Structural Adjustment and Health Thomas Stubbs SOCP304 – 14B: Health, Wellbeing and Policy 1 st October 2014

A Greek Tragedy

Introduction International Monetary Fund (IMF or Fund) Structural Adjustment Programs (SAPs) The IMF and Health Spending In Focus: IMF Programs and Health Spending in Low-Income Countries Conclusions

International Monetary Fund IOs, global economic governance, and the IMF History and mandate – Technical support – Lending (‘lender of last resort’) – 1980s and late-2000s lending boom Influence and legacy – Fund programs (SAPs) – ‘Conditionality’

Countries Under IMF Arrangements: Sub-Saharan Africa,

Structural Adjustment Evolution of conditionality – Core competencies – Extension to non-core – Country ownership and poverty reduction Controversial conditions – Devaluation – Trade liberalisation – Fiscal discipline – Consumption taxes – Privatisation

Structural Adjustment Some general criticisms of Fund programs – Poor track record – ‘One size fits all’ – ‘Mission creep’ – Micro-management (e.g. size of bread loaf) – ‘Loose coupling’ of discourse and practice – Agents of neoliberalism and/or neoimperialism

IMF Programs and Health Spending Relationship between health policy and SAPs has been subject of intense controversy Recent studies criticizing the IMF: – Stuckler, King & Basu 2008 – Hoddie & Hartzell 2013 – Reeves et al 2013 – Plenty of anecdotal evidence, often polemical

IMF Programs and Health Spending Core claims by criticsIMF response (Gupta, 2010) 1. Health spending has decreased in countries with IMF-supported programs 1. Previous analyses of Fund-supported programs have already shown this claim to be untrue 2. Countries are forced to decrease health spending to meet rigid fiscal deficit conditions 2. IMF-supported programs have been very flexible by accommodating larger fiscal deficits and continuing to protect priority social expenditures 3. Conditions on wage ceilings imposed in program countries prevent desirable increases in health spending 3. There is no conditionality that limits health spending in Fund-supported programs 4. Increased aid intended for the health sector has been diverted to repay domestic debt or increase reserves 4. When faced with volatile sources of finance, governments often attempt to maintain a stable flow of social expenditures by smoothing the use of available financing.

IMF Programs and Health Spending in Low-Income Countries But… – Clements, Gupta & Nozaki, 2013 – According to the study, IMF-supported programmes have a positive and significant effect on heath-spending in low-income countries. We set out to replicate and extend this study (Kentikelenis, Stubbs, & King, forthcoming)

IMF Programs and Health Spending in Low-Income Countries: Mechanisms Direct pathways – Conditions to protect social expenditures – Conditions to reshape the health sector – Resource effect Indirect pathways – Conditions on budget deficit – Conditions on public sector wage bill – Conditions on devaluation Differential effects in the short- and long-term

IMF Programs and Health Spending in Low-Income Countries: Research Design Quantitative analysis – Selection bias [Heckman method] – Short- and long-term effects [error correction model] – Control for confounding variables [controls, fixed-effects] 63 LICs for the period Dependent variables – Public health spending as a share of GDP – Public health spending as a share of discretionary government spending – Public health spending per capita Explanatory variable – Presence of an IMF program in a given year

IMF Programs and Health Spending in Low-Income Countries: Findings Entire sample (n=63) – No relationship between IMF programs and health spending Split into SSA (n=30) and non-SSA group (n=33) – Basis for the regional split is the exceptional circumstances of SSA and ‘special treatment’ by IMF – Non-SSA: Negative relationship (“IMF programs decrease health spending”) – SSA: Positive relationship (“IMF programs increase health spending”)

Changes in health spending as share of GDP when on IMF program

IMF Programs and Health Spending in Low-Income Countries: Discussion Interpreting the findings on SSA – Encouraging, but… – Health spending originally very low – Near-constant presence of Fund programs – Failure to meet internationally agreed goals Interpreting the findings on non-SSA – Coheres with standard arguments by IMF critics

Conclusions – Public health spending is not always and necessarily beneficial, but… – Health systems need both provisions of funds and a stable funding environment – Austerity measures and ill-conceived structural reforms have tangible social costs (e.g. A Greek Tragedy)

Recommended Reading Vreeland, J. (2007). The International Monetary Fund: Politics of Conditional Lending. London: Routledge. Stuckler, D. & Basu, S. (2014). The Body Economic: Why Austerity Kills. New York: Basic Books.

References Clements, B., Gupta, S., & Nozaki, M. (2013). What happens to social spending in IMF- supported programmes? Applied Economics, 48(28), 4022–4033. Gupta, S. (2010). Response of the International Monetary Fund to its critics. International Journal of Health Services, 40(2), 323–326. doi: /HS.40.2.l Hoddie, M., & Hartzell, C. (2013). Short-term pain, long-term gain? The effects of IMF economic reform programs on public health performance. Social Science Quarterly. doi: /ssqu Kentikelenis, A., Karanikolos, M., Reeves, A., McKee, M., & Stuckler, D. (2014). Greece’s health crisis: From austerity to denialism. Lancet, 383(9918), 748–753. Kentikelenis, A., Stubbs, T., & King, L. (Under Review). Structural adjustment and public spending on health: Evidence from IMF programs in low-income countries. Reeves, A., McKee, M., Basu, S., & Stuckler, D. (2013). The political economy of austerity and healthcare: Cross-national analysis of expenditure changes in 27 European nations Health Policy. doi: /j.healthpol Stuckler, D., King, L., & Basu, S. (2008). International Monetary Fund programs and tuberculosis outcomes in post-communist countries. PLoS Medicine, 5(7), 1079–1090. doi: /journal.pmed