The Body Economic

PREFACE

Thank you for participating in this clinical trial. You might not recall signing up for it, but you were enrolled in December 2007, at the start of the Great Recession. This experiment was not governed by the rules of informed consent or medical safety. Your treatment was not administered by doctors or nurses. It was directed by politicians, economists, and ministers of finance.

During this study, you were assigned, along with billions of others around the world, to one of two major experimental treatments: austerity or stimulus. Austerity is medicine intended to reduce symptoms of debts and deficits, and to cure recessions. It cuts government spending on healthcare coverage, assistance to the unemployed, and housing support. At the start of the trial, its potential side-effects were not well understood.

When the austerity experiment began, your prognosis was grim and uncertain. The US housing market bubble burst in 2007, battering economies across the world. Some politicians, such as British Prime Minister David Cameron, decided to pursue austerity to reduce deficits. Elsewhere in Europe, the International Monetary Fund and the European Central Bank pressured governments in Greece, Spain, and Italy to experiment with austerity: cutting billions of dollars from social programs. If you received an experimental dose of austerity, you might have noticed some serious changes to your world.

Meanwhile, other politicians chose to invest in health and social safety net programs. If you were in the stimulus group—that is, if you are currently living in Sweden, Iceland, or Denmark—your community was massively affected by unemployment and the recession, but was largely spared from austerity. Instead, stimulus funds were used to bolster health and social safety nets during the recession. If you lived in a stimulus country, you may not have noticed many changes to your neighborhood, waiting lines at the hospital, food prices, or rates of homelessness.

This experiment was not the first pitting stimulus against austerity. Eighty years ago, one of the largest such tests took place in the United States. As a way out of the Great Depression, President Franklin Delano Roosevelt proposed a raft of programs known as the New Deal, and Congress adopted them. The New Deal created jobs and strengthened the social safety net. But while many state governments in the US adopted the New Deal programs, others refused to implement them. They experienced wildly different outcomes as a result. Public health improved in pro–New Deal states but not in anti–New Deal states. Two decades ago, austerity was also tested in post-Communist Russia, and in East Asia, with strikingly similar results.

These experiments provided critical insights about the central findings in this book: economic choices are not only matters of growth rates and deficits, but matters of life and death.

The Body Economic is about data, and the stories behind those data. Over the past decade, we’ve been concerned about how our health is affected by economic crises—including this Great Recession. Our interest is not just academic—it is personal.

Both of us have experienced financial vulnerability, and the health consequences that attend it. David dropped out of high school to follow his passion and play in a band. Music didn’t earn much money (and in retrospect, the band wasn’t that great), so he worked odd jobs waiting tables and doing maintenance work at an apartment complex to make ends meet. But when he was unexpectedly laid off, he couldn’t afford to pay rent. He variously lived in a tent, his car, and on friends’ sofas. When winter came, he started to get sick. Having suffered asthma since childhood, he caught bronchitis and then pneumonia—while out of work, he had no health insurance, money, or a place to go of his own. Eventually he was able to get back on his feet and go to college with the support of his family. There, he studied health economics and statistics, and learned that his situation was not unique: all across America, people were one paycheck away from becoming homeless and needing help, just as he had done.

From a young age, Sanjay’s life was affected by illness as well. His mother was sick for years from a lung infection called coccidiomycosis (the “Valley Fever” of the American Southwest). His father traveled across states to find work and make ends meet. The family moved in and out of hospitals; oxygen machines were delivered every week to the garage. He was good at math, though, and when he enrolled as an undergraduate at MIT, he discovered the mathematics of life and death—how statistics described the reasons behind who lived and who died.

