Why Austerity Kills

Image

By Dr. John Millar

In a recent book ‘The Body Economic – Why Austerity Kills. Recessions, budget battles, and the politics  of life and death’, David Stuckler and Sanjay Basu review the evidence from a worldwide natural experiment in political economic approaches to dealing with recessions: ‘austerity’ vs. ‘stimulus’ (http://thebodyeconomic.com/).

The Body Economic by Stuckler and Basu

The Body Economic by Stuckler and Basu

The austerity approach aims to reduce government debt and deficit by cutting government expenditures (healthcare, education, housing, unemployment) and privatizing as many services and businesses as possible. The stimulus approach is more tolerant of debt and deficit and maintains government investments in social services such as healthcare, education and unemployment. The most drastic austerity approach was applied in Russia in the 90s driven by a concern that once the Soviet Union collapsed, a rapid transition to capitalism was needed to prevent a return to communist political control. The approach advocated by economists such as Jeffrey Sachs and Milton Friedman was called ‘Shock Therapy’: massive rapid privatization and deep cuts to government healthcare and other services. The result was widespread unemployment and poverty and 10 million deaths (life expectancy dropped by 7 years). The deaths were mostly working age men due to suicide and alcoholism. The health of the population has still not recovered. Shock Therapy was successful in establishing capitalism but in a highly inequitable form: wealth concentrated in the hands of a few, an oligarchy.

Other countries from the Soviet bloc such as Poland and Belarus took a more gradualist approach as recommended by Joseph Stiglitz: slower privatization and the maintenance of essential social programs such as healthcare and education. This avoided a deterioration of population health and a quicker economic recovery.

In Southeast Asia in the late 90s, an austerity regime imposed by the IMF on Thailand resulted in widespread poverty, unemployment and hunger followed by a rise in HIV, suicide and infant mortality. By contrast Malaysia took a stimulus approach resulting in few negative health effects and a more rapid economic recovery.

When a severe recession hit Iceland in 2008, demands by the IMF for austerity were democratically resisted. So instead of austerity, healthcare spending was increased, a job-matching program was funded and debt relief provided by government for small businesses to sustain employment levels. As a consequence population health improved, homelessness was avoided and the economy made a good recovery (although many off-shore investors were left with considerable financial losses). And Iceland remains healthy and the happiest of all nations.

In Greece, Italy and the UK various forms of austerity have had serious health impacts including HIV epidemics, increased suicide rates and widespread hunger. And their economies have been slow to recover. By contrast, Sweden has invested in employment programs and maintained social programs thus preserving good population health and the economy.

The authors have three recommendations for dealing with recessions:

  1. “First do no harm”: ensure that government policies are reviewed for their health impacts.
  2. Help people return to work.
  3. Maintain social programs such as prevention and healthcare.

The evidence that emerges from this vast natural experiment in economics and population health is that an ‘austerity’ approach (smaller government, cutting taxes, balanced budgets, cutting social programs, privatizing and relying on economic growth and ‘trickle down’) has a damaging effect on population health and results in slower economic growth. In recessions, more government investment in important social programs such as healthcare, housing, education and skills training, jobs and unemployment services stimulates the economy, preserves the health of the population, reduces poverty and homelessness and results in a more rapid and equitable economic recovery.

To quote Stuckler and Basu: “Ultimately austerity has failed …because it is an economic ideology…that stems from a belief that small government and free markets are always better than state intervention. It is… a convenient belief among politicians taken advantage of by those who have a vested interest in shrinking the role of the state, in privatizing social welfare programs for personal gain. It does great harm…punishing the vulnerable”.

The lesson for Canada and BC is that, while economic growth and job creation are important elements of economic recovery there must also be public investments in social support programs. This will lead to a more rapid economic recovery, shared prosperity and improved population health.

Dr. John Millar

Dr. John Millar

– John Millar is a Clinical Professor Emeritus , University of British Columbia School of Population and Public Health, and Vice President of the PHABC.

