Structural Adjustment Programmes and the Pressures by International Agencies on Health Policies

The World Development Report 1993 is the most comprehensive document of the World Bank regarding the Health Sector as a whole, and in that sense embodies the basic understanding of the Bank towards this sector. In this paper I shall try to critically analyse the essential formulations being made in this document, as well as attempt to project the implications of these formulations on the future development of health infrastructure in developing countries.

Before embarking on this task, however, it would be useful, first, to take a look at the specific juncture at which the World Bank has chosen to make its views on the Health Infrastructure public, in such great detail. Structural Adjustment Policies, now being enforced in the country have been in force in many Third World Countries (mainly in Africa and South America), for a fairly long period – in many cases over a decade. Such policies, thus need to be viewed in a global context, specifically in the context of the attempt by developed market economy countries to gain access to the growing markets of Third World Countries. These policies attempt to encapsulate the ‘free market’ ideology as a guiding principle, and are designed to place the ‘market’ in a central position of dominance, where it would act as the principal, if not sole, arbitrator of all processes. At a global level such a position is extended to encompass the concept of ‘free trade’ – a concept that has been captured in its full essence by the GATT treaty of 1994.

What Lies Behind the Safety Net

The World Bank has obviously has had time to analyse the effect of its Adjustment Policies in the countries which started on Adjustment policies around 1980. One fact that obviously must have leapt to the eye was the ‘rolling back’ of many gains of the previous decades, however insubstantial they may have been, in the areas of Health and Education. As a result of the adjustment Policies, at the behest of the Bank, many of these countries had drastically reduced resource allocation in these areas. The ‘danger signals’ from these countries were, for example, echoed by the UNICEF in the following manner : “For the first time in the modern era, a subcontinent is sliding back into poverty. The number of families in sub-Saharan Africa who are unable to meet their most basic needs have doubled in a decade. The proportion of children who are malnourished has risen.” (1) The UNICEF went further in squarely blaming such conditions on the debt burden imposed by the Bank’s Policies on these countries, noting : “The total inhumanity of what is now happening is reflected in the single fact that even the small proportion of interest which Africa does manage to pay is absorbing a quarter of all its export earnings and costing the continent, each year, more than its total spending on the health and education of its people.” (2) and further, “Great change is in the air as the 1990s begin. .

The report essentially accepts its complicity in the process of this slide back when it says, “Because cuts in government spending are usually central to an adjustment program, health spending is likely to be reduced. In many countries early cuts were indiscriminate and failed to preserve those elements of the health system with the strongest long term benefits for health.”(emphasis added)(4) Having accepted that its Adjustment Policies were responsible for rather unpleasant fallouts in many countries, the Bank found it necessary to suggest certain remedial measures. These measures, had to be of the kind which did not fundamentally endanger the Bank’s Adjustment policies in these countries, but which at the same time could initiate some sort of `disaster management’. The Bank hence starts talking of a `safety net’ for the poorest, who are feeling the brunt of the Adjustment policies most acutely. The term used is in itself interesting, implying as it does the hazards associated with the Adjustment Policies, thereby requiring the use of a safety net. The WDR 1993 is essentially a prescription for setting in motion the erection of this safety net.

The nature of the safety net the Bank wants in position is not determined by any altruistic concerns for the victims of its Adjustment Policies in developing countries. Rather, they are an extension of the very same concerns which led the Bank to push for the Adjustment policies in the first place. In the seventies, the capitalist world was going through a crisis of its own leading to a sharpening of inter-imperialist contradictions and thereby a greater urgency was felt for carving out Third World markets. The precise mechanisms tailored to efficiently carve out the ‘global cake’ was pushed through in the recently concluded GATT agreement. But much earlier, the World Bank, working as the ‘battering ram’ of the capitalist world, had moved to initiate policies – called Structural Adjustment Programmes – that, it hoped, would make markets of the Third World freely accessible on one hand, and at the same time would bring an element of stability in these markets for long term exploitation.

