THE IMF, STRUCTURAL ADJUSTMENT AND HEALTH IN THE CARIBBEAN: A Comparison With Brazil DAPHNE PHILLIPS Ph. D Department of Sociology The University of the West Indies St Augustine, Trinidad Trinidad and Tobago West Indies Paper prepared for the 18th Annual Conference of the Caribbean Studies Association to be held in Kingston & Ocho Rios, Jamaica, May 24 -29, 1993. THE IMF, STRUCTURAL ADJUSTMENT AND HEALTH IN THE CARIBBEAN: A Comparison With Brazil ABSTRACT In this study, an assessment of the impact of Structural Adjustment policies on the living conditions of people in the Caribbean is undertaken through observation of the trends in employment, income, education, nutrition, housing and water supply in the decade of the 1980s. A comparative analysis is carried out on the effects of similar policies on identical living conditions in Brazil in the previous decade. The data show similar patterns of decline in living conditions for the Caribbean in the 1980s as for Brazil in the 1970s. For the Brazil study, through the use of multiple regression techniques on survey data collected in 1990, the relative impact of these living conditions on health is measured. The results show that while nutrition has the greatest impact on health, all the other influencing variables examined significantly affect the health status of the people. In conclusion, I argue that if declines in living conditions result in a measurable decline-in health status, then the declines in these conditions observed in the Caribbean in the 1980s have negatively affected health. This negative effect on health is exacerbated further by the simultaneous cuts in health spending and the gradual privatisation of health care services observed in the Caribbean. ACKNOWLEDGEMENTS The survey data for Brazil used in this analysis were collected in 1990 for a study funded by the Institute of Health, Department of Health, Government of the State of Sao Paulo, Brazil. The principal researchers were Raymond and Karen Goldsteen of the University of Illinois at Urbana-Champaign. I thank the Goldsteens for the use of these data. THE IMF, STRUCTURAL ADJUSTMENT AND HEALTH IN THE CARIBBEAN: A Comparison With Brazil Introduction / Review of the Literature In the 1980s, the policies of the International Monetary Fund (IMF) were introduced into developing countries on a large scale, as the response of the core industrial countries and large international banks to the massive balance of payments problems that were being experienced by developing countries. The balance of payments crises affecting many countries force them to turn to the IMF for loan assistance. The IMF was created at the end of the second World War as a result of an international and monetary conference held at Bretton Woods, New Hampshire in July 1944, to assist countries which experienced temporary balance of payments problems as a result of destruction brought about by the war. These were mainly European countries, and the assistance provided was particularly generous in helping them to rebuild their economies and societies. In the 1980s however, in the wake of the massive balance of payments problems experienced in developing member countries, the IMF restructured its lending policies. The new policies, called Structural Adjustment Policies, were very much unlike the assistance given to European countries with balance of payments problems at the end of the second World War. These policies were punitive and destabilizing and led to declines in the 1 decision making capacity and relative autonomy of the local state. These IMF policies of Structural Adjustment, which have been compulsory for developing societies requiring loans for addressing balance of payments problems, involved reduced public sector spending and participation in economic activity, an increase in exports, increased inflation, devaluation of the currency and the introduction of measures to attract foreign capital. In more specific detail, these measures have meant reductions in government expenditure and the size of the public sector; an end to the creation of new public enterprises and rationalization and privatisation of those already in existence; higher interest rates to discourage capital flight; removal of trade and exchange controls; reduction of effective protection against imports; tax reform to introduce a higher tax structure, and higher prices for agricultural producers, especially exporters. Liberalization of trade and the encouragement of exports are important goals of the structural adjustment package. These are brought about by the introduction of measures such as devaluation, the establishment of quotas and quantitative restrictions, and the introduction of a uniform external tariff rate. Other elements of the package consist of an increase in producer prices, reduction of the wage bill, wage freezes, declines in real wages and salaries, and reduction or elimination of fringe benefits, labour welfare and other protective measures. The insistence on privatisation of economic activities has involved the closure or sale of state enterprises in 2 directly productive and