We met in graduate school, studying public health and medicine because we wanted to help others. Since that time, we have studied how social and economic policies affect our health. That’s because ultimately these policies make more of an impact on who lives and who dies than any pill, surgery, or insurance plan. Good health doesn’t start in hospitals and clinics; it starts in our homes and our neighborhoods, in the food we eat, the air we breathe, and the safety of our streets. Indeed, a top predictor of your life expectancy is your zip code. That’s because much of what keeps us healthy has to do with our social environment.¹

All of the research on health and social policy presented in this book has been subjected to extensive peer review. Leading independent economists, epidemiologists, physicians, and statisticians have checked our data, our methods, and how we present these findings. We draw on the most recent research in the field, as well as many studies of our own. Our work has been published in respected scientific and medical journals, such as The Lancet, British Medical Journal, and PLoS Medicine, in addition to economics and social science journals.

Academic journals can be obscure, however, and so this book is an attempt to translate that data into plain English. Our goal is to provide people with the information they need to make informed, democratic choices about their economy and their health. We also want to inject hard evidence into the debate about austerity—a debate that has been shaped far more by ideology than facts.

The political debate about the Great Recession has been intense. Free marketeers and proponents of austerity tend to believe in paying off debt, regardless of the human price. Some of their opponents believe in maintaining a strong social safety net, even if that means less economic growth. Their longstanding disagreement about these basic principles has devolved into a cacophony of shrill voices and combative viewpoints. And both sides have grossly failed to see the false dichotomy in this debate.

Making smart policy choices can boost growth without human costs. Often those choices require up-front investment in public health programs. These programs, if administered correctly, can help spur growth in the short run, in addition to their long-term benefits. In other words, our data reveal that we can have good health, and tackle our debts too. But creating this balance requires funding the right government programs.

To identify the best drugs and treatments in medicine, doctors use large, randomized controlled trials. But it is difficult, if not impossible, to enroll entire societies into randomized controlled trials to test out the best social policies. So to understand how policies affect our health, we use rigorous statistical methods to study what are known as “natural experiments.” These experiments arise, for example, when policy makers face similar problems such as a large recession, but choose different courses of action. This divergence creates the potential for us, as researchers, to learn how political choices ultimately come to affect our health, for better and for worse.

Can we afford to pay for social protection programs—for healthcare, mental health programs, food stamps, and housing programs—when we face a large national debt? The results of our research demonstrate that stimulus spending on specific public health programs actually helps to reduce debt by sparking new economic growth. Every $1 invested in these programs returns $3 back in economic growth that can be used to pay off debt. By contrast, those countries participating in steep short-term cuts end up with long-term economic declines. When the government cuts its spending during a recession, it drastically reduces demand at a time when demand is already low. People spend less; businesses suffer, ultimately leading to more job losses and creating a vicious spiral of less and less demand and more and more unemployment. Ironically, austerity has the opposite of its intended effect. Far from decreasing debt, austerity increases it as the economy slows. And so debt gets worse in the long run when we don’t stimulate economic growth.

The economic consequences of austerity can already be seen in the early results of the US and UK experiments. As shown in Figure P.1, the US and UK both had a major economic collapse after the financial meltdown on Wall Street. Starting in 2009 when President Obama came into office, the US began to pursue a stimulus path. That choice marked a turning point in the US recession—since then, the economy has been recovering, and now its GDP is greater than it was before the crisis began. In contrast, after the Conservatives came to power in 2010, the British government started cutting billions of pounds in government spending. Its economy has been recovering at less than half the rate of the US, has yet to fully recover, and now shows signs of entering a dreaded “triple-dip recession.”

FIGURE P.1 US Economy Is Recovering After Stimulus but UK Still in Recession After Austerity²

This pattern—the benefits of stimulus, the harms of austerity—plays out in nearly a century of data on recessions and the economy, from countries all over the world.

