Globalisation and Health

Introduction

During the 1970s the long boom of postwar capitalism was slowing down. Growth rates which had been as high as 5-7% were coming down to 1-3%. Why was the global economy slowing down at this time? By some accounts the 'productivity overhang' was starting to balance out the 'wealth through productivity' dynamic. In 1973 the Organisation of Petroleum Exporting Countries (OPEC) increased the prices of oil. It is conventional wisdom that their decision was based on greed and they are blamed for the inflation that was experienced world wide in the late 1970s. However, it has also been argued that they were responding to an emerging inflation associated with the long range economic downturn.

The decision by OPEC to increase oil prices diverted a new stream of revenue to the oil producers and they lent it to the banks, particularly US and European banks. The banks embarked on a vigorous campaign of lending. In many situations they were lending at (what were effectively) negative interest rates because the interest rates were lower than inflation. Many commentators regard the lending practices of the banks at this time as irresponsible; disregarding the capacity of borrowers to repay if circumstances changed. Many developing country governments borrowed funds for development at this time or guaranteed the borrowings of local companies.

Meanwhile the economic policy makers in the North were struggling with stagflation, debating the merits of Keynesian versus monetarism. Led by President Reagan in the early 1980s they opted for controlling inflation through sharp rises in official interest rates and restarting economic growth by weakening the bargaining power of labour through unemployment and union busting. The sharp rises in interest rates in the early 1980s triggered the 'debt trap'.

Developing country debts which were manageable at low interest rates became impossible burdens (odious debts). Not only did the debt burden suddenly become much heavier but the rise in interest rates exacerbated the economic slow down. Indebted developing countries sought first of all to roll over their debts with the commercial banks but when the banks refused they were forced to go to the International Monetary Fund (IMF). The IMF had been established at Bretton Woods in 1944 to assist trading countries to manage short term currency imbalances associated with surges and lags in trade. During the 1970s and 1980s in particular it reinvented itself as a lender of last resort and global financial enforcer for countries in debt.

The IMF imposed stringent conditions on its loans to indebted developing countries, directed essentially to mobilising resources to pay the debt (or at least service the debt). These 'structural adjustment packages' typically included cutting expenditure on health, education, food subsidies, etc; reorienting agriculture to export production, reducing tariffs to reduce prices, devaluing the currency to reduce the prices of exports. These kinds of policies often had devastating effects on living standards and health systems.

During the late 1980s there was growing opposition to the brutality of the IMF's SAPs and the IMF was joined by the World Bank which claimed to be able to design structural adjustment packages which would increase debt repayment and protect the welfare of the poor. SAPs were replaced by Poverty Reduction Strategy Papers (PRSPs) in the late 1990s but nevertheless in many countries the cost of debt servicing (many times the original value of the loans) has perpetuated poverty and underdevelopment.

The debt crisis needs to be understood in relation to deeper dynamics of the global economy including the two dynamics referred to above as: (i) growth and wealth through productivity; and (ii) the structural crisis of overproduction. These are sometimes referred to as two regimes: Fordism and Post-Fordism. In this topic we will explore the dynamics of the global economy in the 60 years since the Second World War and trace out the interplay of the Fordist and Postfordist dynamics. We will look in particular at the compensatory mechanisms implemented by corporations and by governments to manage the crisis of overproduction and the ways in which these compensatory mechanisms shape the health chances of billions of people.

Learning objectives

Participants will:

• gain a clear view of the different usages of the term 'globalisation' and the different dimensions to which they point, ranging from the global village, to the stocks and flows of the global economy, to the power relations (ideologies, institutions and political engagements) which maintain the patterns of economic relations;
• develop their understanding of the dynamics of the global economy, including the sources of economic growth, the conditions for economic development, and the interrelationships between the shifting loci of production and the global flow of inputs, capital, technology, goods and services and profit;
• develop their understanding of the evolution of the global economy over the last 50 years and the significance of some of the major policy interventions which have shaped the direction of the global economy during that time;
• have a clear view of the arguments regarding the structured unfairness of the global economy (including the difference between remediable unfairness and natural order of things and also how such unfairness is reproduced);
• have a clear view of how their own country fits into this regime of globalisation, economically and politically;
• have a clear view of the different interrelationships between population health and globalisation; including: the links between economic growth and health development, health improvement as an input to productivity, but particularly the ways in which policies to maintain the structured unfairness of the regime of globalisation affect health (structural adjustment, unfair trade, trade liberalisation pressures, etc).

Presentations

Neoliberal globalisation (Amit Sen Gupta, Bangalore, Sept 2009)

Globalisation and Health* (David Legge, Bangalore, Sept 2009)

Trade and Health (EN) (David Legge, Porto Alegre, Sept 2008)

Trade and Health: a brief economic history (ESP) (David Legge, Cuenca, July 2005)

The Global Economy* (David Legge, Porto Alegre, September 2008)

*These presentations have notes but they will only display after download.

Readings

• Global Health Watch 3 (2011): A1. 'Economic crisis and systemic failure: why we need to rethink the global economy'
• Global Health Watch 2 (2008): A. 'An alternative paradigm for development'
• Report of Globalisation Knowledge Network of WHO Commission on SDH
• Economic Governance for Health
• Jubilee Debt Campaign (UK)
• Global Issues on Third World Debt
• Third World Network and the Campaign for Debt Cancellation
• The global economy and health (David Legge, 2013)

Discussion questions

What were the origins of the Global Financial Crisis?  How did it develop?  How did the GFC affect livelihoods and living standards in the developing countries? 

How did the GFC move from the subprime mortgage crisis in the US to the sovereign debt crisis in Europe?

Discuss the role of debt in coping with the crisis of overproduction. 

Assignment topics

The Knowledge Network report on Globalisation states that since the mid 1990s there has been a net flow of resources from the global South to the countries of the North.  How can this be?

Return to Political Economy of Health page

Acknowledgement 

This topic developed by: David Legge