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The Survival of "Global Health" - Part Three: Why the World is so Wealthy, But Your Life Feels Otherwise: Significance for Global Health

Posted on by Laurie Garrett

The world order and macroeconomics have changed radically since the U.S. financial collapse of September 2008, and the impact on human health has been profound. This is not a temporary, or passing fancy: This is a fundamental structural alteration.

In its strategic framework submitted to the World Health Assembly this week the Director-General’s office notes that,  “instead of shared prosperity, globalization has been accompanied by widening social inequalities and rapid depletion of natural resources…Globalization has been superimposed upon pre‐existing problems and inequities; current policies and institutions have failed to ensure a balance between economic, social and environmental concerns; and, as a result, the pursuit of economic growth has been too often seen as an end in itself.

“As the decade progressed,” the DG’s office continues, “the world witnessed the most severe financial and economic crisis since the 1930s. The full consequences of this disaster have yet to play out. Nevertheless, it is already apparent that the crisis has accelerated the advent of a new order in which growth is a feature of several emerging and developing economies, and in which many developed countries struggle to maintain a fragile recovery.”The chief winners in this global reshuffling of the economic decks are the roughly 10 million wealthiest individuals and a rarified list of sovereign wealth funds, banks, and top corporations. Far from reflecting a Frederick Engels delineation of class structure, the shift has come primarily at the expense of formerly prosperous middle classes, even as the desperately poor in other parts of the world have gained in stature. It is a complex picture, and its impact of “Global Health” is complicated.

According to The Wealth Report 2012 prepared by Knight Frank and Citi Bank there has been since the crash of 2008 a, “relentless growth of ‘plutonomy’ economics, a phenomenon that sees the wealth of the richest 1% growing far quicker than that of the general population.” The report documents the increase in individuals labeled “centa-millionaires,” whose personal wealth can be calculated in the hundreds-of-millions. In 2011 they collectively possessed $39.9 trillion of an estimated total global wealth of $231 trillion, and their ranks are forecast to increase by 37% by 2016, chiefly swelling in China, India, Russia, Singapore, Hong Kong and Brazil. By 2050, Citi predicts, the world will have been turned upside down with all money, and the power that goes with it, shifted. India will rank firstwith a GDP of some $86 trillion; China will be second with $80 trillion; the United States a distant third at $39 trillion followed by - in order -  Indonesia, Brazil, Nigeria, Russia, Mexico, Japan and Egypt. Missing entirely from the projected top tier is Europe.

Overall the world is witnessing a widening wealth gap in most countries, with assets concentrating in an oligarch top 1%, or even 0.1% of the population. Middle classes in Western societies are shrinking both in size and comparative personal wealth.  In contrast, the middle classes are swelling in China, India, Indonesia, and much Southeast Asia, as the respective economies grow. However, the collective wealth of the class is insignificant compared to the amount of wealth within the top 1% of these countries. The middle classes are running to catch up, but the goal posts of the rich keep moving.  As The Economist charted this last year, overall the world is witnessing a widening wealth gap in most countries, with assets concentrating in an oligarch top 1%, or even 0.1% of the population.

Middle classes in Western societies are shrinking both in size and comparative personal wealth.  In contrast, the middle classes are swelling in China, India, Indonesia and much Southeast Asia, as the respective economies grow, but the collective wealth of the class is insignificant compared to the amount of wealth within the top 1% of these countries. The middle classes are running to catch up, but the goal posts of the rich keep moving.

My colleagues in the CFR Geoeconomics Center have shown that the expansion of global wealth is now divorced from the usual mechanisms that trickle money down to the middle classes in North America, Europe – even in some BRICS countries. Corporate profits are no longer in any way linked to dividends paid out to stockholders, which has profound impact on retirement programs and savings schemes for unionized labor, civil servants and middle class individuals. Even as larger numbers of American workers, for example, are dependent on stocks for their retirement income, fewer companies link stocks to dividends, or even tie the value of their stocks to company profits and real value.

Also unlinked to corporate profits are the salaries and benefits of employees. Since the 2008 finanacial disaster corporate profits have, on average, soared. But so has unemployment. Average salary levels in the OECD countries have either stagnated or fallen; salaries in the formerly “cheap labor” economies, such as China, have risen (but remain far below their counterparts in Europe and North America).

As more of world wealth concentrates in an ever-smaller global oligarchy, a macroeconomic liquidity trap sets in. Trillions of dollars are no longer generating jobs, buying goods, supporting government services or available for the global good, such as HIV, TB or maternal health programs. A recent McKinsey Company estimate reckons as much as $32 trillion is currently hidden in tax havens, representing the personal wealth of just ten million individuals.  If the estimate is accurate, 13 percent of world wealth is out of circulation, creating no jobs, products or tangible assets. Another $3.5 to $6 trillion is locked in sovereign wealth funds, principally controlled by extraction economy governments of the Middle East, Russia, and oil-soaked African states.

Combined, the impact of tax havens and wealth funds is removal of some fifteen percent of global liquidity from the macroeconomy.

In the Big Picture, these shifts have three significant impacts on Global Health.