Conventional wisdom holds that recessions are inevitably bad for human health. Thus, we ought to expect a rise in depression, suicide, alcoholism, infectious disease outbreaks, and many other health problems. But this is false. Recessions pose both threats and opportunities for public health, and sometimes can even improve health outcomes. Sweden had a massive economic crash in the early 1990s, larger than it experienced in the Great Recession, but saw no increase in suicides or alcohol-related deaths. Similarly, in this recession we have seen health improve in Norway, Canada, and even for some people in the US.⁴

FIGURE P.2. Social Welfare Spending Increases Life Expectancy at Birth, Year 2008³

What we’ve learned is that the real danger to public health is not recession per se, but austerity. When social safety nets are slashed, economic shocks like losing a job or a home can turn into a health crisis. As shown in Figure P.2, a strong determinant of our health is the strength of our social safety nets. When governments invest more in social welfare programs—housing support, unemployment programs, old- age pensions, and healthcare—health improves for reasons we’ll explain. And this is not merely a correlation, but a cause- and-effect relationship seen across the world.

That’s why Iceland—rocked by the worst bank crisis in history—didn’t experience rising deaths in the Great Recession. It chose to uphold its social welfare programs, and went even further to bolster them. By contrast, Greece, Europe’s guinea pig for austerity, was pressured to undertake draconian cuts—the largest seen in Europe since World War II. Its recession was smaller than Iceland’s at first, but now has worsened with austerity. The human costs have become dramatically clear: a 200 percent rise in HIV, a doubling in suicide, rising homicides, and a return of malaria—all as critical health programs were cut.

These dangers of austerity are as consistent as they are profound. In history, and decades of research, the price of austerity has been recorded in death statistics and body counts.

Too much of the conversation surrounding the Great Recession has focused on lost GDP, deficits, and debt reduction. Too little has focused on human health and well-being. In March 1968, Senator Robert Kennedy criticized this fetishization of economic growth:

Our gross national product now is over eight hundred billion dollars a year, but that gross national product—if we should judge the United States of America by that—that gross national product counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm, and it counts nuclear warheads, and armored cars for the police to fight the riots in our cities. It counts the television programs which glorify violence in order to sell toys to our children.

Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America except why we are proud that we are Americans.⁵

We take Robert Kennedy’s proposition seriously. In The Body Economic, we focus on the choices that governments make and the implications of those choices not only for our economies, but also for our bodies. We now have extensive data that reveal which measures kill, and which save lives. As citizens, we can call on our governments to make the right decisions—decisions that protect our health during hard times.

INTRODUCTION

Olivia remembers being on fire.

Eight years old, she was scared by the sound of dishes crashing onto the kitchen floor. Her parents were having another fight. She ran up the stairs to her bedroom and hid under a pillow. Exhausted from crying, she fell asleep.¹

She woke up with a splintering pain on the right side of her face. The room was black with smoke. Her bedsheet had erupted in flames. Screaming, she ran out of her room and straight into the arms of a firefighter who had raced up the stairs. He wrapped her tightly in a blanket. As she would later hear the nurses in the hospital whisper, her father had set the house on fire in a drunken rage.

It was the spring of 2009, during the ongoing Great Recession. Olivia’s father, a construction worker, had been laid off. Millions of Americans had joined the unemployment rolls, and some turned to drugs or, like Olivia’s dad, to alcohol.²

Olivia’s father ended up in jail. Olivia required extensive treatments for her burns and undoubtedly will need years of therapy to heal the mental scars from that horrible night.

But Olivia survived. Others were not so lucky.

Three years later and half a world away, on the morning of April 4, 2012, Dimitris Christoulas set off to the Greek Parliament building in the center of Athens. At age seventy-seven, he saw no other way out. Christoulas had been a pharmacist, retired in 1994, but now he was having trouble paying for his medications. Life had been good, but the new Greek government had slashed his pension, and life was now intolerable.³

That morning, Christoulas went to Syntagma Square, the city’s central plaza. He walked up the Parliament steps, put a gun to his head, and declared, “I am not committing suicide. They are killing me.” Then he pulled the trigger.

