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Why Austerity Kills

by Joachim Kasten Monday, Nov. 24, 2014 at 2:47 PM
marc1seed@yahoo.com

The poorest and weakest persons must pay the price for misguided political decisions. Political-economic decisions decide over the life and death of persons. The New Deal stands for an effective debt reduction. Germany has been an active driver of austerity.

WHY AUSTERITY KILLS



By Joachim Kasten



[This book review published on November 6, 2014 is translated from the German on the Internet, http://www.gegenblende.de.]



Eight-year old American Olivia was rescued from the flames of her house. She survived with serious mental and physical injuries. Her father, an unemployed construction worker, set his own house on fire out of despair in an alcoholic frenzy. He landed in jail. His was one of many family tragedies in 2009 – in the fire storm of the financial crisis.



Three years later in April 2012, the retired pharmacist Dimitris Christoulas committed suicide. He shot himself before the Greek parliament building in Athens. His pension was dramatically cut. Dimitris’ health was gravely impaired and he could not pay for his medicine. He was a casualty of the economic conditions.



Olivia and Dimitris are selected fates with which the American authors David Stuckler and Sanjay Basu introduce their book “Why Austerity Kills.” Its central thesis is that political-economic decisions decide over the life and death of people. These are the misguided decisions of politicians and managers sacrificing people in the US, Russia, Thailand and Greece.



NEW DEAL IN FOCUS



In the introductory chapter, David Stuckler and Sanjay Basu recall the history of capitalist crises produced better solutions. For Americans, the New Deal after the worldwide economic crisis of the 1930s was characteristic. On “Black Thursday” in October 1929, a gigantic speculative bubble burst in the stock market crash. In the United States, the dramatic downswing led to thirteen million unemployed and a society where three of five citizens were poor according to the data of Stuckler and Basu.



“Tax the rich and feed the poor” was a typical slogan during the many hunger demonstrations of that time. Fifteen casualties and fifty wounded were a brutal culminating point, according to the authors, when the security forces of the Ford auto company opened fire on protesting workers. Parallel to the battle on the streets, a debate raged between politicians and economists around savings (austerity). In this argumentative conflict, the central question was how the deep economic crisis should be properly countered – more cuts or social programs for millions of people without work and housing. The answer is well-known. The democrat Franklin D. Roosevelt won the 1933 presidential election with the promise of using state financial resources to alleviate the social misery and simultaneously stimulate an economic upswing. That his New Deal was also the result of fears that the “Socialist Party” would split votes for the left and thus prepare the ground for the “2nd term” of the republican Herbert Hoover is less well-known.



The authors Stuckler and Basu praised President Roosevelt’s “New Deal” as the greatest project for the public health system in American history. The improvements were tremendous. In most states, the investments led to more and better hospitals and better trained medical personnel. Child mortality and suicides declined. For the authors, the New Deal stands for an effective debt reduction and not only a lower mortality and growing average incomes. In the view of American academics, this historical example shows the worst catastrophe may not be an excuse for a deterioration of social standards.



SHOCK THERAPY FOR RUSSIA



“The Post Communist Mortality Crises” may be the most dramatic chapter of the book. The fatal risks of austerity policy in Russia after the collapse of the Soviet Union are described as a “natural experiment” on living persons. Gigantic social dislocations occurred in Russia at the beginning of the 1990s with the radical system change from a socialist-bureaucratic plan- to a capitalist market economy. “No other industrialized country was exposed to a comparable catastrophe since the worldwide economic crisis,” Stuckler and Basu write.



According to official sources, 25 percent of the population lived in poverty at that time. Independent sources even put the number above 40 percent. “The worst thing about communism is post-communism” was a frequent aphorism. Russia recorded a huge increase in its death rate with a simultaneous lowering of the average life expectancy. The causes of these developments were an increase of alcohol poisonings, murders, suicides and a higher number of heart attacks among younger men according to the authors.



People were abandoned to their fate, particularly outside the big cities. Hope for a better future died without job perspectives with a radically shriveled health system. For Stuckler and Basu, the politicians that backed a disastrous economic theory were responsible for all these malformations. In the final phase of the Soviet Union when Michael Gorbatchev pushed his Glasnost- and Perestroika reforms, the land experienced a dramatic tug-of-war between so-called gradualists and advocates of a radical reform.



A “shock therapy” supported by Russian president Boris Yeltzin had priority instead of a gradual transition to capitalism. The program promoted by him was implemented in 1994 and contained a rush liberalization and a radical privatization of public enterprises. The Russian Vice-president at that time Alexander Ruzkoi condemned the decision as “economic genocide.”



This transformation process also led to a deeply unequal wealth distribution. Decision-makers of the former communist style expropriated Russia’s tremendous wealth. Even today they rule the land as oligarchs with absolute power. The market-fundamentalist economist and Nobel Prize winner Milton Friedman was godfather of the shock therapy, according to Stuckler and Basu. The guiding thesis at that time was “short-term pain for long-term gain.” Stuckler and Basu speak of ten million casualties in Russia. According to their calculation, the death rate in Russia is higher today than in 1991. The profiteers of this shock therapy are the one percent oligarchs who appropriated the tremendous wealth of the country.



THE FATAL PRESCRIPTIONS OF THE IMF



Spiegel once wrote the word “austerity policy” in France sounds like an instrument of torture. The cuts proposed by the socialist president Francois Hollande are only a mild social reform compared to what Stuckler and Basu report about crisis countries in Southeast Asia or Greece.



Toward the end of the 1990s, the Asian tiger states fell sick with a grave economic recession. The International Monetary Fund offered financial assistance to help stricken countries like Thailand and South Korea. The IMF financial injections were coupled to massive cuts above all in the public health sector. As only one dramatic consequences of this, the authors report an increase in pneumonias, TBC and HIV with over 50,000 casualties. In Malaysia, the government ignored the conditions of the IMF. Malaysia had a comparatively quicker economic recovery and protected the population of the country from considerable health risks, Stuckler and Basu report.



The IMF seems to have hardly learned any lessons from the Asian debacle. The modern staging of the Greek tragedy is a certain sign of that. The authors reveal impressive evidence how HIV-programs were cancelled through the pressure of the Monetary Fund and the World Bank. In Greece, the austerity policy aggravated the downward social spiral through a rise of unemployment to 40 percent and homelessness to 25 percent in 2009 and 2011.



In all the examples, the poorest and weak persons must always pay the price for misguided political decisions. Part of the responsibility for the economic causes of the crises is homemade, Stuckler and Basu recognize.



The authors blame the German government for being an active driver of the Greek austerity policy. According to their interpretation, the measures “give a lesson” to the rest of Europe as the German chancellor Angela Merkel declared. The idea of rescue was not the only motive. The well-known American economist James Galbraith even spoke of a “collective punishment” with regard to Greece’s treatment.



BETTER MODELS



With nearly heroic tones, the authors praised the Icelandic way of referendum that rejected the bitter medicine of the IMF. This rejection proved right in the ex-post-reflection since their health system was untouched and a gradual economic recovery occurred. Sweden and Finland are also praised. The two Northern countries decided against cuts in their health systems during the recession phases in the 1990s. Instead they invested in an active labor market policy. On the other hand, the conservative premier David Cameron in Great Britain actively defends the austerity course. Stuckler and Basu see this as ideological transfiguration.

- David Stuckler, Sanjay Basu: The Body Economic – Why Austerity Kills; Harper Collins 2013, 215 pages

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