Advertisements

Marjorie’s Welfare Food Challenge – Day 1

By Marjorie MacDonald

Because I had forgotten to sign up for the challenge in advance I did not do any real preparation. This was a huge mistake.  I had not looked to see whether there were any guidelines for participants before starting. Thus, I struggled through the first day trying to figure out what I was allowed to do. I had a lot of questions like:

  1. Could I eat the food I already had in the house? I thought – probably not, but what else was I going to do since I was not prepared?   However, I was pretty sure my organic steel cut oats might be a bit too expensive.  Some cheaper no-name oats out of the bulk bin would likely be a safer choice. Put that on the shopping list.
  2. Was I allowed to put food I had purchased (e.g. stale bagels I bought on sale) into the freezer to keep them from getting any staler? Someone living on welfare in a SRO would not likely have a freezer.  Hmmm. Check with Ted on that one.
  3. Could I eat food that I had been given? For breakfast I did toast a stale bagel, no butter. I used some homemade jam that someone gave me. I had a vague feeling that was probably not OK, but hey, it was free wasn’t it? Note to self – find out if someone has written any guidelines for this.  I felt Ok about using my toaster (versus the freezer) because my husband bought it for $2.00 at a thrift store about 10 years ago. I had considered putting a skiff of cream cheese on the bagel (surely that small amount wouldn’t cost much?). I discovered, however, a bit of mold on the cream cheese.  Big dilemma. Should I just scrape off the mold and keep using it because I couldn’t afford to throw it out, or use my public health knowledge about food safety and get rid of it. I’m pretty sure that if I was living on welfare I knew what the answer would be – scrape it off! I got rid of it.
  4. How the heck was I going to manage without my coffee? I knew for sure that my gourmet beans freshly ground in my coffee grinder would be a bit out of my price range this week. But, there was no way I could face a day on $3.50 cents worth of food without my caffeine. I had one cup. Guilt trip – cheating already on my first meal of the day!

These were just some of the many questions that I obsessed about all day.  It took me quite awhile in the morning to calculate the cost of everything for my lunch, which consisted of a hardboiled egg (about 40 cents), some carrot sticks (about 10 cents – bag of carrots $2.99, with 30 carrots, so one carrot about 10 cents), cucumber slices (10 cents), and an apple (about $1.00).  That is pretty healthy I thought!  Oh oh, probably costs too much and I’ll be going over my limit. Dinner was pasta (purchased at Costco – yikes, that is probably not ok – I wouldn’t have a membership if I was on welfare) with a bit of canned tomatoes on top and lots of pepper. Note to self – protein is going to be an issue. I definitely need to find the rules for this venture and do a proper shopping trip.

Postscript. I did look for the guidelines last night and discovered that I had broken most of the rules on the first day. No charity. No food already in your house.  Ok, I guess that means a trip to the grocery store this morning – to start fresh today on Day 2.  I promise myself I won’t cheat today.

Ethical healthcare in British Columbia

By Ted Bruce

I read with interest the article in The Tyee by Christine Boyle and Seth Klein entitled Imagining a Moral Economy for British Columbia.

The article laid out the rationale and the potential for us to re-think economic development and base our decisions about the economy on a set of moral principles. The principles they articulate include ecological justice, equality and shared good.  The article resonated with me in part because of the work PHABC has been doing to bring attention to the Corporate Determinants of Health: see the recent commentary in the Canadian Journal of Public Health by PHABC’s Dr. John Millar.

But it also reminded me of the need for a moral foundation for the health care system.

PHABC has called for greater investment within the health care system on upstream prevention and health promotion. Similar to the “moral economy”, a health promoting system would be based on a strong set of ethical principles – those articulated by public health. The core principles of public health concern themselves with questions of equity, social justice and the distribution of health and risk. Public health recognizes that health is situated within the social, political, and economic environment and if the health care system is to be effective it must attend to the relationship between these aspects of society and the individual. In short, improvements in the health of the population and the reduction in health inequities – ostensibly the goals of the health care system – depend upon addressing poverty, racism and inequality.

In fact the current approach to health care, with its focus on treating sick individuals, is nearing collapse under the weight of an unlimited demand for more service and an attempt to respond to this demand primarily by improving efficiency of services geared to these already ill individuals. Many would say that addressing the social determinants of health is not the job of the health care system. But there is an important and under developed role for health care to focus on health promoting factors – to keep people healthy, to address health inequities through targeted programming and to show leadership to encourage and facilitate inter-sectoral actions to address the social determinants of health such as poverty.

It is time we redesigned our health care system based on the ethics or moral foundation underlying public health.

– Ted Bruce is the past-President of the PHABC.

