David Stuckler and Sanjay Basu’s new book The Body Economic: Why Austerity Kills is a thorough examination of the toll that recessions take on people’s health. They show, convincingly, that there are many, many channels through which health outcomes can deteriorate when the economy goes into a deep recession. They also show that the manner in which the government reacts to an economic downturn is a critical factor in determining health outcomes. Deterioration in health in a recession, though common, is far from inevitable.
When economists examine these types of questions, they are not able to conduct laboratory experiments to test their theories in the way that a chemist or physicist would do. Instead, economists must rely upon historical data and hope that “natural experiments” – historical episodes that have laboratory experiment like features – allow them to discriminate between different theories about the macroeconomy.
As David Stuckler and Sanjay Basu explain, the Great Recession provided us with an important natural experiment to examine how health outcomes in a recession vary with changes in government provided social services. Some countries, for example Italy and Greece, cut government spending on social services drastically. That is, they pursued what has come to be known as austerity. The idea was that cuts in spending would generate confidence in the country’s ability to pay its bills and an economic boom would follow. Other countries such as Iceland expanded spending, that is, they pursued Keynesian policies; and there were also countries such as the US that were essentially treading water. By examining differences in government policies, both in terms of the magnitudes and the composition, we can get information on how well the policies performed.
Stuckler and Basu present compelling evidence that austerity can have large negative effects on health, particularly among the most vulnerable citizens. The level of detail is quite impressive, they examined mounds and mounds of health data from around the world and the conclusion expressed in the title to their book is clear: austerity kills.
But what’s even more impressive is that they don’t just document the ways in which austerity is harmful to health, they also provide specific policies that can be used to offset these effects. For example, one of the biggest threats to health is homelessness. The homeless are far, far more likely to suffer from poor health since they don’t have insurance, a job, or the financial resources to obtain the care they need. The authors show, again convincingly, that countries and states that put more effort into providing public housing had far fewer health problems and deaths than countries that did little along these lines. They also show that access to publicly funded health care made a big difference, and that policies to reduce the number of foreclosures, a large source of homelessness, or provide employment can also help quite a bit.
These are just a few examples of many, many policies they identify that can improve health and save lives. Their conclusion – correct in my view – is that increased spending on health-related social services during recessions can save us money in the long-run. But even in countries like Greece where expanding social services is simply not possible, the research documented in the book provides very specific guidelines about how a country can cut spending yet minimize the negative health outcomes.
The Great Recession is not the only instance where nature has provided us with a natural experiment that can be used to compare health outcomes under austerity and Keynesian policies. As documented in considerable detail, the Great Depression also had both cross-state and cross-country variation in policy that can be used to assess what type of policy works best, and other events such as the Asian Financial crisis are similarly useful.
The clear picture that emerges is that austerity kills both people and economies, especially austerity that does not consider the policies and guidelines in this book. The right response to an economic downturn – one that gives us a faster, healthier recovery – is to provide people with jobs, housing, access to health care, and other social services they need to whether the storm.
[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]