in crime and delinquency increased under these circumstances. Rising food
prices meant that an increasing proportion of families were pushed under the
poverty line, and women and girl children were disproportionately affected.
Morbidity levels increased even as poor people were increasingly unable to
access health institutions, which, under the reform measures, typically
introduced payment for services. Given increasing levels of malnutrition, it
is not surprising that infant and child mortality rates, which had hitherto
shown a decline, either stagnated or in fact increased in a number of poor
communities.

The growth promised by the initiation of SAP measures was particularly not
achieved in Africa, which has shown reduced economic growth for more than
two decades now. Per capita income for sub-Saharan Africa as a whole is
lower than it was in 1960. It is thus not surprising that these last two
decades are often described as lost decades for these countries.

Concentration of power
Global changes in production technologies and in the organisation of
production have also taken place, with fewer and fewer corporations
controlling such critical sectors as information, energy, transport and
communication; this process has been described as transnationalisation.
Multinational corporations were increasingly becoming transnational in their
operations, spreading different components of their manufacturing processes
to different countries where resources and conditions for their operations
were optimal. Thus, around 100 TNCs control 33% of the world's productive
assets, account for one- third of world production and employ only 5% of the
global workforce. At the same time, the state sector in Third World
countries, which was the only sector large enough to enable investment for
wider development, has been pushed into a much less significant  role. Such
measures as the sale of public assets (often to TNCs), and fiscal policies
that combined decreasing taxation of the richer segments of the population
with decreasing subsidies to weaker segments, essentially meant a widening
of income disparities. It is not surprising that income inequalities within
countries have significantly increased.

Reduced public sector spending to enable debt repayment also  meant that
states could no longer play a critical role in maintaining measures for
equitable development that they had in many cases initiated. Thus the
package of SAP measures led to the collapse of the models of self-sufficient
import-substituting industrialisation that many of them had established in
the immediate postcolonial years. The essential feature of this past was
that socio-economic development in these countries was based on their being
exporters of cheap primary commodities and importers of finished
manufacturedg goods.

Many SAP-implementing countries fell from their initial debt into the debt
trap wherein they had to take increasing loans merely to pay back the
interest on their earlier loans. Since they now received less for the raw
materials they exported, they were forced to undertake repeated devaluation
and thus paid more for imported products. They became caught in a vicious
cycle of low capital for initiating development, borrowing, devaluation, and
less capital. Furthermore, the net flow of resources from the countries of
the South to those of the North substantially increased. UNICEF, for
instance, estimates that this outflow now amounts to 60 billion dollars
annually. In other words, the SAP measures have been successful in
increasing the rates of exploitation of the poor by the rich. Liberalised
capital markets meant that trillions of dollars could flow in and out of a
country within a single day. As the crises in East Asia have indicated, the
free flow of capital in search of quick profits has left in its wake
devastating poverty and social disruption.

As noted by the UNDP, free market expansion has outpaced systems to protect
the social well-being of people and human development. Recent UNDP Human
Development Reports note that more progress has been made in norms,
standards, policies and institutions for open global markets than for people
and their rights. They note that when economic growth through the market is
left uncontrolled, it inevitably concentrates wealth and power in the hands
of a select group of already powerful people, nations and corporations,
while marginalising others.

International organisations and national elites
It is equally true that several global institutions of the United Nations
have themselves been a part of this process. The World Health Organization
(WHO), for instance, has increasingly forfeited its leadership role in
health to the World Bank; indeed the total budget of the WHO is less than
the health spending of the WB. It has also been suggested that the interests
represented by the advanced capitalist countries have themselves
increasingly influenced such institutions. Policy prescriptions such as the
endorsement of the concept of Disability adjusted life years (DALYs) in
health means an approach to health services development that increases the
role of the private health sector and the pharmaceutical industry. The World
Trade Organization (WTO) has become a forum  of debate and struggle over the
extent to which trade and industry, including the pharmaceutical industry,
should have rights over governments to meaningfully protect resources and
public health. Rapidly changing trade regulations demand capacities and
negotiating abilities that many developing countries do not have.

The dominance of neoliberal policies across the globe was also linked to the
collapse of the socialist economies. The ideological vacuum of alternatives
to free-market promises at the global level led to the demoralisation of
social movements that rejected first colonial and later neocolonial policies
of development.

Although these neoliberal policies have often been described as a
neocolonialization, influential sectors in Third World countries have
expressed their support for them. These sectors, which benefited
disproportionately from postcolonial development in the 1950s and 1960s,
have given up  ideas of national self-sufficiency, independence and
sovereignty, which guided them before. They now intent to reap the benefits
as junior partners to foreign capital in search of quick profits, or the
purchase of public assets at a low price through privatisation, these
classes have lent open support to the policies of the World Bank and the
IMF. Aiding this process has been the role of the global media, which
transmits messages glorifying consumerism. Not to be underplayed is the role
of illicit sources of money from trade in drugs, and rewards to politicians
in the Third World for protecting these practices.

