In the early 1990s, following a decade of state retrenchment under Thatcher and Reagan, political scientist Paul Pierson observed that despite repeated efforts to reduce healthcare spending “governments generally found health care to be a cause of political headaches rather than a target for successful retrenchment.” This is because, he argued, healthcare is so visible and so emotive that cuts to health systems will be resisted by the public.
Yet, widespread healthcare austerity since 2008 has shown that Pierson was incorrect. Many European countries have dramatically reduced healthcare spending as part of an austerity agenda, implementing sweeping reforms to healthcare systems and restricting access to healthcare services. In Greece, for example, the number of people reporting unmet medical needs because they were unable to afford the cost of care rose by 50% between 2007 and 2011.
Why has this happened now?
Those on the right have argued the recession was so deep and so widespread that austerity had become an economic necessity. As Prime Minister David Cameron argued: “We’re tackling the deficit because we have to“. Yet, across Europe we find no evidence that cuts to healthcare spending are a necessary response to the recession. There is no relationship between the depth of recession and cuts to government health spending. Take Austria and Germany. Both experienced recessions of similar size and timing (2008–2009) but Austria saw reduced government spending on health while Germany saw an increase.
In tandem, right-leaning parties have argued that the debt crisis necessitates cuts to healthcare. Following Reinhardt and Rogoff’s now discredited paper on the relationship between debt and economic growth, Ollie Rehn, then Commissioner for Economic and Monetary Affairs, wrote in a memo to the European Commission: “When public debt levels rise above 90%, they tend to have a negative impact on economic dynamism.” The argument was that because healthcare spending constitutes a large proportion of government spending, reducing it was necessary to reduce the public debt. However, once again, we find no association between the level of public debt and reductions in health spending. Some countries with relatively low levels of debt have been choosing to reduce health spending, while other countries with relatively high levels of public debt are allowing spending to rise. This suggests that other factors are driving countries to reduce healthcare spending, regardless of their level of debt.
The left, in contrast, have argued that such cuts are driven by a neoliberal orthodoxy especially prominent among international financial institutions (IFIs). Although Cameron has claimed “he didn’t come into politics to make cuts… out of some ideological zeal“, a wide variety of commentators, such as Paul Krugman and Joseph Stiglitz, have argued that economic ideologies are driving the desire to reduce health spending. The IMF, for example, lends money to ailing economies, but it does so with specific conditions that reinforce neoliberalism. Countries that borrow are encouraged to implement structural adjustment programmes which include reducing health spending and lowered tax rates. Although we found no clear evidence that the economic ideology of governing parties increased the likelihood of reducing health spending, the influence of neoliberal international financial institutions, such as the International Monetary Fund, the European Central Bank, and the European Commission (the so-called ‘Troika’), is one of the major determinants of healthcare austerity. Borrowing money from the Troika reduced health spending by an additional $44.8 per person whereas a right-leaning party was no more likely to reduce healthcare spending than a left-leaning party. Greece and Spain’s left-leaning governments both implemented austerity following guidance from the Troika.
More work is needed to understand the interaction between economic ideology, IFIs, and austerity, but our results suggest that supra-national organizations are potentially undermining national democracies by enforcing neoliberal policies during economic crises. The political ideology of elected parties remains important but, as demonstrated by New Labour, neoliberalism is permeating even left-leaning parties in European politics.
Cuts to healthcare services are harming Europeans, but healthcare austerity is not inevitable. It is a political choice, but a choice influenced, in part, by the Troika.
This article is based on our paper: The political economy of austerity and healthcare: cross-national analysis of expenditure changes in 27 European nations 1995-2011, Health Policy.
About the Author: Aaron Reeves is a post-doctoral fellow at the University of Oxford working on public health, culture, and political economy. His work involves examining the causes and consequences of social, economic, and cultural inequity in Europe and North America.