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First, a positive one: The reordering of world wealth means nations that were long dependent on OECD charity to finance health schemes can now become self-reliant. Whether a government chooses to get off the global dole is one thing: Its financial possibility to do so is more likely to exist today than at any time in history. Dr. Bernhard Schwartlander spoke to this in his address to the International AIDS Conference in Washington, D.C. last summer. Then the chief scientist for UNAIDS, Schwartlander told the conference that, “in 2000, when we began the fight for universal access to prevention and treatment and the creation of the Global Fund, 70% of people with HIV lived in low income countries. Eight years from now, it will be only 13%....In this new and complex world, although poverty is as big a problem as ever, the days when we had a simple world of rich countries and poor ones are gone. And with it, we should abandon the concepts of dependency and charity, as well as habitual ways of thinking and acting.”

As the delegates of the World Health Assembly gather this week in Geneva, fewer of them represent nations that are dependent on donations from outsiders to cover the financing of their healthcare and prevention programs. The absolute number of dependent individuals in the world may not have changed, but government dependency is clearly on the decline. That is the good news.

But the second outcome of this massive restructuring of the world economy is less sanguine. Economic despair is killing people. As the recession crisis unfolded in Europe the consequences of austerity measures on poor and middle class individuals, versus maintenance of high caliber medical care for the wealthy came into sharp relief. In Greece, for example, several rounds of austerity measures imposed by the IMF and the EU led to massive reductions in public health and medical services, starting in early 2009. By 2012 the Greek suicide rate and mental illness crisis had soared, pharmaceutical outages were reported all over the country, hospital hygiene and basic services had reached such low levels that doctors advised patients not to seek inpatient care, HIV incidence was climbing, malaria was widespread for the first time since World War II, dengue spread in various regions of the country for the first time in nearly a century, and tragedy plagued every aspect of health protection in the nation. When the state of Greek health was summarized for EU leaders in a May 2013 austerity meeting the Europeans reportedly left in “a state of shock.”

Similar, though less severe, outcomes of austerity have been observed in Italy, the UK, Portugal, Spain and much of southern Europe. Mortality increased in Portugal, for example, along with other vital indicators that collectively demonstrated a severe deterioration in the quality of the population’s health. In the last year the cost of seeing a doctor has doubled in Portugal, and basic services such as kidney dialysis have become unaffordable for the country’s huge unemployed population.

The Centers for Disease Control and Prevention recently announced that the suicide rate for Americans aged 35 to 64 jumped 28 percent between 1999 and 2010. The majority of the U.S. suicide increase was among Americans who turned their guns upon themselves – other forms of suicide did not increase significantly. For the first time in U.S. history suicidal deaths exceed those due to traffic accidents.

A UNICEF survey of its field officers worldwide found dire concern that the expanding wealth gap in societies constitutes the paramount threat to child health in this second decade of the 21st Century. The prominent NGO Save the Children issued a report in late 2012 stating that, “in our 32 sample countries, children in the richest decile have access to 35 times the income that is available to children in the poorest decile…The richest 10% of people has access to 17 times the incomes of the poorest.”

Another recent analysis discovered a clear correlation between widening wealth disparity and child survival rates, demonstrating that concentration of wealth in ever-smaller segments of populations was actually killing youngsters in poor families.

A 2012 World Bank survey of seventy countries offers a distinct challenge to proponents of health equity. In contrast to expert opinions, populations within rich and poor countries tend to place higher priority on the quality and innovation in health services, versus equity of access to said services. As the study authors put it, “Our results indicate that residents of these countries may not favor the prioritization of within-country health equality and fairness to the same degree as residents of high-income countries.”

Will this wealth challenge persist, even worsen, over the coming decade? The Global Trends 2030 report issued by the U.S. National Intelligence Council (NIC) predicts two, seemingly contradictory trends: Rising numbers of middle class around the world even as the Gini Coefficient worsens, amid widening disparities. “Middle classes most everywhere in the developing world are poised to expand substantially in  terms of both absolute numbers and the percentage of the population that can claim middleclass status during the next 15-20 years,” the NIC forecasts. Yet the middle class worldwide could collectively possess little compared to the spectacular wealth held by the top 2 percent richest individuals, resulting in a scenario the NIC labels “Gini Out-of-the-Bottle,” wherein, “inequalities within countries and between rich and poor countries dominate. The world becomes wealthier—as global GDP grows—but less happy as the differences between the haves and have-nots become starker and increasingly immutable. The world is increasingly defined by two self-reinforcing cycles—one virtuous leading to greater prosperity, the other vicious, leading to poverty and instability. Political and social tensions increase. Among countries, there are clear-cut winners and losers.”

It is not clear how the WHO, or any entity on the global health stage, can or will address these issues. Both the financial sustainability of global health programs and agencies, and the health of world populations depend on institutions that thrived in the pre-2008 economic environment. The newly-hatched macroeconomic environment poses severe challenges for both the survival of Global Health, as a public good, and of the health of hundreds of millions of individuals.

Tomorrow’s Post: Part Four: The New Global Health Architecture Does Not Match Its Emerging Mission