The Financial Crisis and Global Health

1. The Financial Crisis and Global Health Ronald Labonté Canada Research Chair Globalization and Health Equity Institute of Population Health rlabonte@uottawa.ca www.globalhealthequity.ca

2. ‘the nastiest of men for the nastiest of motives will somehow work for the benefit of all’

3. Neoliberalism 1.0 Washington Consensus: • privatization of state assets • deregulation of economic markets • lower corporate and individual taxes • more user pay for public services • government deficit reduction • trade and financial liberalization

4. Behind the worst recession since the 30s: The simplified story • Declining rate of profits in ‘real’ economy in 1970s in high-income countries • Seek new markets (global trade) • Reduce production costs (outsourcing, labour market ‘flexibilization’) • End of fixed exchange rates, financial market deregulation, new digital technologies creates new forms of financialization, speculation and ‘easy’ wealth creation • Developing countries transfer capital to high-income countries through low-interest US Treasury Bills

5. Number of financial crises by year, 1971 - 2002

6. Net financial flows, by region and all developing and transition economies, 1993-2005 Source: United Nations Dept. of Economic and Social Affairs, 2006. “Sub- Saharan Africa” excludes Nigeria, South Africa

7. Bank of International Settlements data cited by Durden (2011): http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/10/BIS%20OTC%20Gross%20Notional_0.jpg

9. And then there was 2007

10. Costs of the Financial Crisis • Direct public subsidy to banks: over USD 100 billion dollars annually by the US and UK governments • Knock-on recessionary effects and lost global economic income: over USD 4 trillion dollars annually, expected to persist for many years, and likely ranging between USD 60 and 200 trillion dollars • That’s USD 200,000,000,000,000 Source: Andrew Haldane, Executive Director, Financial Stability, Bank of England: The $100 Billion Question. Institute of Regulation and Risk, Hong Kong, 30 March 2010

11. Austerity for the poor Eurozone health cuts • Bulgaria • Romania • Czech Republic • Estonia • Ireland • Latvia • Spain • Portugal • Greece Eurozone health effects • Decreased hospital services • Increases user fees • Rise in HIV/AIDS and malaria • Rise in suicides • Road accidents, tobacco, alcohol down • Cheap unhealthy food up

12. Austerity’s African health bite A rapid appraisal by AFRO-WHO in 2009 found, that of 19 countries responding: • 7 had been told their health funding would be cut • 3 were warned that international donors were reducing their health transfers • 11 noted rises in drug costs, 15 commented on increases in food • 7 reported local currency depreciation against the (globally depreciating) US dollar, and • 8 noted increased unemployment since the start of financial crisis

13. Health Consequences of the Crisis: Low-Income Countries • Increase in those living below the extreme ($1.25/day) poverty level: 50 – 200 million by 2009/2010 • For 390 million poorest Africans, a 20% drop in income • Increase in global unemployment: 55 - 100 million • Increase in child mortality: 200,000 to 400,000 excess deaths • In 2009 alone in Africa, 28,000 – 50,000 excess infant deaths concentrated in girls • Increase in out of pocket spending on health, ‘medical poverty’ • In 7 of 10 East and Southern African countries, 2000-2009 • Decrease in remittances: around 10% in Africa in 2009 • Decrease ($300 billion, or 25%) in financial flows to developing countries Sources: World Bank. The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens, 2009; Marmot M, Bell R. How will the financial crisis affect health? BMJ 2009;338:858-60; International Labour Organization. Global employment trends 2009. Geneva: ILO, 2009; Overseas Development Institute. Children in times of economic crisis: Past lessons, future policies. Background Note. March 2009. Friedman & Schady ‘How many infants likely died in Africa…’ Health Economics (2012). Equinet, 2012Regional Equity Watch. UN Economic and Social Council Economic Commission for Africa, The global financial crisis: impact, responses and way forward. June 2009.

14. US “Quantitative Easing” Is Fracturing the Global Economy Michael Hudson, Levy Economics Institute of Bard College, November 2010 The Federal Reserve’s quantitative easing is presented as injecting $600 billion into “the economy.” But instead of getting banks lending to Americans again—households and firms—the money is going abroad, through arbitrage interest-rate speculation, currency speculation, and capital flight.

