Debt and Health

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Information about Debt and Health

Published on April 13, 2008

Author: Ming


Debt and Health:  Debt and Health The Debt Crisis, Structural Adjustment & Global Health Impacts Outline:  Outline History of Debt Crisis Structural Adjustment and the IMF Health Impacts Hurricane Mitch: A Nicaraguan case Study 1944: Bretton Woods:  1944: Bretton Woods Post WWII: US and Europe - Pre-war isolationism and depression - Post war economic instability and stagnancy US and UK most powerful leaders meet to create “A New Set of Rules for Global economy” “ A golden Age of Capitalism” Robbins (2004) Slide4:  Keynesian policy aimed to: Stimulate the global economy - Promote international trade Address growing worker discontent By: Reconstruction and development Government regulation of markets: An Interventionist State Welfare system for workforce Pegged Exchange Rates Fix $35 to 1 oz Gold Creation of GATT, World Bank…and the IMF Stage 1: The break down of the $-Gold system:  Stage 1: The break down of the $-Gold system 1973 Nixon abandons the $-Gold system for generalized system of floating exchange rates Why? A Growing US deficit ($3.5 billion) Declining competitiveness in international manufacturing markets New social justice political movements driving up wage demands and … - Spiraling cost of Cold War and Vietnam Nixon does not want to raise taxes to fund an unpopular conflict… :  - Spiraling cost of Cold War and Vietnam Nixon does not want to raise taxes to fund an unpopular conflict… The mint prints $$$’s -- no longer regulated by gold standard More $’s in circulation value of $ falls Cost of US exports falls Cost of foreign imports to US rises Global economy now structured around the dollar Slide7:  Reckless Inflationary Action!! Everyday prices and wages could not rise with inflation Gold becomes just like any other commodity - value determined by market Challenging this policy risks destabilizing institutional system of global economy and Cold War security system Other countries quickly followed suit and float currencies Stage 2: The Oil Crisis 1973-74:  Stage 2: The Oil Crisis 1973-74 OPEC: The Organization of the Petroleum Exporting Countries peg oil prices to $ so affected by this devaluation They form a cartel to: - regulate and restrict production of oil - create set price of oil Oil prices rise 3-4 times!! Related price hikes throughout economy Slide9:  Huge profits created as “petrodollars” Invested in EU Banks as “Eurodollars” Some used to purchase US debt in form of bonds US IOU’s flooding market and interest rates falling = lots of $$$$$$’s in banking system… Stage 3: Loans, Loans, loans:  Stage 3: Loans, Loans, loans “Peripheral”/”Developing” countries encouraged to borrow Why? - Interest rates are low (so many $$$’s to lend) - Greater devaluation of “soft” currencies with global inflation so need $$’s to buy foreign goods - oil prices so need $$’s to buy oil - Ideological pressure from US to promote capitalism and contain communism through economic stability and economic growth (and use of Western backed dictators). Allows US to print dollars to pay for it’s oil. - Legacy of mono-export commodity = economies vulnerable to global recession and declining export commodity values eg coffee and tin Slide11:  BUT: Some $$$’s misused or lost to corrupt (and often Western backed) leaders Irresponsibly lent by major banks Investment in vulnerable mono-crop commodities like coffee and large wasteful “development” projects Stage 4: Economic restructuring in the US:  Stage 4: Economic restructuring in the US Late 1970’s Carter administration tightens US monetary policy ‘Volker Shock’ ends inflationary and devaluation policies, and tightens credit Value of $ stabilized Interest rates increased Impact globally… Slide13:  -Rising global interest rates -Rising value of $ -Continuing devaluation of “soft” currencies -Lowering values of primary commodities Money owed by countries like Nicaragua dramatically increases Stage 5: Default:  Stage 5: Default 1982 Mexico defaults on debt Why? - Payment in hard stable currency - Low export values - Escalating compound interest rates Emergence of the Debt Crisis Many countries follow… …Threat to international banking system The Debt Trap:  The Debt Trap Many nations have already paid back their original debt but compound interest made repayment impossible eg Nigeria borrowed $5 billion, paid $16 billion to date and still owes $32 billion! Africa pays $10 billion /yr in debt – 4 x budget for health and education! "Debt is tearing down schools, clinics and hospitals and the effects are no less devastating than war." Dr. Adebayo Adedeji from the African Center for Development Strategy 1983-1989 $165 trillion more from periphery to core than received Emerging Role of The IMF:  Emerging Role of The IMF Private banks will no longer lend money Enter: The