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Life A.D. (After Drummond), Part 2: Structural adjustment for Ontario?

Posted by Ted Schrecker
Ted Schrecker
Ted Schrecker is a clinical scientist at the Élisabeth Bruyère Research Institut
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on Lundi, 19 Mars 2012
in CHNET-Works!

On February 15 the Government of Ontario released a far-reaching report on reorganizing public service provision in response to the budget deficits that followed the post-2008 recession. The central theme of the report was that “just to meet the government’s goal of a balanced budget seven years hence, the government will have to cut even more deeply from its spending on a real per-capita basis, and over a much longer period than the Harris government did in the 1990s, without the option of an immediate deep cut in social assistance rates” (p. 121). Ontarians will remember that the Harris government cut those rates by 21 percent almost immediately after coming to power. Despite some increases, in 2009 they remained (depending on the type of household receiving assistance) between 17 and 38 percent lower than in 1996 after adjusting for inflation, according to the National Council of Welfare.

The Commission says much that is important and worthwhile about health care in Ontario, starting with the recognition that Ontario does not really have a health care system, but rather “a series of disjointed services working in many different silos” (p. 152), and that Ontario health care does not perform well based on international comparisons. Well grounded hypothetical descriptions of patient trajectories spotlight shortcomings in health care performance (pp. 153, 159, 164), measured against what ought to happen as a matter of routine. The report makes a compelling case for improving coordination among the silos, through measures both large and small, and making the non-system’s current approach to complex and chronic conditions (the management of which is also very costly) more effective – all of which should have been accomplished long ago, for reasons unrelated to cost. The report urges “aggressive” negotiation with the Ontario Medical Association on compensation (p. 189) – bringing to mind Robert Evans’ long-standing insistence that "cost containment is in aggregate income control, by definition" – and, perhaps more importantly from a health policy perspective, insists on moving “critical health policy decisions out of the context of negotiations with the Ontario Medical Association and into a forum that includes broad stakeholder consultation” (p. 185).

life-ad-part-2-pic-1 A leaner, meaner Ontario: Locked out workers at the Electro-Motive plant in London, Ontario, January 2012. Photo: CAW Media; reproduced under a creative commons licenceAlthough such changes are overdue, hard questions remain unanswered. The Commission proposes to strengthen Ontario’s 14 Local Health Integration Networks (LHINs, the province’s variation on regional health authorities) so that they can improve coordination among silos and health care management in general. But can these entities accomplish such critical tasks as ensuring that best practices are rapidly adopted province-wide? What are the pitfalls of specifying that the accountability of LHINs, currently with no requirements for public participation, is to the Ministry of Health, as per the Commission’s recommendations, rather than to the clients they serve? And the proposed transformation of an organization called Health Quality Ontario, now an advisory body, into “a regulatory body to enforce evidence-based directives to guide treatment decisions and OHIP [Ontario Health Insurance Plan] coverage” (p. 186) could be a dream or a nightmare. Since “nothing works” is a fiscally attractive conclusion, we can imagine immense pressure to compromise transparency and scientific integrity, and ignore standard of proof issues, in the interests of cost containment.

The report further acknowledges the importance of social determinants of health: “Socio-economic factors such as education and income explain 50 percent” of population health outcomes, and the physical environment another 10 percent (p. 132) although the percentages, drawn from a Canadian Senate Committee report, appear to be guesstimates and no supporting evidence is provided. This acknowledgement is ironic, to say the least, given what the Commission has to say about social policy.

The Commission’s proposed 0.5 percent limit on annual spending growth for all social programs means that no increase in social assistance rates is envisioned, despite the decline from mid-1990s levels. In fact, the Commission proposes slowing the provincial takeover of social assistance costs downloaded to municipalities during the Harris era (p. 483), prolonging the nineteenth-century practice of leaving “poor relief” to local governments. (Unfortunately, some surveys find that nineteenth-century attitudes toward economic hardship remain widespread.) No new resources are contemplated for social or affordable housing, despite the existence of multi-year waiting lists in much of the province. As the Toronto Star’s Thomas Walkom and a policy analyst for the Ontario Nurses’ Association have pointed out, despite Drummond’s long career as a professional economist, the report ignores the employment consequences of taking billions of dollars out of the provincial economy. Walkom predicts that implementation of the Drummond recommendations would cause unemployment in Ontario to rise to 11 percent by 2018, “even without another global crisis”. Poverty reduction is nowhere acknowledged as a legitimate goal or priority of government; indeed, the word “poverty” appears only six times in the text of the 562-page report.