Let us see how, in more concrete terms, the kind of thrust these policies would like to have in a country like India. In the schema of seeking out markets in the Third World, India occupies an almost unique position. The ‘middle class’ consumer market in the country is estimated to cater to a population of around 100 million – i.e. larger or comparable to the total market in the largest countries in Europe and about 40% the size of the entire domestic market of the United States. There is thus a special interest in ‘prising’ open the Indian market for various global players to exploit. In order to nurture this market it is also necessary to increase extraction of surplus value from the 800 million who do not constitute a part of this potential market. This is precisely what is sought to be achieved through Structural Adjustment Policies that have been initiated in the country – by way of fiscal austerity measures designed to cut Govt. spending and subsidies in social sectors, reduction in direct taxes, increase in administered prices, deregulation of the labour market, etc. In other words, policies designed, on the one hand, to increase the paying capacity of the target population in the potential market and, on the other hand, to keep the rest of the populace at a level of mere subsistence.

However, as noted earlier, the signals emanating from the countries that had taken up Structural Adjustment Programs in the early phase, were disturbing for the Bank. Disturbing not because of its actual effects, but because the effects threatened to totally disrupt the stability of these countries, and thereby of their markets. Markets in Sub-Saharan Africa and in some countries of South America almost ceased to exist due to widespread dislocation of local economies. The safety net formula was hence required to bring back a semblance of stability in these countries, and had to be extended to countries now going in for Structural Adjustments, so as not to repeat the past experience.

The safety net formula can thus be also seen as a partial strategic retreat of the earlier World Bank prescription of total withdrawal of the State from all social and infrastructure sectors. While the Bank continues to pursue its policies geared towards private takeover of other infrastructure sectors like Power, Telecommunications etc., in the area of Health and Education it has had to do make certain concessions to the logic of state support. However such concessions are grudgingly advanced, and in fact are responsible for the large variety of inconsistencies contained in the Report. The attempt is still to formulate a package which involves minimum state involvement, as the intent is not to make provisions for comprehensive health care that required, in the words of the Alma Ata Declaration of 1978, “All governments should formulate national policies, strategies and plans of action to launch and sustain primary health care as part of a comprehensive national health system and in co ordination with other sectors. To this end, it will be necessary to exercise political will, to mobilise the country’s resources and to use available external resources rationally.”(5) The WDR 1993, in sharp contrast, believes in the necessity for a political will to restrict health care access when it says, “As policymakers try to reach compromises, they must deal with powerful interest groups ……. and strong political constituencies, including urban dwellers and industrial workers.”(6)

Thus essentially the report is an attempt to formulate a package of interventions, and push for a policy that can sustain the overwhelming number of people in a developing country at a level of mere subsistence. Anything beyond this is anathema, and is strongly disapproved of in the Report. For, after all, the Report is designed to keep state support at a minimum and not to provide health care. This is stated in so many words, “Adoption of the main policy recommendations of this Report by developing country governments would …..and also help to control health care spending. Millions of lives and billions of dollars could be saved. (emphasis added) (7) But even to make provisions for such a package requires State support, and this is where the Report goes into a series of convoluted reasonings to work out a comprehensive set of rules for state intervention. In order to do so the report also goes through the exercise of compartmentalising health into a series of `nuggets’, to which it assigns scores with a novel computing system called DALYs (Disability Adjusted Life Years). The whole exercise is to reduce health to a series of mathematical calculations to determine which interventions `optimise’ returns. To this end the report states, “When governments become directly involved in the health sector – ….. policymakers face difficult decisions concerning the allocation of public resources. For any given amount of total spending, taxpayers and, in some countries, donors want to see maximum health gain for the money spent. An important source of guidance for achieving value for money in health spending is a measure of the cost-effectiveness of different health interventions and medical procedures – that is, the ratio of costs to health benefits (DALYs gained). (8) It is interesting to note here the Bank’s concern for the taxpayers, as ultimately this is the constituency, or in other words the market, that the Bank wishes to address and nurture.

