Globalisation, Economic Policies and Crisis

Feride Aksu Tanık

İzmir, 11 July 2014

This lecture will try to give…

A general framework of

Crisis of Capitalism

Law of value

Relations of production and distribution

Determinants of health

The ways of how crisis effect health

Globalization and historical background of neoliberal policies

IMF and “structural adjustment packages”

WB and “Poverty Reduction Strategies”

WTO and “GATS, TRIPS agreements”

Homo sapiens Homo faber

Homo consumens

Is it a Financial Crisis or Production

Crisis?

• Let’s remember the “law of value”

• c + v + s = W

• c: capital

• v: variable capital - labor

• s: surplus

• W: value of the product

s v demand

Capitalist Production

Mechanization

Less need for labor

Unemployment

Inadequate consumer demand

technological level

wages

surplus value

Inadequate consumer demand

Rate of profit is higher in financial sector rather than the production sector

Kondratiev Wave

Waves of capitalism

• Expansion

• Stagnation and

• Recession

What are the Determinants of Life?

Relations of distribution

Property relations

Relations of

production

Relations of Production

• constitutes the economic structure of society

• the real foundation

• on which arises a legal and political superstructure

• to which correspond definite forms of social consciousness

Relations of Distribution of Income

and Products

• determined by property relations

• reproducing the relations of production,

• the mode of production of capital reproduces the relations of distribution corresponding to it

Superstructure

• Education

• Culture

• Law

• Health

What is Health?

Physical, mental, social wellbeing

The ability of

• collective production and equal distribution

of the needs

• protection of biological and mental integrity

of human beings

• socialization in an organized society

The Determinants of Health

• Main determinants

– Relation of production

– Relation of distribution

• Intermediate determinants

– Economical

– Political

– Social

– Environmental factors

The Crisis of Capitalism Effects Health

in 2 Ways

1. need for labor a. Unemployment

b. of wages

c. poverty

2. of public investment and spendings – Transfer of public

funds to capitalists

– of the coverage of social insurance

– of the coverage of health package

– of the prices of medicines

Intermediate determinants and the health

results in the structural crisis of capitalism

Unemployment

of wages

poverty

Food consumption

Hunger

Deprivation of the life conditions

of the coverage of social insurance

of the coverage of health package

Out of pocket payments

of the prices of medicines

Infant Mortality Rate

Low Birth Weight

Malnutrition

Depression

Suicide

Alcohol and cigarette consumption

Communicable diseases

Epidemics

Complications of chronicle diseases

‘Globalisation’

1. Global village – communications, travel and transport

– health concerns: communicable disease, tobacco, etc

2. Global economic integration – trading relationships

– money flows

– ownership and control

3. Global regime of economic governance – economic, political and military power

Globalisation as a regime of economic and political governance

• Bretton Woods Institutions – IMF, WB and WTO

• United Nations system – EcoSoc, UNCTAD and UNDP on the economic side

– WHO, UNAIDS, UNICEF on the health side

• ‘Public private partnerships’ in health – GFATM, GAVI

• Various conventions and agreements – WTO agreements

– declarations on economic, political, cultural and social rights

– Kyoto Agreement

– International Health Regulations

– Framework Convention on Tobacco Control

Bretton Woods Conference (1944)

• World Bank (1944)

• IMF (1947)

• General Agreement on Tarrifs and Trade

World Bank (1944)

• Liberalization of trade

• Deregulation of banking system

• Privatization of public enterprises

• Tax reform

• Privatization of agriculture

World Bank

• “The World Bank promotes – long-term economic development and – poverty reduction”

• “It provides technical and financial support to help countries reform particular sectors or implement specific projects.” For example, building schools and health centres, providing water and electricity, fighting disease, and protecting the environment.

The different divisions of the World bank

One group - Five agencies

• IBRD (The International Bank For Reconstruction and Development): provides loans and development assistance to middle-income countries

• IDA (International Development Agency): Interest free loans and grants to poorest countries

• IFC (International Finance Corporation): Financing private sector investments and technical assistance to governments and business

• MIGA (Multilateral Investment Guarantee Agency): Provides guarantees to foreign investors – also technical assistance to help developing countries promote investment

• ICSID (International Centre for the Settlement of Investment Disputes)

International Monetary Foundation (1947)

“Improving the international trade”

– Opening the borders to powerful monopols

– Giving up the principles of Social State

• Starting in early 1980s, IMF, WB and regional development banks required the application of Structural Adjustment Programs (SAPs) as loan conditions.

