Overexpansion of the finance industry remains one of the systemic drivers of rising inequalities, in the face of the international community’s engagement to reduce them through the 2030 Agenda. This article maintains that, while the right to health is constantly redesigned to play an ancillary role to financial markets, the global health community needs to raise its visual spectrum beyond diseases to better understand and address the speculative dynamics of finance advancing in the health sector, with little promise of sustainability. Actually, the financialization of global health is in the crosshairs at a time when complex questions arise around governance, democratic, cultural and market related relevant issues
By Nicoletta Dentico
Executive Director, Health Innovation in Practice (HIP), Geneva
Steering Committe Member, Geneva Global Health HUB
Financialization of Health and the Impact on Peoples’ Lives
We live in a globalized economic system that is bound to reproduce a vicious cycle of inequalities. Rising inequalities between the global North and the global South, the economically privileged and the marginalized, among different genders and minority identities, have been historically reproduced and structured across generations, so much so that these are today the defining feature of our time. It is an undeniable fact that global challenges such as climate change and environmental degradation affect us all as humans living on this planet. Yet, they do not affect us all equally. Indeed, the impact of global warming is mostly felt by those who have least contributed to it, by those who are most marginalized from public service delivery, most exposed to economic instability and environmental crises. Growing economic disparity and wealth concentration kindle political inequality in all parts of the world, by expanding the capacity of corporate and financial élites to influence policy-making at national and international level, and therefore protect their wealth and dominant positions, or outright privileges. There is indeed an urgent need for people’s movements to converge around a common agenda for taking back our economies, reclaiming public services and protect natural resources.
The efficient allocation of capital is one of the most valuable tasks in a global economy, and it is impressive to realize that while three decades ago the average holding period of a stock was four years, today it is only 22 seconds. This is to say that finance has a tremendous potential. But we can do much better. The 2008 global financial crisis is a stark reminder that laissez-faire did not work. Financial markets left to themselves produced too-big-to-fail banks and did not trigger competition but rather oligopolies and vacancy of regulators. The prices of financial assets did not manage to signal the incoming crisis. The very high payments that come with profitable speculations which disrupt the economic system in countries and lead to collapse and misery for the million people affected – “financial weapons of mass distraction”, as investor Warren Buffet calls them – describe the route the world takes when “financial markets, financial institutions and financial élites gain greater influence over economic policy and economic outcomes”. This is what the financialization of the economy is about. A process that ultimately threatens the very funding efforts needed to meet the Sustainable Development Goals (SDGs), and makes us all vulnerable to the frequent crisis cycles that the casino capitalism driven by digital high-frequency trading needs to survive.
Addressing this phenomenon is the focus of the report Spotlight on financial justice: Understanding global inequalities to overcome financial injustice, launched at the end of September during the UN General Assembly in New York (http://citizensforfinancialjustice.org/resource/spotlight-on-financial-justice-understanding-global-inequalities-to-overcome-financial-injustice/). Through five thematic areas – 1. food and land; 2. health; 3. women’s rights; 4. housing; 5. infrastructure – the report illustrates how the overexpansion of the finance industry remains one of the systemic drivers of rising inequalities, in the face of the international community’s engagement to reduce them through the 2030 Agenda.
After the 2008 financial crisis started in the global North, the governance structures and the deregulation regimes that had got us there, especially the uncontrolled expansion of the financial sector over the real economy, finally raised enough red flags. Notwithstanding their direct responsibility in the global financial collapse, major banks were bailed out by governments using taxpayers’ money. At the same time, those very governments were overruling their human rights obligations by resorting to austerity measures to balance the loss of public finance, thereby creating pervasive negative effects on peoples’ lives, and dignity, around the globe. Consequences included reducing communities’ access to natural resources, restrictions on housing and employment, a considerable decrease of access to basic public healthcare services.
Greek people know only too well what financialization of health means, through the harsh lessons of EU austerity cuts and loan agreements imposed by the trojka (the European Commission, the European Central Bank and the IMF) to the Greek government, without any consideration for their potential side effects. The Greek administration, as the report accounts, was forced to reduce investments and put severe strains on core social services, which severely undermined community resilience to the crisis. The national health budget suffered a contraction of 36% between 2009 and 2014, which resulted in the meltdown of the Greek public health system. Infant mortality rose by 50%, especially among infant younger than one year. Chronic disease increased by 24,2%, due to the collapse of the healthcare system and the absence of the needed medical treatments caused by lack of financial means. Mental illness among the population soared from 3.3% in 2008 to 12.3% in 2013. Greece’s prescription for the shock to the healthcare system was state subsidized health insurance, but with the unemployment rate at 27%, many remained outside the eligible criteria. Cost sharing for healthcare increased remarkably even for those with insurance, while entitlement restrictions were introduced for childbirth and a range of other essential interventions.
The discourse on Universal Health Coverage (UHC) is today one of the driving institutional paths stimulating the penetration of private finance into the social arena of health, at country level. With different shapes, UHC is overall featured by concerted efforts to promote models of healthcare financing based on affordable user fees and voluntary health insurance schemes, alongside the expansion of privately owned healthcare infrastructures. In this way, loan based approaches like microfinance are opening up new opportunities for rent seeking from the poor. There has never been a more exciting time to be an investor in health, especially now that the combined burden of communicable and non communicable diseases is sharpening perceptions on the needs for health in lower income countries.
Beyond the health domain, the euphoria for financialization seems to have captured contemporary international development circles, primarily by means of multi-stakeholder partnerships. Escorting private finance into development is increasingly touted by alliances of multilateral institutions, national governments and owners of equity investment funds and private capital overall. The assumption is that multi-stakeholderism may be the solution to the current problems with the multilateral system[i], and that resorting to private money is the inevitable strategy if the world is to catch up for the estimated annual gap of US$ 2.5 trillion required to achieve the Sustainable Development Goals (SDGs) – a gap considered beyond the capability of public funding [ii]. The acceptance of an argument that makes poverty bankable finds in this context no institutional resistance. This is what drives new asset classes such as the impact bonds (like the Cameroon Cataract Performance Bond) or the catastrophe insurance schemes like the Ebola bonds, betting on international health outbreaks within the Pandemic Emergency Financial Facility.
The financialization of global health poses a range of complex questions:
- a governance issue, due to the fragmentation produced in the health system and the hybridization of the role of health institutions at all levels;
- a democratic issue, since financial markets are based on private agreements usually covered by a confidentiality clause. The use of public funding can be traced, at least in theory, while the same does not apply to private sector investments, which entails some negative externalities in terms of transparency and accountability;
- a market related issue, to the extent that the provision of healthcare services may end up being exposed to the volatility of the financial casino;
- a cultural issue, in the sense that health financialization may well influence consumerism, and people’s culture around the healthcare approach to be desired.
While the right to health is constantly redesigned to play an ancillary role to financial markets, the global health community needs to raise its visual spectrum beyond diseases to better understand and address the speculative dynamics of finance advancing in the health sector, with little promise of sustainability. This is urgent.
[i] Gleckman, H. (2019), “How the United Nations is quietly being turned into a public-private partnership: A new agreement with the World Economic Forum gives multinational corporations influence over matters of global governance”, OpenDemocracy, 2 July 2019, https://www.opendemocracy.net/en/oureconomy/how-united-nations-quietly-being-turned-public-private-partnership/.
[ii] Hunter, B. and Murray, S. (2019): Deconstructing the Financialization of Healthcare, Development and Change 0(0): 1–25. DOI: 10.1111/dech.12517, p. 1