Income Inequality “No Big Deal” according to Economists

By Diana Daghofer

In North America, the Occupy movement cast the spotlight on an issue that has been the focus of grave concern around the world – income inequality. So the media flurry that came with the release of Statistics Canada’s latest report on the Income of Canadians (September 11, 2013) was no surprise. CBC’s Kelowna-based Daybreak South (September 12, 2013) and the CBC national show, The 180 (September 13, 2013), are two examples that featured leading economists, both of whom were completely uninformed of the health, social and even the economic costs of income inequality.

The numbers simply confirm what we all know – the rich are getting richer, leaving the rest of us behind. At an average of $381,000 each, the richest 1% of Canadians earn more than ten times the average Canadian income. More than the numbers, though, it is the response from leading economists that is troubling for the future of our country.

Take, for example, the response to Daybreak South host, Chris Walker’s, excellent question “Why does it matter that there is a gap?”  His guest, UBC Okanagan economics professor Ross Hickey, was pretty nonchalant: “Things have been going better for most of us. The gap matters because people care about it. Extreme wealth bothers people.” The good professor proceeded to talk about the value these wealthy few bring to our nation: “There is no reason to try to trip these people up, because a lot of what they are doing is fuelling the economy and providing jobs for those at the low end of the income distribution.”

On CBC’s The 180, guest Terence Corcoran, editor of the Financial Post, echoed those sentiments, actually saying, “Inequality is not a bad thing. It is inevitable…in any political system.” When asked whether he thought anything should be done about growing income inequality in Canada, he said, “What’s the point? What are we trying to accomplish?” Well, I would ask him, “How about saving lives?”

No reason to reduce the gap?

Public health practitioners, and many beyond our circle, know that the social determinants of health – with income leading the way – are the prime predictors of disease and illness. Living conditions out-trump the effect of any behavioural risk factors, including diet, exercise and even tobacco use.[i]

Here are some of the effects of income inequality on health, comparing those living in neighbourhoods with the lowest 20% average income in Canada to those in the wealthiest 20% average income:

  • Infant mortality is a very sensitive indicator of societal health, and Canada is a healthy place, right? So it would likely surprise most Canadians that 40% more babies die in their first year of life in our poorest neighbourhoods (7.1 of 1000 live births) than our richest (5.0 of 1000 live births).[ii]
  • Suicide rates in the lowest income neighbourhoods are almost twice as high as in the wealthiest neighbourhoods.[iii]
  • Men in Canada’s wealthiest neighbourhoods live, on average, almost 4.5 years longer than those living in our poorest neighbourhoods.1
  • People in our poorest neighbourhoods are almost one and a half time more likely to have a chronic disease than those in the wealthiest neighbourhoods, and almost twice as likely to be hospitalized for them.2

Literally hundreds of research reports show us that health inequities in Canada are widespread and affect us at every stage of life.

Does Wealth = Health?

It is true that, at every step up the income ladder, people are healthier, overall. The economists pointed out that the incomes of the poor are increasing. So, does more wealth mean better health? Not necessarily. It is actually the gap between the rich and poor that is the best indication of health, or the lack thereof. Countries with the smallest gap between rich and poor are those that report the best health of their populations.2 Of course, those countries take an active role in distributing resources more equally among their populations, and tend to invest more in their social infrastructure.1 In other words, income inequality – leaving people in poverty – is a choice that governments (and those that vote them in) make.

The Financial Impact

Leaving lives lost for a moment, more illness clearly increases healthcare costs. In 2010, the cost of ‘avoidable’ and ‘excess’ hospitalizations was over $400 million.3 And it hits us at the other end of the economic scale, too.  When people are sick, they can’t contribute to the workforce and other economic productivity.

So, while Messrs. Hickey and Corcoran could be excused for not recognizing the health impact of the income gap, they should understand its economic impact. In 2011, the International Monetary Fund identified “the increase in inequality (as) the most serious challenge for the world.”[iv]

Researchers, policymakers, the Canadian Medical Association and countless public health practitioners have expressed deep concern about the health, social and economic consequences of the increasing gap between rich and poor in Canada, and around the world. I applaud the media’s efforts to cover the issue, but the next time they interview economists about income inequality, I would ask them to include a public health professional who can bring to light the many evidence-based solution to this problem. Many people believe that poverty is inevitable. It’s time we show them that it is a choice our governments, with voter support, have made.