15. In the wake of the food, fuel and financial shocks, a fourth wave of the global economic crisis began to sweep across developing countries in 2010: fiscal austerity (p.v). http://www.networkideas.org/featart/sep2011/Isabel_Jingqing_Matthew.pdf

16. all recipient governments were expected to cut spending • none were given flexibility to defer debt payments, and • half were instructed to reduce deficits and introduce wage freezes • all recipient governments advised to increase VAT (regressive) taxes, privatize financial and energy sectors, and deepen liberalization http://www.eurodad.org/uploadedFiles/Whats_New/Reports/Bail-out%20or%20blow-out.pdf

17. Those who support fiscal tightening argue that it is indispensable for restoring the confidence of financial markets, which is perceived as key to economic recovery. This is despite the almost universal recognition that the crisis was the result of financial market failure in the first place… (p.V)

18. Source: OECD Divided We Stand, 2012.

19. Inequalities on the Rise • High net worth individuals, the 24 million of us with liquid assets of between $1 and $50 million. • Amongst these are the ‘ultra’ high net worthies, the 80,000 whose assets exceed $50 million. • And then there are the 1,200 global billionaires • As a group, these individuals hold a staggering 77% of total global wealth. Source: Credit Suisse, 2010, 2011 http://royal.pingdom.com/2011/03/11/world-billionaire-stats-charts/

20. Capital Accumulation by Dispossession • Dispossession of the public’s goods under the austerity agenda • Dispossession of our knowledge by stronger and stronger intellectual property rights • Dispossession of the urban poor to make room for private developers

21. Ethiopia has sold leases to 3.6 million hectares of its best farmland to foreign companies yet relies on 700,000 tonnes of emergency food aid each year Karmjeet Sekhon, project manager for Indian food company Karuturi Global, with crops in Ethiopia's Gambella province. Photograph: John Vidal for the Guardian

22. Land-grabbing in Africa • Of 56 – 80 million hectares worldwide being grabbed, 52% lies in sub-Saharan Africa • Costs/hectare charged are 1% - 5% of prices in other leasing countries • Commodities speculation is driving acquisition, and driving up global food prices • The real value lies in the water rights Sources: Gurara and Birhanu, Large-scale land acquisitions in Africa, AfDB Economic Brief, 3(5) 2012 GRAIN, The Great Food Robbery, Pambazuka Press 2012

23. The Great Aid Debate (50 Years On)

24. Global Health Partnerships established 1974-2003

26. Systemic Tax Evasion • Half of all global trade goes through tax havens • $21 trillion of ultra- and ordinary high-worth elites in tax havens • 30% tax on 3% annual increase in holdings = $188 billion, more than all ODA flows • Top 10 investment banks (all operating in tax havens) saw their ‘wealth management’ jump from $2.3 to $6 trillion since the global financial crisis Sources: Tax Justice Network Africa, Tax Us if You Can, 2011 Guardian Weekly 27.07.12 p.18

27. $854 billion to $1.8 trillion (1970-2008) • 3% bribes • 30-35% criminal • 60-65% commercial tax evasion

29. UN Social Protection Floor Initiativehttp://www.socialsecurityextension.org/gimi/gess/ShowTheme.do?tid=2485

30. Poor social policies, unfair economics and bad politics are killing people on a grand scale.

31. Growth as the only solution… The financial system should be fixed, and countercyclical spending should be increased, in order to increase consumption to re-energize production to recreate growth. World Bank Swimming Against The Tide: How Developing Countries Are Coping With The Global Crisis March 2009 On the one hand: Climate change, state fragility, violent conflict, population growth and urbanization are all rising up the agenda. They throw into sharp relief questions about the long term viability of aspects of the market-economy model… But on the other: Maintaining growth is a priority. DFID, Eliminating World Poverty: Building our Common Future, March 2009.

32. …there is as yet no credible, socially just, ecologically sustainable scenario of continually growing incomes for a world of nine billion people. UK Sustainable Development Commission, Prosperity without Growth? 2009

33. Redistribution, regulation and rights Policies should provide for: • systematic resource redistribution between countries and within regions and countries to enable poorer countries to meet human needs, • effective supranational regulation to ensure that there is a social purpose in the global economy, and • enforceable social rights that enable citizens and residents to seek legal redress. Deacon, B., Ilva, M., Koivusalo, M., Ollila, E., & Stubbs, P. (2005). Copenhagen Social Summit ten years on: The need for effective social policies nationally, regionally and globally (GASPP Policy Brief No. 6). Helsinki: Globalism and Social Policy Programme, STAKES.

34. A Way Forward • A life that is secure • Opportunities that are fair • A planet that is livable • Governance that is just Free at:ghwatch.org Peoples Health Movement, Peoples Health Assembly, 2010