In Economics debates frequently revolve around the tensions between equity and efficiency (for example see Okun’s ‘leaky bucket’ hypothesis). Yet in recent articles published in the BMJ (cited below) the evidence is starting to accumulate that the austerity plans implemented by governments in the UK and across mainland Europe are not only inequitable but also inefficient. This is some feat.
Ben et al. (2012) found that in the UK between 2008 and 2010 349 of the excess
846 male suicides could be closely associated with the 25.6% annual increase in
unemployment. The areas with the biggest rises in unemployment also had the
biggest rises in suicides. The authors found that as a result of policies aimed
at taking demand out of the economy, reducing public sector employment and
access to preventative health services there were extra deaths.
Arie (2013) reports the doubling of suicides, increases in mental health problems, and alcohol and drug abuse in Greece, Spain, Italy, Portugal and Ireland. The costs of suicides in Ireland have been estimated at 1% of GDP (see Ben et al. 2013) Malaria has returned to Greece and infant mortality increased by 32% between 2008 and 2010.
Access to health services have also become more complicated with drastic reductions in funding and increased user payments for services or medications. In countries such as Greece access to health services is linked to whether a person is employed. Alongside these changes there have been wide spread attempts to privatise services and hospitals. Yet according to Legido-Quigley et al. (2013), research has not found that privatisation improves service efficiency, let alone equity.
These increased costs and reductions in coverage will tend to result in poorer people delaying their use of services and consequently only seek help when conditions are more
complex and costly. The removal of preventative services will also contribute to worse population outcomes.
Wider economic research has tended to show that for individuals to achieve their potential they require the support of society. In turn society is also then more likely to achieve its full potential. The quality and access to healthcare, education wider social services and the level of tolerance are instrument to individual’s long term economic opportunities. Moreover, the more equal the distribution of resources and economic opportunities the more resilient an economy is to shocks. For example, Kenworthy (2008) shows for a country such as the UK, that a reasonably high minimum wage and tax credits with a shallow taper at higher income levels supports individual’s ability to participate in society and contribute by paying taxes. Whilst the supplement to wages means firms can keep costs down and employment up. The changes in health provision briefly outlined above will result in poorly planned health provision, which becomes more reactive rather than focused on society’s longer term requirements. Provision will become inefficient. Health provision will also become more inequitable as access will vary depending on a family’s income and any lack of access will reinforce wider inequalities.
These poor health outcomes can be mitigated by strong social support for those at greater
risk. The short term recognition of the need for greater social support and possibly a need for the state to act as employer of last resort could reap long term equity and efficiency benefits. This was the case when such polies were followed by Scandinavian countries during their recession of the early 1990s (see Stuckler and Basu 2013) and Iceland is currently achieving relatively good outcomes in spite one of the highest European government debt to GDP ratios (World Bank Data). This evidence is seemingly ignored in the UK and elsewhere in Europe as we appear to be locked into a politically driven agenda. Irrespective of what makes for good politics, economics suggests austerity is not only
increasingly inefficient but also inequitable.
References and Book Recommendation
Arie S. (2013) Has austerity brought Europe to the brink of a health disaster?, British
Medical Journal 18th June 2013; 346 (BMJ 2013;346:f3773)
Ben B., Taylor-Robinson D., Scott-Samuel A., McKee M. and Stuckler D.(2012) Suicides associated with the 2008-10 economic recession in England: Time trend analysis, British Medical Journal 14th August 2012; 345 (BMJ 2012;345:e5142)
Kenworthy L. (2008) Jobs with Equality, Oxford University Press
Legido-Quigley H., Otero-Garcia L., la Parra D., Alvarez-Dardet C., Martin-Moreno J.M. and McKee M. (2013) Will austerity cuts dismantle the Spanish healthcare system? British Medical Journal 13th June 2013; 346 (BMJ 2013; 346:f2363)
WorldBank Data, Central government debt, total (% of GDP) Table accessed July 2013. Available at: http://data.worldbank.org/indicator/GC.DOD.TOTL.GD.ZS
Recommended read: Stuckler D. and Basu S. (2013) The Body Economic: Why Austerity Kills, Allan Lane (ISBN 978 1846 147838). For a review see: BMJ 2013:346: f3659 or ‘Recessions can hurt, but austerity kills’