– SAP: program for reforming an entire sector or economic

structure of a country.

• During the 1980s, more than 70 developing countries apply SAPs designed by the IFIs on the pretext of reducing or avoiding indebtedness.

• During the 1990s, most of former centrally-planned economies apply SAPs recommended by IFIs, claimed to be necessary steps for building a market economy.

Structural Adjustment Programs (SAPs)

Conditions for getting new loans or for obtaining lower interest rates on existing loans

• Cutting social expenditures • Focusing economic output on direct export and resource

extraction • Devaluation of currencies, • Trade liberalization • Increasing the stability of investment with the opening of

domestic stock markets • Balancing budgets • Removing price controls and state subsidies • Privatization • Enhancing the rights of foreign investors vis-a-vis national

laws, • Improving governance and fighting corruption

Declared Philosophy

• Reduction of role of the state will lead to

countries attracting more private investment

into the economy.

• The liberalisation of trade and investment will

reduce prices, increase productivity and

stimulate economic growth.

• Reduction of labour costs will increase job

creation, and reduce unemployment and

poverty!

The Reality…

• The IFIs have not succeeded in preventing an increase of poverty and inequality.

• In general, there has been slower growth and more inequality after the introduction of SAPs in the 1980s.

• During the 1990s, the number of people living in extreme poverty has increased in all regions except Asia.

• In most developing/transition countries, real wages have fallen.

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Impact of structural adjustment on health

Widening of inequalities

Reduced purchasing power for the poor (increased prices, withdrawal of subsidies, freezing of wages)

Downsizing of public sector

User pays in health care

Joint initiatives

• The IMF and World Bank have jointly launched two major initiatives to help poor countries. In 1996, the IMF and the World Bank introduced the Heavily Indebted poor Countries (HIPC) initiative – “reduce the external debt burdens of the most heavily

indebted poor countries”.

• In 1999, the IMF and the World Bank initiated the Poverty

Reduction Strategy Paper (PRSP) approach – “a country-led strategy for linking national policies, donor

support, and the development outcomes needed to reduce poverty in low-income countries”.

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Poverty Reduction Strategy Papers

• Documents required by IMF and WB before a country can be considered for debt relief within the Heavily Indebted Poor Countries (HIPC) initiative

• PRSPs are also required before low-income countries can receive aid from most major donors and lenders

• SAPs reinvented

• Country governments required to devise their own SAPs

• IMF funding is still contingent on neo-liberal ‘reforms’ (the Washington Consensus)

Washington Concencus

• Fiscal policy discipline • Redirection of public spending from subsidies toward primary

education, primary health care and infrastructure investment • Tax reform • Interest rates • Competitive exchange rates • Trade liberalization • Foreign direct investment • Privatization of state enterprises • Deregulation of financial institutions • Legal security for property rights

‘Investing in Health’ (WB, 1993)

• Response to criticism of impact of SAPs on health

• Reconciling structural adjustment with health improvement? – health improvement despite

poverty

– proceeding with SAPs regardless

Health Packages based on Cost Effectiveness

1. Limited coverage: a health package can/should not

cover everything

2. Content should be prioritized: what should be covered?

Evaluation of Cost-Effectiveness → DALY / Burden of Disease

World Bank, 1993

Investing in Health 1993, National Burden of Disease & Cost efficiency Survey, 2004

According to World Bank

• 100 $ is cost effective

• 250-999 $ is middle level cost effective

601,05

1121,25

254,07

2003,93

87,36

3928,92

221,49 208,21

0

500

1000

1500

2000

2500

3000

3500

4000

temel hizmet paketleri

Public health

Child Health

Mother and Child Health

STD

Cancer

Diabetes and Hypertension

Oral health

Mental health

Cost less than 500 $

Detailed package

COLD and LRSI

Osteoarthritis

Most common 20 diseases

100 $

999 $

Packages

0

1000

2000

3000

4000

5000

6000

7000 6141

4054

1529

891 581 576 474 419 340

trachea, bronchus, lung

ovaria

colon, rectum

breast

melanoma

prostate

stomach

bladder

servix

National Burden of Disease & Cost efficiency Survey, 2004

$

Depression

Who should decide Where should the patient be treated?

