Fighting Coronavirus: It’s Time to Invest in Universal Public Health

26 March 2020 by Isabel Ortiz , Thomas Stubbs

Credit: Mohamed Fofanah/IPS

NEW YORK and LONDON, Mar 23 2020 (IPS) - Austerity policies pushed by international financial institutions have weakened public health systems, despite current financial support packages, condemning many people to die.

As health systems of East Asia, Europe, and the Americas buckle under the strain of coronavirus, developing countries are expecting an even higher human toll. Decades of austerity promoted by international financial institutions (IFIs) such as the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
(IMF), the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, and regional development banks have weakened public health systems, impeding the ability of governments to respond to the pandemic.

The IMF pledged $1 trillion, and the World Bank a further $12bn, in immediate funds to assist countries to cushion the impact of Covid-19. Yet, these organisations are implicated in decades of brutal austerity and privatizations that damagedpublic health systems in the first place. And it is in regions with fragile health public systems where outbreaks spread the fastest, witnessed most acutely during the 2014 West African Ebola outbreak.

Governments across the globe have implemented spending cuts and the commercialization of health services since the 1980s, advised by IFIs during regular surveillance missions or as part of their lending programmes. Austerity policies are criticised for prioritising short-term fiscal objectives over longer-term social investments such as health.

Under IMF guidance, for example, governments reduced health budgets, cut or capped public sector wages, and limited the number of doctors, nurses, and other public health staff. In the name of efficiency, governments – often advised by “development” banks – decreased the number of hospital beds, closed public services, and underinvested in health research and medical equipment. This undermines the ability of health systems to cope with infectious disease outbreaks, leaving billions of people highly vulnerable during pandemics.

What is worse, governments were discouraged from raising alarm to the debilitating impact of scarce funding for public health. With the publication of “From Billions to Trillions: Transforming Development Finance Post-2015” and related documents, IFIs reassured governments of a simple solution to declining budgets: private sector delivery of public goods and services. This advice came despite multiple failures in public-private partnerships and privatizations over the last decades – for example, the US private health model is the world’s most expensive health system, but it has low effectiveness, leaving millions of Americans without health coverage.

From Lesotho to Sweden, public-private partnerships on health were costlier to citizens and resulted in poorer service delivery than public health systems.

So who benefits from these policies? IFIs have not prioritized public health issues, but fiscal or private sector objectives instead. Macroeconomic or business interests were often considered over the public good, and people’s welfare was an afterthought. This has already resulted in higher morbidityand millions of avoidable deaths, with many more yet to come.

A recent report shows how IMF-induced austerity cuts are negatively impacting about 75 percent of the world population– a total of 113 countries in 2020 – despite urgent health and developmental needs. Spending cuts apply to 72 developing countries and 41 high-income countries, many of which have already been suffering decades of adjustments. Another study shows how 46 countries prioritised debt service Debt service The sum of the interests and the amortization of the capital borrowed. over public health services at the beginning of 2020, when coronaviruswas spreading.

Despite contributing to the crisis, IFIs now aim to become part of the solution by making new funds available. While laudable, the World Bank’s $12bn financial package represents a smokescreen to the public relations disaster related to its flagship Pandemic Emergency Financing (PEF) bonds. PEF bonds were designed with markedly stringent pay-out criteria to reduce the risk of losses for private investors – who have so far made annual yields of up to 14 percent, funded by the aid budgets of Germany, Japan, and Australia. Ultimately the bonds have diverted aid from crucial investments in public health systems of developing countries.

At its core, the reckless actions of IFIs represent the absence of effective global governance for health. Decades of IFIsundermining public health systems highlight how desperately the world needs global leadership and a coordinated response.To that end, the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). has scheduled a virtual Summit over Covid-19. But will G20 leaders have the foresight to permanently abandon outdated austerity policies and urgently invest in universal public health systems?

Given the coronavirus emergency, even the IMF is advising governments to ramp up public health expenditures. This needs to be more than just a short-term measure, to then later return to a situation where millions are excluded from healthcare. The building blocks of global health security should be based on prevention and universal public health systems, especially in countries with underdeveloped healthcare.

The United Nations, in particular the World Health Organization (WHO), is more capable than IFIs to coordinate universal public healthcare systems, but the WHO currently lacks resources to move beyond monitoring and surveillance. The US Trump Administration recently cut contributions to the organisation, instead funnelling trillions of US dollars on restoring short-term confidence in the markets. European countries could have given meaningful aid in solidarity to East Asia and developing countries, where thousands are infected of Covid-19. But, from the outset of the crisis, they instead adopted inward-looking responses that often entrenched or intensified authoritarian and populist nationalism.

How many more people need to die? While we are now reaping the consequences of austerity policies imposed around the world, the coronavirus pandemic also offers an opportunity to redress public health gaps and do things differently. State intervention is necessary to address the magnitude of the Covid-19 pandemic, develop long-term public health, and realize the right to health of populations everywhere. It is time for world leaders to abandon myopic austerity policies and instead focus on building robust public health systems for all.

Source: IPS

Isabel Ortiz

is Director of the Global Social Justice Program at the Initiative for Policy Dialogue, Columbia University, and former director of the International Labour Organization (ILO) and UNICEF.

Other articles in English by Isabel Ortiz (6)

Thomas Stubbs

[es] es profesor titular de Relaciones Internacionales en Royal Holloway, de la Universidad de Londres, e investigador asociado en economía política en el Centro de Investigación Empresarial de la Universidad de Cambridge.
[en] Credit: Mohamed Fofanah/IPS




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