There have been two significant political ramifications of this process.
First, international financial institutions and TNCs consolidated their
position through institutional measures. Under the new world trading order,
which emerged with the completion of the Uruguay Round of talks in
Marrakech, the role of the Bretton Woods institutions and national
governments was redefined. It was envisaged that in the articles of the new
World Trade Organisation (which was to have been endorsed in Seattle), many
aspects of SAP would become legally enforceable articles in international
law. Third World countries would thus be at an increasing disadvantage, and
less and less the owners of their own indigenous biological materials and
knowledge.

The WTO has been criticised for its lack of transparency and democracy in
decision-making, but the problem runs even deeper. In the profoundly uneven
playing field on which the process of global economic change is taking
place, even a transparent WTO would not pursue the values or principles that
would enable the vast share of the world's population to access resources or
enhance their productive capacities.

The second ramification is that national governments in many Third World
countries, after losing support from the former socialist countries, failed
to build stronger South to South links with neighbouring countries or with
those producing similar primary commodities; instead they embarked on a
competitive race to integrate into the global economy, thus pushing primary
commodity and labour prices lower.

When populations in Third World countries resisted-and these sites of
resistance are legion-their governments used severe measures to suppress
them. Indeed, in many countries, scarce public resources were often
typically directed to military and security expenditures. Thus,
paradoxically, 'liberal' pro-market policies in much of the developing world
have been associated with repressive politics.

There have been many sites of resistance to these policies in many parts of
the Third World. The Caracas anti-IMF riots in 1989 were sparked off by a
200% increase in the price of bread. Unofficial reports indicate that in
January 1984 more than 1000 people were killed by the police firing in Tunis
when protesting adjustment measures. Bread riots have also occurred in
Nigeria in 1989. In 1990 anti-SAP riots took place in Morocco. The 1994
uprising in Chiapas, Mexico were also sparked off by SAP measures.

Movement for change: setbacks and hopes
The last decade of the 20th century  has seen the weakening of democratic
movements and aspirations. This has occurred partly because of the
preoccupation with survival among larger sections of the population and the
weakening of trade unions in the face of privatisation and layoffs. It is
also partly due to the increasing centralisation of decision-making at
national and often international levels. Indeed decisions affecting large
sections of the population in poor countries are often made at distant
capitals in the West, with the national government mandated merely to
implement such decisions.

It is in this situation that poor people fallback on their sectarian
identities and turn on their equally poor neighbours in ethnic and religious
conflicts. At the same time, increasing conflicts over scarce resources at
the local level are breaking out in a number of places. In other cases a
withdrawal into the family occurrs, with women bearing the brunt of this
rise in violence.

While these are mechanisms for coping with an increasingly hostile world
where people are marginalised and disempowered, they do not confront the
sources of  alienation and disempowerment. A political culture of
dependence, withdrawal or passivity, even as governments have acted against
the interests of their own poor people, strengthens the same forces of
authority.

The situation is not, however, completely bleak. There are significant
positive developments that indicate confrontation with this unacceptable
social and economic order. These are leading to organisation for change at
many levels: local, national and international. Powerlessness is being
addressed through a range of movements that organise in a representative and
accountable manner, giving voice to the voiceless. Those movements that make
links with others, pressurising governments for participatory democracy and
to rebuild national priorities with a focus on the needs and aspirations of
the majority of the population, must inevitably confront the wider sources
of disempowerment. It is from this dimension of social movements confronting
the current global political economy that there is hope for a more humane
and human-centred type of development based on sustainability and equity.
Within this larger struggle must be located the struggle for health for the
people of the world.


Guyana in South America is the poorest country in the Western hemisphere.
Since 1988, 80% of the government's revenues have gone on servicing foreign
debt. Through the 1980s and 1990s, malnutrition, child death rates,
unemployment and poverty rose dramatically as a result of the implementation
of the SAP package. In 1992, following the election of a new President, the
citizens of Guyana joined forces with the Bretton Woods Reform Organisation
(BWRO) to create the first Alternative Structural Adjustment Programme,
which envisaged a comprehensive economic policy to meet the basic needs of
the entire population. The ASAP was based on the principle that a healthy
economy does not rely on exports for income and imports for daily needs. The
supporters of the ASAP also rejected the IMF freeze on social sector
spending, and the President declared that raising the standard of living of
the majority was the first objective.


Questions:

? What has happened to the lives of ordinary people in your country or
community in the last two decades? How similar are the experiences of
different countries? Who have been the winners and losers?
? Why is 'free trade' a slogan primarily of the rich and influential
countries?
? What has happened to the profile of health and disease in poor
communities? What has caused these changes in health and ill-health?
? What actions have ordinary people taken to protect their rights to food,
housing, jobs, health and health care? How far have these actions been
coping mechanisms? How far have they confronted the causes of their problems
collectively? What has been the response of the state?
? In what ways have countries acted together to improve their trade
advantage in your region? In what way have they competed with each other?
Which is more effective?
? What do ordinary people know about the international banks, financial
institutions, world trade rules and markets that affect their lives?
? Have you ever thought of the range of products available in a typical
supermarket in the West? How many of them emanate from the Third World? How
is it that these are available to the middle class Westerner but not to
large populations within the countries they come from?