135,13

2182,28

0

500

1000

1500

2000

2500

depression

primary care

hospital care

$

National Burden of Disease & Cost efficiency Survey, 2004

Cost efficiency Minimum health package

The needs of patients Clinical independence

World Trade Organization

• 1995, Geneva • International, Multilateral organization • Organizing the global trade • 30 agreements • 150 member states

Agreements particularly relevant to health •GATS •TRIPs

GATS General Agreement on Trade in Services

The treaty was created to extend the multilateral trading system to service sector

• Health care • Education Any services won’t be excluded

“public services available for economic benefit !”

The Principles of GATS

…”you don’t have to include all services to GATS. You can have exceptions. You can exclude some services which are strategic for you.”

…”Although you have included service areas to GATS, you can say that foreigner doctors, teachers etc. Can not work in my country.”

But… • The country which signed the agreement can not return from

the decision (stand still) • Every five years there must be a restructuring (built-in) • The exceptions based on the sector can take maximum ten

years!

GATS and Commercialization…

• Eventhough the services are given by the public sector – Should be sold with market prices

– Employment should be similar to private sector

• Flexible

• According to quality norms

• Performance based

• Insecure

Commercialization of public sector

TRIPS (Agreement on Trade-Related Aspects of Intellectual

Property Rights)

Products without trademark and patent will not have a share form world trade

What is Patent?

TRIPS • Provides to the producer right of monopoly of

producing and selling the vaccines and drugs for 20 years

• In addition prohibits the others from using, selling, importing the product

• This means millions of preventable diseases and deaths for underdeveloped countries

• 2005 – all the vaccines are covered by patent protection

Patent Coverage

Number of patents granted per year for each country

In the above image, the proportion of the world's patents granted per year is represented for each

nation by its size on the map. The number of patents granted by a nation per year may have no

relationship to the creativity of people living in that nation. Note that regions of the world where

many innovative people live are under-represented in patenting.

© Copyright 2006 SASI Group (University of Sheffield) and Mark

Newman (University of Michigan), www.worldmapper.org

Struggle for Access to Vaccines and Drugs

• HIV Pandemics in Africa and Latin America

• The struggle for the production of antiretrovirals – South Arfica

– Brazil

• Flexibility of TRIPS

DOHA Declaration (November 2001)

Agreement can and should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all.

Flexibilities of TRIPS is possible in following conditions

• If there is an epidemic of HIV/AIDS, tuberculosis, malaria

• If the national laws allow Flexibilities of TRIPS is possible till

2016

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Brazil

• Compulsory licences issued for generic equivalents of antiretrovirals

• Free care for all HIV+ people, AIDS-related deaths halved in four years, spread of the HIV reduced

• Savings of half a billion dollars by producing the generic equivalent of the patented drugs, saved $422 million in hospitalisation costs.

• Brazil taken to a WTO dispute panel by US over its patent legislation but not the issuing of compulsory licences

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South Africa

• 1996 South Africa passes a new law for the procurement of medicines; sourcing brand name drugs internationally through cheapest supplier

• 1998 39 drug makers sued South Africa arguing that the law contravened international trade agreements

• 2001 Medicins Sans Frontiers petition against the lawsuit collects 250,000 signatures

• 2001 companies withdraw their lawsuit and agreed to pay the government's legal costs

The Indian Pharmaceutical Industry • Huge manufacturing capacity, large

generic sector

• Exports to 150 developing countries

• Half of drugs used to treat AIDS in developing countries come from India – Cipla offered to sell (to MSF) a three-drug

cocktail for AIDS treatment at $US350 per year (compared with $10,000 to $12,000 a year in western markets)

• ‘The pharmacy of the developing world’ is covered by TRIPS

Transatlantic Trade & Investment Partnership (TTIP)

Between EU & USA ; to remove regulatory ‘barriers’ of our most prized social standards and environmental regulations such as

labour rights

food safety rules

regulations on the use of toxic chemicals

digital privacy laws

new banking safeguards introduced to prevent a repeat of the 2008 financial crisis

To create new markets by opening up public services and government procurement contracts to competition from transnational corporations, to introduce a further wave of privatization in health and education

Neoliberal Theory

Benefit of society is related to market mobility

All human activities should be in the domain of the market

Harvey, 2007

Neoliberal Reforms!

• All the regulations protecting the working class against the economic power of capital have been purged

Boratav, 2011

Another World is Possible!

• How to struggle against?