Austerity kills

Literally!

For a while one has held the view that austerity, during a recession, kills the economy; it is a rather strange strategy to focus on restricting the fiscal deficit by collapsing the development budget all together and sucking out additional taxes from the markets when unemployment is on the rise and capital investment in on the decline.

However, never realized that austerity actually kills!

When I picked up the book "The Body Economics- Why Austerity Kills", written by Messer David Stuckler and Sanjay Basu (2013), the understanding even then was that the book was all about how austerity further kills the economy by deepening a recession; to say the book was enlightening is perhaps an understatement, "The dangers of austerity are consistent as they are profound. In history, and decades of research, the price of austerity has been recorded in death statistics and body counts".

The primary takeaway from the book is that invariably austerity negatively impacts public health spending, essentially the safety net for the poor man's health, and the consequences are obviously grave. For their book the authors researched the great depression, the Russian post communist era, the Asian Financial crisis, and the great recession, and their findings are consistent and horrific. In their own words, "The price of austerity is calculated in human lives. And the lost lives won't return when the stock market bounces back".

One has been sceptical about the IMF programs because of their focus towards free markets and free trade, but to say that the authors have a bone to pick with the IMF on the austerity part of the latter's structural reform programs will be an understatement; and perhaps rightly so. "In South Korea, the Fund became known as the "Infant Mortality Fund" because the infant mortality rate rose in association with the Fund's austerity program".

Scathing comment indeed, but this one takes the cake. "What's the difference between the IMF and a Vampire? One stops sucking your blood after you have died" Dr. Magnusson.

With all credit to the authors, I have decided to quote mostly from the book. Firstly, there is no point in reinventing the wheel, especially when it has already been invented so efficiently; and there is a common cause, disagreeing with IMF. Secondly, since we in this part of the world obsessively believe that foreign consultants are always right. One is reminded of the joke about a public sector advertisement which asked for a one armed foreign consultant, since it got extremely confusing when the consultant's recommendations began with, "On the one hand" and ended with "On the other hand".

"All the IMF did was make East Asia's recessions deeper, longer, and harder. Indeed, Thailand, which followed the IMF's prescriptions the most closely, has performed worse than Malaysia and South Korea, which followed more independent courses" , What I Learned at the World Economic Crisis By Joseph Stiglitz New Republic April 17, 2000.

"The first is that capital market liberalization - opening up developing countries' financial markets to surges in short-term "hot" money - is dangerous. It was not an accident that the only two major developing countries to be spared a crisis were India and China. Both had resisted capital market liberalization", 10 Years After the Asian Crisis, by Joseph Stiglitz, July 3, 2007.

And to add to this, high interest rates coupled with budget cuts will slow down the economy and when the economy slows down, the first to lose their jobs are the unskilled labour who are entirely depended on public healthcare which obviously takes a hit under an austerity drive.

And healthcare is not the only problem; during austerity suicides increase.

The authors find that that unemployment is a major risk factor for depression, anxiety, sleeplessness and self-harm and that people who are looking for work are about twice more likely to end their lives than those who have jobs.

The authors' three-pronged solution is- do no harm; help people return to work and invest in public health; easier said than done with the IMF breathing down your necks. Albeit, the authors sum it up terrifically, "When we tell our children about the Great Recession (for Pakistan replace with repeated recessions), they will judge us not by growth rates or by deficit reductions. They will judge us by how well we took care of our society's most vulnerable, and whether we chose to address our community's basic health needs; healthcare, housing and jobs".

In our case, most likely there isn't enough data to establish how austerity has impacted health care and whether suicide rate went up during IMF-led austerity programs; but then we are not from Mars either.

Perhaps it would be wise to focus on healthcare, housing and jobs rather than interest rates, fiscal deficits and tax collection if we don't want our children to criticise us for being callous towards society's most vulnerable and to call us dumb for not knowing that austerity kills!

(The writer is a chartered accountant based in Islamabad. Email: [email protected]. The views expressed in this article are personal. The views are not necessarily those of the newspaper)