Badly timed budget cuts cost lives

New studies quantify the human cost of austerity

That economic downturns and spikes in unemployment tend to drive up suicides isn’t news. People started to notice the correlation back in the 19th century. A new book by David Stuckler of Oxford University and Sanjay Basu of Stanford, though, argues that austerity can make things considerably worse. Suicide epidemics, they say, aren’t an unavoidable accompaniment to contracting GDPs: Social safety nets can considerably reduce or even eliminate rises in self-inflicted deaths during economic hard times.

The book is part of a growing body of research showing that the public health harms of the Great Recession were particularly severe in countries that, wittingly or unwittingly, embraced austerity. Italy and Spain, which cut spending on health and social protection, both saw suicide rate spikes after 2007. In Greece, where budget slashing measures were most draconian, suicides rose by a jaw-dropping 60 per cent in the first few years since the onset of the crisis. As Stuckler and Basu wrote in a recent New York Times op-ed, the crisis-stricken country has also seen infant mortality rise by 40 per cent, malaria rearing its head again in certain regions (after mosquito-extermination programs fell under the government’s ax) and a 200 per cent jump in HIV infections since 2011, likely as a result of increased drug use among the unemployed combined with cuts to needle-exchange programs.

Contrast that with Iceland, say Stuckler and Basu, which managed to sail through a massive banking crisis and nine-fold increase in unemployment without swaying from pre-crisis suicide rates. The country’s secret according to the two scholars? Icelanders voted to reject austerity and to “pay off foreign creditors gradually.” Every one of them preserved their health benefits intact.

Admittedly, the example of Iceland raises some questions. The country, for one, was able to let its currency plunge, a move that normally helps soften the impact of an economic downturn by stimulating a country’s exports. Eurozone countries did not have that option. Stuckler and Basu acknowledge this but argue that the contrast in outcomes between Greece and Iceland is so stark it cannot be denied that “an economic crisis does not necessarily have to involve a public health crisis.” But currency depreciation also reduces the inflation-adjusted value of a country’s debt, meaning that Iceland will pay back less than it actually owes. Did Icelanders effectively pass on some of the health effects of their economic collapse to others, such as Great Britain and the Netherlands, where many sunk their life savings into Iceland’s once booming banks?

On the other hand, there are more examples of countries with generous health care and unemployment protection that managed to withstand skyrocketing joblessness with no impact on suicides. Finland, for one. Between 1990 and 1993, according to a 2009 study Stuckler and Basu co-authored with others, the country’s unemployment rate shot up to 16 per cent, from 2 per cent but suicides continued to dip as they had for years before.

Mind you, the studies are no ammunition for advocates of tax-and-spend government. After all, ultra-generous and prolonged unemployment benefits, for example, increase long-term and structural unemployment, which has its own heavy public health toll. This research makes the case for smarter, rather than bigger, government: think extensive re-training for the jobless and public assistance to help workers re-join the labour force. Programs that temporarily places job seekers into part-time work also seemed to limit the negative mental health effects of unemployment spells.

Maybe countries should have some sort of public health automatic stabilizers. Income taxes and unemployment insurance are notoriously tied to the business cycle: when things get tough, one drops and the other rises. This helps stabilize the economy. Perhaps public spending on mental health that automatically swings up whenever GDP takes a dive would stabilize public health outcomes.

Be that as it may, the public health record of the Great Recession is a damning testament to the human costs of cutting the budget when the economy is in dire straits. American lawmakers, who oversaw $85 billion in sweeping spending cuts this year while unemployment is still at 7.5 per cent and workforce participation rates at record lows, might want to think twice about new, drastic rounds of fiscal tightening.