Diana Daghofer is a public health consultant living in Rossland, British Columbia and a member of the Public Health Association of British Columbia

References and Further Reading


[i] Raphael D, Social Determinants of Health: Canadian Perspectives, 2nd edition, Toronto, ON, Canadian Scholars Press, 2008

[ii] Raphael D (2010), Health Equity in Canada. Social Alternatives Vol. 29 No. 2, 2010

[iii] Canadian Medical Association (2013), Submission on Motion 315 (Income Inequality), Submitted to the House of

Commons Standing Committee on Finance, April 25, 2013 [cited September 12, 2013]. Available from: http://www.cma.ca/multimedia/CMA/Content_Images/Inside_cma/Submissions/2013/Income-inequality-Brief_en.pdf

[iv] Philip Aldrick, “Davos WEF 2011: Wealth Inequality is the “Most Serious Challenge for the World,” The Telegraph, January 26, 2011.

Need We Say More

By Ted Bruce

Need we say more? Apparently yes. The evidence on the impact of low income on health such as that described by Dr. Patricia O’Campo just keeps piling up.

When many people working full time cannot get out of poverty. When many people working full time cannot get out of poverty. And when we ignore studies showing that acting on critical social determinants of health such as quality child care makes economic sense for our society, it is clear there is something very wrong. The need to invest in poverty reduction is an elephant on top of the table not under it. Fortunately, we know from other public health efforts that the evidence eventually does lead to action. Just consider the 12 great achievements in public health as recently documented by the Canadian Public Health ssociation: http://www.cpha.ca/en/programs/history/achievements.aspx.

It can be frustrating to see a lack of action, but that is all the more reason for public health practitioners to speak out about the evidence. Thank you Dr. O’Campo.

Ted Bruce is the Past President of the PHABC

Further reading:

Social policy is health policy. Vancouver Sun Opinion: Poverty linked to multiple health problems in new mothers, study finds | Patricia O’Campo |  August 28 2013

BC’s welfare recipients need immediate relief | Seth Klein, Lorraine Copas, Adrienne Montani | April 24 2012

2012 Child Poverty Report Card | First Call: BC Child and Youth Advocacy Coalition | November 2012

15 by 15: A Comprehensive Policy Framework for Early Human Capital Investment in BC | Human Early Learning Partnership | August 2009

Government Must Be Accountable for the Costs of Poverty

By Ted Bruce

A report on the rising poverty rate among new immigrants to Canada ran side by side with an article on BC’s version of austerity as the government moves to deal with a declining economic situation.

The report on poverty notes that the failure to address this rising poverty sets up a “tinderbox” of discontent. A similar message has been repeatedly stated by the public health community. There is ample evidence as demonstrated by epidemiologists Richard Wilkinson and Kate Picket and documented so well in their book The Spirit Level that societies with high levels of economic inequality perform very poorly. And it is clear that the public wants government to address poverty as is shown by the recent polling done by the BC Healthy Living Alliance.

Is government’s “austerity” response the solution? Governments that essentially ignore poverty reduction policies say that they can’t afford them or that policies related to job creation will be the best solution to the problem. The economists can debate this but there is ample evidence that the cost of poverty is greater than the cost of the investments that could alleviate it. The study by the Canadian Centre for Policy Alternatives (supported by PHABC) provides a startling analysis of the costs of not acting.

But even if politicians believe their austerity and trickle down growth paradigm is correct, they have an obligation to demonstrate that it works. So why not set some timelines and targets as has been called for by public health organizations like PHABC and the Health Officers Council of BC? If our elected officials believe they are building a better society for citizens through their policies, it is not asking too much for them to show us they can reduce poverty. Let’s measure it and report on it. That is not asking for too much.

Ted Bruce is the past-president of the PHABC

 

Literacy: A foundational element of a poverty reduction strategy

By Ted Bruce

Books-1-iconIn the current election we see almost random program promises to address issues related to poverty. These are necessary but not sufficient to make a substantial change. A comprehensive poverty reduction strategy is about a lot more than small increases in welfare rates or small increments in early childhood services for children. That is why the PHABC position calls for a COMPREHENSIVE approach. What are needed is a bold vision and an all of society approach led by a dedicated minister and a plan with target and timelines. Without a comprehensive plan some fundamental elements of success will be missed.