IMF and WB with new short term refinancing loans IMF: Neo-liberal institution - Belief in free-markets, export-led growth, minimal government regulation… So, loans come with conditionalities known as Structural Adjustment Policies (SAP’s) = Macro-economic packages which developing countries like Nicaragua must comply with before they can receive resources and loans and include IMF argue that through these policies countries will progress towards western model of efficiency, modernity and development through Privatization, Liberalization and Economic stabilization Structural Adjustment Policies :  Structural Adjustment Policies Increase Exports - Currency devaluation - Relax barriers to foreign direct investment - Deregulating of financial markets - Reduce/ freeze wages Privatize public sector - “Free Market Rules” - Liberalization of interest rates - Liberalize prices on everyday goods and services  - End to targeted subsidies for small business and agriculture Aim to lower inflation and stimulate growth in the economy Slide18:  Substantial cuts in public spending Large-scale public sector lay-offs Reduce social expenditures including health and education Impacts of Structural Adjustment -World Bank report 2000:  Impacts of Structural Adjustment -World Bank report 2000 In 40% countries per capita income failed to grow or shrank In 25% countries share of population living in absolute poverty increased In 23% countries life expectancy declined Income gap rose dramatically Nicaragua:  Nicaragua Debt and Structural Adjustment 1979: The Revolutionary Sandinista government inherits a war-torn country with an an estimated $1.6 billion debt from the corrupt Somoza dictatorship 50, 000 Nicaraguans killed 120, 000 fled to neighboring countries 600, 000 homeless 70% of population, no access to healthcare Restructuring of Health:  Restructuring of Health Government attempts to reconstruct the decimated economy and address the huge social and economic inequalities, providing subsidies for basic foodstuffs and healthcare Primary health care capacity from less than 200 to over 800 staffed units expanding healthcare access to 70% of population IMR reduced from 80/1000 Pre revolution to 50/1000 at the end of the 1980’s At War with the Contras:  At War with the Contras US under Reagan imposes embargo and funds Contras in a covert war against the new government The costs of the war, amplified by natural disasters and policy blunders, prompt the government to acquire new loans - mainly from sympathetic socialist countries …The fighting continues Structural Adjustment:  Structural Adjustment In 1990, The Sandinista government is ousted and Violetta Chamorro takes office Nicaragua is now the most indebted economy in the world (Esquivel et al, 2001) with and external debt of more than 6 times its GNP and more than 5 times its total exports (Gibson, 1996) Chamorro takes on a new IMF approved loan on condition that she will implement major neo-liberal structural adjustment policies including; - Privatization - Fiscal austerity (i.e. cut government spending) - Tight monetary policies - Reversal of land reforms The Impacts :  The Impacts By 1993: > half of Nicaraguans lived below the poverty line 25% living in ‘extreme’ poverty (World Bank, 2000) User fees introduced for education -Enrolment for primary school children dropped by 25% with the introduction of registration fees and stipends (Curtis, 1998) User fees introduced for health care - 1992-1996: Real health spending declines by over 12% - Decline in investment in preventative care including diagnostic services - Incidence of malaria rises 1995-1997 = 3 times rate of 1980-1990 (Birn et al, 2000) Hurricane Mitch:  Hurricane Mitch October 1998, Hurricane Mitch, the 4th most powerful Atlantic hurricane of the 20th century, sweeps through Nicaragua and Honduras. 3,332 Nicaraguans are reported killed or missing. 1 million Nicaraguans (22% of population) reported directly harmed $1.5 billion of damage Reactions:  Reactions ‘I suppose I should be grateful to be alive. After all, so many died during the hurricane. But I can’t help wondering how many lives could have been spared if Nicaragua wasn’t so poor, and if the government had not delayed in taking action’ Rosario, Hurricane Survivor ‘..while multilateral aid might alleviate some of the immediate impact of the natural disaster for victims, it is generally not aimed at minimizing the adverse impact of future natural disasters (e.g. by installing early detection warning systems; building stable housing and buildings; relocating victims to safer land)’ Metoyer (2001: 402) Health Impacts of Hurricane Mitch: A ‘Political Ecology’ Framework:  Health Impacts of Hurricane Mitch: A ‘Political Ecology’ Framework Health Experience ‘Physical Environment’ ‘Social Environment’ Political Cultural Economic Topology Vegetation Climate

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