Cost-effectiveness is important for the World Bank as it candidly admits, “Using cost-effectiveness to select health interventions for public financing does not necessarily mean spending the most resources where the burden of disease is greatest. Instead, it means concentrating on the interventions that offer the greatest possible gain in health per public dollar spent.” (emphasis added) (9) It is such an approach that impels the report to exhort the use of iodised salt for endemic goitre but abhor `government action in nutrition’. The report clarifies this – “There is a strong case for government intervention to improve health by improving nutrition, but not for interfering generally in food markets, except in extraordinary conditions such as famine. Government action in nutrition has often been wasteful because it has duplicated what private markets do and has paid too little attention to the causes of poverty and to cost-effective measures that improve families’ knowledge and capacity to feed themselves adequately.” (10) The calculations to justify this is simple if one understands the World Bank’s logic. Salt iodisation requires little resource inputs, and the costs can easily be passed on to the consumers. But actual intervention to raise nutrition levels would interfere with the market – a cardinal sin as far as the World Bank is concerned. So a hands-off policy is recommended, except in times of famine. Under more `normal’ conditions governments can limit their intervention to telling (and not providing) people what they should eat. Intervention in nutrition would attract the World Bank’s ire as it is not cost-effective and `distorts’ the market, irrespective of the fact that protein-energy malnutrition affects an estimated 28% of children and iodine deficiency goitre affects 7% (an overestimation by some accounts).

The fragmentation of health into discrete components, to facilitate calculation of DALYs, reinforces a model of health care that has its roots in technological determinism. It follows from the belief that technological solutions can be applied piecemeal to health problems of a community, to the virtual exclusion of social and economic determinants. Thus the belief, for example, that governments can fulfill their objective of controlling diarrhoeal diseases by efficiently distributing Oral Rehydration salts, without intervening in provision of safe drinking water. While not discussing more details of such an approach, already in vogue in many countries including India, it would probably suffice to point out that this approach is a necessity as far as the World Bank’s compulsions are concerned, rather than a logical need.

Retreat of the State

The need to repeatedly emphasise that state intervention, and thereby resource inputs, should be kept to a minimum, has led the report to take strangely contradictory positions. While reiterating that public funding of health care needs to be reduced, the report is forced to contend with the fact that in most developing countries such funding is abysmally low. It thus grudgingly admits, “Adoption of the package in all developing countries would require a on public health ….There (in the poorest countries), paying for an essential package will require a combination of increased expenditures by governments, donor agencies, and patients and some reorientation of current public spending for health.” (emphasis added) (11) But the crux lies in mobilising the extra resources to quadruple spending on health. No answers are offered, except for references to good work being done by Non Governmental Organisations (NGOs) and the possible help by donor agencies. Except in Sub-Saharan Africa, such aid accounts for, 1.5% or less, of the total spending on health in developing countries and even the report does not visualise any major increase. NGOs are dependent on either foreign donors or government funds, or act as a part of the private sector. The World Bank is obviously caught in a contradictory situation, and has no solutions to offer. The report is on much firmer ground, in terms of internal consistency with its other positions, when it argues for increased involvement of the private sector. The intent is at least transparent and consistent with the need to reduce public sector involvement in health care. The report thus argues for private sector takeover in most areas not covered by the Bank’s minimum package. This, it is posited, would increase ‘efficiency’ and ‘consumer satisfaction’. There is a clever piece of argumentation which shows that public funding is already low in most developing countries, and a formal role for the private sector, with the state acting as a regulator of the market for health care, will only work towards making the present system more efficient. The report argues in this vein, “People often pay dearly for supposedly ‘free’ health care. Recent household surveys in India, Indonesia and Vietnam indicate that each visit to a government health centre actually costs patients two to three times the amount of the low official fees. Bribes aside, the indirect costs such as transport and the opportunity cost of time spent seeking care are substantial. Since patients are already paying for supposedly free or low-cost health-care, new user fees, when accompanied by reduction in indirect costs and improvement of services, may increase utilization.” (12)

The private sector is portrayed as the paragon of efficiency. Efficiency is a term difficult to quantify in the area of health care. The report obviously equates efficiency with fast turnover, easy accessibility and possibly, consumer satisfaction. Whether these considerations really go towards improvement of the quality of health care is however a debatable issue. The report for example lauds the performance of private practitioners working in the slums of Bombay thus – “Competition among health providers in developing countries can improve the quality of services as perceived by patients and thus increase consumer satisfaction. …….competition among private physicians in the slums of Bombay, for example, is intense, with private practitioners offering convenient evening hours, short waiting times, and readily available drugs to win patients from other private practitioners and from public clinics.” (13) Contrast this with innumerable studies on private practice in India, which has shown that practitioners chronically overcharge, use too many drugs and use inappropriate medicines, not to speak of various reports of malpraxis. One study says, “…private physicians serving the urban poor in the slums of Bombay have grossly inadequate awareness about the treatment regimen of leprosy..” and further that, “..(they) do not consider standard drug regimens in treating patients suffering from pulmonary tuberculosis. The drugs which were used were found to be three times more expensive than the standard regimens.” (14) The situation is probably best summed up in the following terms : “Its (the World Bank’s) implication continues to be that markets can do little wrong and that all economic growth is necessarily to the good ……… Government intervention in the economy, on the other hand is always regarded as guilty until proven innocent.” (15)

