AnEconomicHistory English

Trade and Healtha brief economic history : Trade and Health a brief economic history David Legge International People’s Health University July 2005


Framing the analysis: an economic history : Framing the analysis: an economic history 1945-1975: the ‘long boom’ 1975-80: stagflation 1981+: looming threat of ‘over-production’ (post Fordist crisis)


The long boom (1945-1975) : The long boom (1945-1975) need for reconstruction (huge demand) increasing productivity (motor vehicles and cheap oil) capital and labour make things that people need and can pay for increasing productivity (new technology) frees up labour to make new things (that people want) and to recycle wages as consumption (more sales, profit and investment) some ‘trickle down’ to the poor (associated with Keynesian policies) and to the Third World (trade opportunities associated with rapid growth)


1975-80 - Stagflation and the failure of national Keynesianism : 1975-80 - Stagflation and the failure of national Keynesianism Recession (cyclical slowdown on top of structural over-production) Emerging inflation (increasing price pressures associated with growing monopoly power) oil (OPEC) labour (strong unions) business (monopolies associated with brand names and protected technologies)


Resistance to Keynesianism and ascendancy of monetarism : Resistance to Keynesianism and ascendancy of monetarism Resistance to Keynesian counter-cyclical policies contributes to inflation economic stimulus increases imports rather than (as well as) boosting local production Keynesian policies increase money supply and inflation without boosting employment and local business Ascendancy of monetarism strong business antipathy to inflation (because of the costs of uncertainty) leads to ‘fight inflation first’ policies monetarism argues for sole reliance on interest rates to control the business cycle but increased interest rates also used to control inflation (at a time when the economy was in recession!)


The debt trap set : The debt trap set 1973: OPEC price rise; oil producers flush with cash; deposited in banks Banks send salesmen around the world lending money at low and negative interest rates (negative after taking inflation into account) lending to corporations (but with government guarantee) in South America lending direct to governments in Africa


The debt trap sprung : The debt trap sprung Ascendancy of monetarism around 1980 interest rates escalate (peaking at 17% in the US in 1981) imposing repayment and servicing burdens that many poor countries could not carry


From 1981 to the present : From 1981 to the present Two parallel dynamics the continuing dynamic of the long boom the looming threat of post-Fordist crisis (structural over-production)


The continuing (slowing) dynamic of the long boom : The continuing (slowing) dynamic of the long boom Investment and employment in the Sustainable production of useful goods and services which People need and are able to pay for and the Accumulation of capital (through profit, savings and tax) for Continuing investment (and ....)


The threat of ‘over-production’ (and ‘post-Fordist crisis) : The threat of ‘over-production’ (and ‘post-Fordist crisis) Where expanding (capital intensive) productive capacity (with stagnating employment growth) exceeds ‘demand’ (because of stagnant purchasing capacity) owing to saturated markets and/or markets with real needs but limited purchasing capacity


‘Compensatory’ mechanisms which exacerbate the damage from ‘over-production’ : ‘Compensatory’ mechanisms which exacerbate the damage from ‘over-production’ The corporate world sees falling profitability The policy world sees falling growth rates Eliciting a range of corporate strategies and policy responses many of which exacerbate the risk of crisis


Compensatory corporate strategies : Compensatory corporate strategies New markets, new products and better marketing (including commodification of family and community) Externalise costs (including to labour and to the environment) Consolidate production and increase market share through mergers and acquisitions, Increase market power (and capacity to increase prices) Reduce wages Replace well paid labour with technology Many of these strategies will further reduce demand


Compensatory policy responses : Compensatory policy responses Cut taxes (in particular, reduce corporate and executive tax burden) to encourage new investment Outsource and privatise public sector service provision (create new market opportunities) Labour market deregulation (union busting) to reduce labour costs Deregulate environmental controls (converting natural capital into recurrent revenue) Force repayment of debt from TW countries Force TW countries to open their markets and economies (under the slogan of free trade and open markets) Many of these strategies further reduce demand


Corporate and policy responses : Corporate and policy responses Exacerbate the imbalance of productive capacity over effective demand Other consequences destroy the environment increase unemployment and inequality weaken family and community decay social infrastructure transfer value from South to North two worlds stratification (unified global bourgeoisie but fragmented global proletariat)


Exclusion and debt : Exclusion and debt The threat of over-production managed by exclusion and debt Exclusion continue to increase productivity with a smaller productive base but marginalise and ghettoise those who are excluded (countries and classes) Debt redirect flow of profit (and debt repayment) to debt based consumption (household and government)


Capital recycled as consumption through debt : Capital recycled as consumption through debt Increasing size, wealth, turnover and power of the financial sector: slowing growth outlook so business redirects profit into financial sector (as portfolio investment) rather than into new direct investment privatisation of pensions (superannuation) redirects billions from tax into savings held by financial institutions


Profits and savings redirected as loans : Profits and savings redirected as loans Private consumption supported through increasing household debt (recycling savings as consumption) Corporate rationalisation (in particular mergers and acquisitions) financed through corporate debt Military interventions funded through government debt US standard of living maintained by debt


Managing the threat of ‘over-production’ : Managing the threat of ‘over-production’ Currently enforced transfer of value from periphery to centre (from South to North) enforced division between participants and the excluded (from the globalised economy) capital recycled as consumption through debt Alternative strategies (really) free trade? self-sufficiency and regional trade? decentring ‘productivity’ global Keynesianism?


Free trade - the key to growth and development? : Free trade - the key to growth and development? ‘Free trade’ - a catch-all slogan obscuring countries’ and corporations’ manoevering for advantage Regulatory framework defining ‘free trade’ discriminates in favour of the rich North IP rules compared with barriers to people movement free trade in manufactures compared with agricultural protection declining terms of trade (commodities vs manufactures) minimal commitment to ‘special and differential treatment’ Globalised free trade risks exacerbating the crisis of overproduction Protectionism, can have important benefits as well as drawbacks Amin: self-sufficiency and polycentric regional (South South) trade


Mass resistance; small victories : Mass resistance; small victories Delegitimation of SAPs MAI-non! (1995-8) Seattle 1999 Jubilee 2000 and the Drop the Debt campaigns Doha 01 - TRIPS and access Cancun 03 – advancing the demand for agricultural reform and resisting the Singapore issues (emergence of G20) Miami 04 – resistance to US ambitions for a FTAA Learn from the successes (and failures) of popular movements Another World is Possible!


Issues linking health policy with global economic regime : Issues linking health policy with global economic regime SAPs and nutrition TRIPS and access to drugs GATS and the building of comprehensive PHC Health and fair trade (with special and differential treatment) AoA and small farmers’ loss of livelihood (and health consequences) Policy reports (such as CMH) which deny (by obscuring) the disease burden created by the prevailing regime of economic governance Projecting more clearly the disease burden of poverty, alienation, despair, violence, conflict and asylum seeking and their links to the continuing expropriation of resources and value from South to North


Develop a clear macroeconomic analysis : Develop a clear macroeconomic analysis Importance of economic literacy (cf media gobbledygook) Key elements of the economic analysis the dynamic of structural ‘over-production’ exclusion, marginalisation the face of overproduction the ‘stabilising’ effect of converting capital (including capital created in TW) into rich world / rich strata consumption the significance of the US dollar and the way it binds trading countries to US hegemony changing class structures (emergence of global bougeoisie)


Analysis, issues and vision : Analysis, issues and vision Project clear narratives linking these processes to the disease burden of the different ‘entry points’ Link campaigning around health specific goals to global economic reform goals (especially greater national self-sufficiency and polycentric South South trade)