Later, a note found in his satchel was released.⁴ In it Christoulas equated the new government to the widely hated World War II government of Georgios Tsolakoglou that collaborated with the Nazis:

The Tsolakoglou government has annihilated all traces for my survival, which was based on a very dignified pension that I alone paid for 35 years with no help from the state. And since my advanced age does not allow me a way of dynamically reacting (although if a fellow Greek were to grab a Kalashnikov, I would be right behind him) I see no other solution than this dignified end to my life, so I don’t find myself fishing through garbage cans for my sustenance. I believe that young people with no future, will one day take up arms and hang the traitors of this country at Syntagma square, just like the Italians did to Mussolini in 1945.

“This was not suicide,” a protester later said. “He was murdered.” A mourner nailed a note to a tree near the spot where Christoulas died. “Enough is enough,” it read. “Who will be the next victim?”

Olivia and Christoulas may have been 5,000 miles apart, but their lives were woven together by the worst economic crisis since the Great Depression. As two public health researchers—one at Stanford in California and the other at Oxford, En gland—we became concerned that the Great Recession would take its toll on people’s bodies. We heard stories from our patients, friends, and neighbors who lost their health insurance but also experienced harms that went well beyond the medical clinic or the pharmacy, intruding upon the very fabric of their lives—their ability to afford healthy food to eat, avoid the high stress of losing a job, and keep a roof over their heads. We wondered what impact the Great Recession would have on the rates of heart disease, of suicide and depression, and even the spread of contagious diseases.

In search of answers, we have mined data from around the globe and from decades of prior recessions. We’ve found that public health can be profoundly affected by economic shocks. Some of our findings were expected. When people lose jobs, they are more likely to turn to drugs and alcohol or become suicidal. When they lose their homes, or are mired in debt, they often turn to junk food, for comfort or simply to save money.

Tragic as they are, the misfortunes of people like Olivia and Dimitris are unsurprising. More than 600 Greek citizens killed themselves in 2012. Before the Great Recession, Greece had the lowest suicide rate in Europe. Now that rate has doubled.⁵ And Greece isn’t alone. Suicides in the other European Union countries had been dropping consistently for over twenty years until the Great Recession.

But in our global research, we also encountered some surprises. Some communities, even entire nations, became healthier than ever as their economies were devastated. Iceland went through the worst bank crisis of all time, but the population’s health actually improved. Health in Sweden and Canada also improved. Norway reached its highest life expectancy ever. But this had nothing to do with the cold climate. Japan, which had suffered a “lost decade” from the prolonged effects of recurrent recessions, now reports some of the best health statistics in the world.

Some economists looked at these data and concluded that recessions were “a lifestyle blessing in disguise,” the cause of these health gains. Thanks to losing income in the Great Recession, they argued, people would get healthy: drink and smoke less, and walk rather than drive. They were finding that recessions correlated with a drop in death rates in many places. Looking grimly into the future, one economist predicted that an economic recovery will kill 60,000 people in the United States. Such odd and counter-intuitive pronouncements are contradicted by data from health departments around the world. During the Great Recession, life expectancy in the United States appeared to fall in some counties for the first time in at least four decades. In London, heart attacks rose by 2,000 amid the market turmoil. And suicide and alcohol death reports keep piling up on our desks.⁶

These data were a puzzle. How had some people become healthier during recessions, while others ended up like Olivia and Dimitris?

The answers could be found in the politics of the Great Recession. The 2012 US presidential election helped define a seemingly eternal debate between austerity and stimulus, services and revenue. Lo and behold, austerity lost. President Barack Obama campaigned on raising taxes on the wealthy and investing in social services, and he won. As the US climbs slowly out of recession, other countries should take note. Britain, under a Conservative Party government since 2010, has enacted an austerity regime that has, as of January 2013, shown signs of sending the country back into recession.

Over the past decade, we’ve looked through reams of data and reports in search of answers. Austerity or stimulus? Cuts or hikes in taxes to the rich? Cuts or hikes in services to the poor? We traveled from the coldest gulag in Siberia, to the red-light district of Bangkok, to the biggest intensive-care unit in the United States to find answers. The data we’ve gathered lead irrevocably to this conclusion: societies that prevented epidemics during recessions almost always had strong safety nets, strong social protection.