Impact on Infrastructure Development

Let us now turn to what is possibly most fundamental to the position of the World Bank – the need for the state to withdraw from areas of infrastructure. It has been discussed earlier how in the area of Health the Bank feels compelled to slightly dilute its position, but regardless of that, this remains an overriding concern in the Report. It is a position that needs to be addressed at a generic level, because the Bank’s position is dictated not by concerns of feasibility but by ideological considerations. These ideological considerations necessitate that the Bank make a case for a global push in developing countries, for the state’s withdrawal from areas of infrastructure. Yet, it is a germane question, whether such areas are at all amenable to market forces, and if so at what stage. As has been pointed out, “It is common knowledge that savings/investments (and labour productivity and incomes) are low in a developing country. There is no `market demand’ for basic infrastructure services. This is where Adam Smith’s famous argument in favour of the State – erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a society, are however, of such a nature that the project would never pay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain – becomes obviously relevant.” (16)

It would be interesting here to examine in some detail the kind of spending that is done by countries on health care and the percentage of such spending that is borne by the public sector.

An analysis of this data shows very clearly that countries with higher income levels spent a larger percent of Gross Domestic Product on Health and, further, these countries also have a significantly higher percentage of these costs paid for by the public sector. Thus what we have here is a clear illustration of the fact that developed countries have been consistent in following the logic that development of health infrastructure requires state funding. Yet the Bank tells us, arguably at the behest of these very same countries, that in order to accelerate economic growth developing countries must cut public spending on health infrastructure. This is however not a novel method of argumentation any more – we have heard similar logic being put forward in the pressure being put on developing countries to change consumption patterns in order to reduce the threat of ‘Global Warming’ while the global North can merrily continue its unsustainable consumption pattern.

So the Report has a series of recommendations designed to operationalise the withdrawal of the state, like reduction in support to medical education, research activities, tertiary care etc. To legitimise this the report cleverly ‘uses’ the terms of discourse common among public health professionals and social and community health activists. Concern is expressed for poor communities and women, and a case is sought to be made for reduction in tertiary care expenditure so that the same could be reallocated for primary health care. The issue which it skirts in the process is that infrastructure development does not take place piecemeal. There are certain minimum facilities that need to be built up, irrespective of their level of deployment. Thus for example, it is not feasible to have primary health care exist in a vacuum without tertiary facilities also being set up. In fact the report itself contains reference of previous infrastructure development in developing countries having helped in partially tiding over the disastrous consequences of Adjustment Programmes in many countries, when it says, “….especially in the earliest adjustment programs, recession and cuts in public spending slowed improvements in health. This effect was less than originally feared however – in part because earlier expenditures for improving health and education had enduring effects.” (emphasis added) (17) Yet the final prescription is to cut down on infrastructure development, if not totally withdraw from it.

The concept of targeting is used to argue for the narrowest possible base of beneficiaries for the minimum package suggested by the Bank. The principal villain, that we are told, needs to be excluded in this exercise is the organised working class – a section which finds repeated mention as being responsible for garnering too many benefits of government supported programmes. One may argue about the truth in the specific charge made against the organised working class, but it should be understood that the Bank is also making a specific political point. While a market demand does not ordinarily exist for infrastructure development, organised sections of the working people can and do orchestrate such a demand. This has been so in all developed countries at various points in their history, and infrastructure development in these countries has been accelerated by such organised demands – in addition of course to the real needs of their ruling classes. Thus if the Bank today is seen to be harsh on these sections, such an attitude is also designed to stifle islands of organised demand for infrastructure development in developing countries.