financial sectors, the reduction or elimination of state marketing agencies and a series of incentives for foreign investors (Ghai,1991). These policies are based on a number of assumptions: firstly, there is the general assumption that excessive expenditure by the state, particularly where it takes the form of introducing higher levels of consumption, rather than production, should be reduced. Secondly, reduction in state spending is assumed to be necessarily associated with a reduction in wages; thirdly, it is assumed that the cuts in wages and services will reduce imports. However, they also lead to increases in the profits of the private sector since private capitalists subsequently have to pay lower taxes and reduced labour costs. Finally, the attempt to discourage direct controls over trade is assumed to enhance the local economy, but this influences the previous tendency to use the rate of exchange to favour local as opposed to foreign producers (Brett,1983). In an attempt to increase their exports, lesser developed countries immediately confront the core capitalist countries which are attempting to do the same thing; the latter have the advantage of producing on a very large scale, selling to a huge home market as well as controlling established markets abroad, having direct use of highly trained work forces and research facilities and monopoly over areas of technology and skills. Lesser developed countries cannot compete effectively in these conditions. 3 On the other hand, in sectors where lesser developed countries do have a competitive advantage, where cheap labour provides the possibility of employment to larger sections of the populations such as in textiles, the core industrial countries have tended to adopt protective controls in order to defend jobs and capital investment in those sectors (Brett,1983). In the textile sector in poor countries therefore, jobs are not available to the extent to which this may have been possible. The rescheduling of debt and debt service as well as the granting of new loans have been made contingent upon acceptance of the policy package of structural adjustment measures outlined above, thereby paving the way for a degree of external intervention in national policy-making unprecedented in the post war period. The strong insistence upon eliminating barriers to free trade in these countries, as well as reducing the role of the state in the economy has run directly against and counteracts the efforts of Latin American, Caribbean and African governments to foster greater national economic integration within a framework of protection for local industry (Ghai,1991). Research Questions The questions posed in this paper are: 1. Have structural adjustment policies affected living conditions in the Caribbean? 2. What are the effects of living conditions on health status? 4 3. What are the effects of Structural Adjustment policies on health in the Caribbean? Methodology The methodology employed to answer these questions involves firstly, a comparative analysis • between the effects of Structural Adjustment policies on living conditions in the Caribbean, and the effects of similar policies on living conditions in Brazil. Secondly, I measure the effects of living conditions on health in Brazil (for which recent survey data is available). Thirdly, I infer similar effects of living conditions on health in the Caribbean. Finally I argue that if Structural Adjustment policies have led to a decline in living conditions, and living conditions have a noticeable and measurable effect of health, then Structural Adjustment policies have led to a decline in health status. The living conditions used in this study are those of income, employment, education and other social services. Effects of Structural Adjustment on Living Conditions in the Caribbean Many sources clearly indicate a real decline in living conditions in Latin America, the Caribbean and African countries since the universal introduction of IMF structural adjustment policies in 1980 for peripheral capitalist countries. 5 Income The following Table on economic changes in Latin America and the Caribbean highlights declines in income and resources - from both resource loss due to deterioration on the terms of trade and lower levels of imports (both by volume and per capita measures) coexisting with a huge effort to improve the volume of exports. The overall conditions of living have nevertheless deteriorated. Table 1 Changes in Economic Indicators. 1980 - 1988, Latin America and the Caribbean (Accumulated Percentages) GDP per capita -6.6 Income per capita -16.0 (loss due to terms of trade) (-3.0) (loss due to resource transfers) (-6.0) Export volume +56.0 Export per capita +36.0 Import volume -13.0 Imports per capita -33.0 1978-1979 1987-1988 Ratio of interest payment to exports of goods and services 16.7 -28.9 Resource transfers as percentage of goods and services 22.5 -20.5 Rate of inflation (percentage) 46.0 336.0 6 Source : "The Crisis of the 1980s in Africa, Latin America and the Caribbean : An Overview." D. Ghai and Cynthia Hewitt de Alcantara, in The IMF And The South, D.