Disasters like Olivia’s inferno and Dimitris’s suicide do not always follow economic downturns. Rather, they are the consequences of a simple political choice—a choice to bail out bankers and cut safety nets for everyone else. Just a few key decisions, we’ve found, can stop a recession from turning into an epidemic. But our research shows that austerity involves the deadliest social policies. Recessions can hurt, but austerity kills.

The world’s biggest economic adviser, the International Monetary Fund (IMF), was once a leading proponent of austerity cuts to safety nets in recessions. In a recent report, the IMF reversed its policy. Now it finds that austerity actually slows down economies, worsens unemployment, and hampers investor confidence. In Europe, businesses are now clamoring against austerity, having seen their demand dry up. The safety net policies that we advocate for not only boost people’s health but help people return to work, maintain their incomes, and keep the economy going in bad times.⁷

Collectively, we have lost sight of what matters most. Debts, revenue, and growth are important. But when you ask people around the world what they value most, they don’t pull their wallets out of their pockets, or talk about the new additions to their homes, or the brands of their cars, or even the latest gadget in the Apple store. In survey after survey, people are consistent about what they care about. Above all, they say they value their health and that of their families.

Suppose we reframe the debate to focus on “body economics”: the health effects of our economic policies. Since our economic choices have a huge impact on health, they ought to pass the same rigorous tests that we apply to other things that affect our health, like pharmaceuticals. If economic policies had to be proven “safe” and “effective,” just like any drug being approved for our patients, we might have an opportunity to make our societies safer and healthier. Instead, at the moment, in those countries where austerity is ascendant, we’re undergoing a massive and untested experiment on human health, and left to count the dead.

The price of austerity is calculated in human lives. And these lost lives won’t return when the stock market bounces back.

PART I

HISTORY

1

TEMPERING THE GREAT DEPRESSION

“I will never forgive them,” wrote thirteen-year-old Kieran McArdle to the Daily Record, a national newspaper based in Glasgow. “I won’t be able to come to terms with my dad’s death until I get justice for him.”¹

Kieran’s father, fifty-seven-year-old Brian, had worked as a security guard in Lanarkshire, near Glasgow. The day after Christmas 2011, Brian had a stroke, which left him paralyzed on his left side, blind in one eye, and unable to speak. He could no longer continue working to support his family, so he signed up for disability income from the British government.

That government, in the hands of Conservative Prime Minister David Cameron since the 2010 elections, would prove no friend to the McArdles. Cameron claimed that hundreds of thousands of Britons were cheating the government’s disability system. The Department for Work and Pensions begged to differ. It estimated that less than 1 percent of disability benefit funds went to people who were not genuinely disabled.²

Still, Cameron proceeded to cut billions of pounds from welfare benefits including support for the disabled. To try to meet Cameron’s targets, the Department for Work and Pensions hired Atos, a private French “systems integration” firm. Atos billed the government £400 million to carry out medical evaluations of people receiving disability benefits.³

Kieran’s father was scheduled for an appointment to complete Atos’s battery of “fitness for work” tests. He was nervous. Since his stroke, he had trouble walking, and was worried about how his motorized wheelchair would get up the stairs to his appointment, as he had learned that about a quarter of Atos’s disability evaluations took place in buildings that were not wheelchair accessible. “Even though my dad had another stroke just days before his assessment, he was determined to go,” said Kieran. “He tried his best to walk and talk because he was a very proud man.” ⁴

Brian did manage to reach Atos’s evaluation site, and after the evaluation, made his way home. A few weeks later, his family received a letter from the Department for Work and Pensions. The family’s Employment and Support Allowance benefits were being stopped. Atos had found Brian “fit for work.” The next day he collapsed and died.