Finally, the report also indicates how donor agencies would and should modulate policies of developing countries and give them the ‘desired’ direction. A veiled threat is implied in the following assertion – “Countries that are willing to undertake major changes in health policy should be strong candidates for increased aid, including donor financing of recurrent costs.”(18)

Future Trends in India

India’s situation in terms of spending of Health Care is different from most developing countries on two counts. At 6% of GDP spent on health care, India spends more on health care in percent terms than most developing countries. At the same time, at 21.7%, public spending of the total expenditure on Health Care, India is one of the lowest in the world, both in actual terms as well as in percentage terms. Health spending in India is thus already heavily distorted in favour of the private sector. There are signs that the distortions will further sharpen as India embarks on a ‘corrective’ course under the tutelage of the World Bank. On the one hand trends of charging fees in public health facilities have started gaining ground, and the emphasis on ‘Vertical Programmes’, i.e. programmes designed to follow the World Bank’s piecemeal, cost-effective return based approach, is being strengthened. The Indian government receives a pat on its back on this count in the report – “In India, where state governments account for more than three-quarters of total public spending for health, the central government is attempting to act as a catalyst for more cost-effective resource allocation by earmarking its funds for immunization, treatment of leprosy and tuberculosis, and AIDS control.” (19) The message is clear – the central government is valiantly trying to cover up for the ‘wasteful’ state governments. In its recruitment policies too the government is looking for avenues to cut down on infrastructure, a step which too the report finds cause to comment favourably upon – “In India the Ministry of Health is planning to hire 8,000 workers for a leprosy control project on a per diem basis rather than engage them as civil servants with virtual lifetime guarantees of employment. (20) (Note : This is part of a Rs.302 crore World Bank project in 66 endemic districts for Leprosy Control. It is a nice illustration of how donor agencies, while providing only a small part of health care costs, can determine policy directions.)

On the other hand private medical colleges are sprouting and there is a proliferation of private facilities catering to the ‘high end’ of the market, or one can argue the only actual market that exists for health care. The movement is towards creation of islands of ‘excellence’ in general conditions of subsistence existence. However, how far such islands are sustainable in the absence of government supported infrastructure is a moot point. It has not happened in any country till date, to the limited exception of the United States, though even there the extent of public funding is as high as 44% of total health care costs.

Conclusion

A lengthy conclusion is not being attempted here, as the inferences are fairly simple to draw. At the risk of repetition, it may be mentioned that the WDR 93 is a fire-fighting measure drawn up by the World Bank, after the feed back received about the disastrous consequences on health care of Adjustment Programmes in many countries. Having set out to do so, the report appears to have had to contend with too many contradictory impulses. Thus, while setting out to work out the case for a ‘safety net’ the report ends up in re-emphasising the virtues of state sector withdrawal from health care. In other words it only manages to reiterate the same policies which had compelled it to think of the necessity for a safety net in the first place. Strangely, this is being attempted in the background of the fact that developed countries show little signs of actual dismantling of health infrastructures, which are publicly funded, in their own countries. India, has chosen to follow the World Bank’s logic. It is to be seen how long such a logic, and its attendant fallouts can be sustained.

References :

1) State of the World’s Children – 1992, p. 48, UNICEF, 1993

2) Ibid, p.51.

3) State of the World’s Children – 1990, p.1, UNICEF, 1991

4) World Development Report – 1993,Oxford University Press, 1993, p.45

5) Alma Ata Declaration – 1978, International Conference on Primary Health Care

6) World Development Report – 1993,Oxford University Press, 1993, p.45

7) Ibid, p.13

8) Ibid, p. 5

9) Ibid, p. 65

10) Ibid, p.81

11) Ibid, p.11

12) Ibid, p.118

13) Ibid, p.131

14) Bhatt. Ramesh, ‘The Private Health Care Sector in India’, Health for the Millions, p.3-4, Feb. 1994, VHAI.

15) State of the World’s Children – 1992, p. 34, UNICEF, 1993

16) Ghosh Arun, Infrastructure Development : The Economic Issues, paper presented at seminar on Infrastructural Issues in the Current Context, 7th Oct. 1994, Teen Murti, New Delhi, organised by Delhi Science Forum.

17) World Development Report – 1993, p. 165, Oxford University Press, 1993.

18)Ibid, p. 16

19) Ibid, p. 158

20) Ibid, p. 127

21) Ibid, p. 147

22) Ibid, p. 155

(Note : This is a slightly modified version of a paper presented at a Seminar on World Development Report 93 : Investing in Health, held at JNU on Dec.8-9 1994 and organised by the Centre for Community Health & Social Medicine.)