Take literacy for example. One seldom hears literacy discussed as part of a poverty reduction strategy although it is almost foundational to creating sustainable change. Without strengthening literacy in society we do not get upstream of one of the critical areas of disadvantage for many adults in our society. The fact sheets about literacy, health literacy and poverty highlight (see links below) highlight the importance of tackling literacy as a poverty reduction strategy. Its time we stopped a piecemeal approach to poverty reduction and truly invested in a bold approach – one that is comprehensive and sustainable. It will pay for itself many times over.

Fact Sheet: Literacy and Poverty | Decoda Literacy Solutions | March 2013

Fact Sheet: Health Literacy | Decoda Literacy Solutions | March 2013

Health Officers Council release report on health inequities in BC

By Dr. Victoria Lee

Capture 1

Today, the Health Officers Council of BC (HOC) released an updated report on Health Inequities in BC.  Analyses of life expectancy in British Columbia (BC) by income groups between the periods of 2002‐6 and 2006‐10 found a disturbing trend: the gap in life expectancy between Local Health Areas (LHAs) with the highest socio‐economic status (SES) and those with the lowest SES has widened dramatically.  We know that poverty is bad for our health.  People living in the lowest SES areas are more likely to suffer from health risks and complications of illness, while less likely to be able to access care.

We also know that tackling poverty head on can shift the trends that we’re observing in BC.   BC is one of the two provinces in Canada that does not have a provincial poverty reduction plan in progress or development.  We can start to reverse the trends by developing and implementing a provincial poverty reduction plan with critical milestones, indicators and evidence-based strategies.

Read the full HOC report ‘Health Inequities in BC 2013

Dr. Victoria Lee is the Co-chair of the Population Health Committee, Health Officers’ Council.

Embrace the wisdom of investing in children

By Dr. Brian O’Connor

In a recent blog (‘It Doesn’t Have to Be this Way’, March 27th), Trevor Hancock, in a tribute to Clyde Hertzman, reviewed the policy platform of the Human Early Living Partnership (HELP) as contained in the 15×15 document.  Much of this speaks to the importance of ensuring adequate incomes for families and some of the key aspects of a poverty reduction plan.

One of Clyde’s colleagues at HELP, Professor Paul Kershaw, has put a unique twist on early child development and the need for adequate resources for families in terms of income, time and services.  Young people and young families have unique challenges in today’s social environment that present huge impediments in terms of the ability of children to develop optimally.  Professor Kershaw refers to the young families of today as the squeezed generation or GenSqueeze (www.gensqueeze.ca).  His thesis is that today’s young families, quite unlike their predecessors (boomer, gen x, etc.) are severely under resourced in terms of

1) the time they have available for optimal parenting

2) the lack of supportive services – the consequences of a paucity of sound social policies in support of today’s families such as universal, quality, affordable for all, day care – Professor Kershaw proposes a $10/day solution, a solution also promoted by the Coalition of Child Care Advocates of BC (CCCABC.bc.ca) and

3 ) income issues arising from discrepancies in wages and the cost of living over time leading to two working parent families with very long hours

Professor Kershaw has contrasted the social policy supports that as Canadian society, we have put in place for seniors as an example while at the same time we have not been as generous in our support for young people and young families.   While he is not trying to pit one generation against another, he does point out that our social spending on seniors comes to $45,000 per Canadian over 65, while a similar young family today is afforded social policy spending of only $12,000 per Canadian under 45.   He does not support reapportioning  spending  (maintain funding to existing social programs) but adding a mere $1000 per Canadian in additional spending which will as an investment bear vast return in mitigated costs from things such as reduction in costs from crime, education, avoidable absenteeism and improvements in human capital, and competitiveness.

It is interesting that our society has not fully embraced the wisdom of investing in children, the future of our province, by ensuring optimal early child development for all BC’s children.  While our universal Medicare program is a defining national characteristic and the support we provide seniors is never questioned, we can hear the negativity that arises when one proposes $10/day child care – “why do I have to pay for their child’s day care?”

So Professor Kershaw comes at the poverty reduction question in a slightly different way.  But it is anchored in the recognition that optimal child care development if not addressed through policy options that provide more resources, will perpetuate the continuum of poverty, poor child outcomes and increased health inequity.

Brian O’Connor is the Co-Chair of the Population Health Committee, Health Officers Council of BC

Additional Reading:

15 by 15: A comprehensive policy framework for early human capital investment in BC | Human Early Learning Project | 2009

Poverty is Bad for Your Health – Backgrounder and Q&A info series | PHABC 2012