To put this discussion into context: on Thanksgiving weekend in 2010, the Premier of Ontario was quoted by CBC News as urging Ontarians to donate to food banks, and in March, 2011 395,000 Ontarians relied on a food bank to feed themselves at least once. Rents and food prices are not going down. So the Commission has said to a significant proportion of Ontarians: forget about any hope that your opportunities to lead a healthy life will improve before 2017-2018. The cupboard is bare.

But is it, really? In order to answer this question, we have to look at both the revenue side and the expenditure side of Ontario’s public finances, in historical perspective. The Commission itself emphasizes that “spending is neither out of control nor wildly excessive. Ontario runs one of the lowest-cost provincial governments in Canada relative to its GDP and has done so for decades” (p. 5). Further, it notes that the provincial treasury’s “own-source revenues” – taxes and user fees collected by the province, as distinct from revenues received from federal transfers – as a percentage of provincial Gross Domestic Product (GDP) were considerably lower (13.65 percent) in 2010-2011 than in 1999-2000, midway through the Harris era (15.9 percent). Although precise comparisons are impossible, this is consistent with estimates by the Canadian Centre for Policy Alternatives that, every year since the start of the century, provincial tax cuts (mainly in personal income tax rates) begun in 1995 have reduced revenues by between $10 billion and almost $18 billion relative to the revenues that would have been received if tax rates had remained at their 1994-95 levels. In other words, well before the post-2008 and its undeniable effects on revenue stream, the province’s fiscal capacity was suffering from major self-inflicted wounds.


The Commission was instructed not to consider the possibility of raising taxes. However, as shown in the illustration, if we accept the Commission’s estimates of the growth of the provincial economy and the spending restraints incorporated into the Drummond Commission’s “preferred scenario,” but are willing to consider tax increases sufficient to return own-source revenues as a percentage of provincial GDP to their 1999-2000 level by 2017-2018, we see that the budget is in surplus by more than $22 billion. Stated another way, if the province were to pursue what Hugh Mackenzie of the Canadian Centre for Policy Alternatives has called “an adult conversation about the public services we need and the revenue we are going to have to raise to pay for them,” the provincial budget could be balanced in the target year while making available $22 billion more than the Drummond projections for program spending. According to one commentator the province is not even planning pre-budget legislative hearings, thus making it difficult to start such a conversation. Indeed, the Commission’s description of the provincial budget as “a powerful educational tool” (p. 13) suggests that most of the key immediate decisions have already been made. Its proposal for a centralized expenditure management process involving the Premier’s Office, Cabinet Office and Ministry of Finance that “should stay in place for at least several years” warns of little room for debate in the future (pp. 140-141). Shouldn’t public finance be a matter for public debate?

At several points in its report the Commission underscores the difficulties created by the government’s refusal to consider tax increases, anticipating (for instance) a $38.5 billion shortfall in financing planned and necessary public transit investments in the Greater Toronto and Hamilton Area. For those who can afford to drive everywhere, this means only the inconvenience of more traffic jams; for those who can’t, it may seriously limit mobility … and of course that foregone investment also means lost employment. The Commission states that its budget-balancing strategy would mean “tough decisions that will entail reduced benefits for some” (p. 69) – although not, it seems, for everyone. On the matter of soaring compensation for people like Drummond’s fellow commissioners at the top of public sector salary scales, the report says that “focus must remain on the larger picture, which is the government’s need to get the right people into the right positions at a cost that is both compatible with its fiscal circumstances and appropriately aligned with private-sector compensation” (p. 138). Well, workers at Electro-Motive Diesel’s London, Ontario plant know about that kind of alignment: they were locked out after refusing a 50 percent pay cut before the parent company closed the plant and moved the work to Indiana. In the Ontario of tomorrow, it seems that what Saskia Sassen calls “the savage sorting of winners and losers” characteristic of the contemporary global marketplace is to be accepted, and indeed welcomed.


Any assessment of the Commission’s implications for population health (and never was there a better example of the need to apply health equity impact assessment to macro-scale economic and social policies) should keep this in mind. As pointed out by (among others) economist Erin Weir of the United Steelworkers, there is quite a bit in the report that those of us committed to social justice can support. At the same time, the report is about much more than public finance. Effectively, it recommends for Ontario a variant of the structural adjustment programs* of marketization and social policy retrenchment demanded by the International Monetary Fund in return for loans enabling low- and middle-income countries to reschedule their debts to external lenders, in the process creating widespread economic hardship and seldom leading to long-term economic improvements. Equity, for both the IMF and the Drummond Commission, was an unaffordable luxury. Against a background of worsening economic disparities that would be further magnified in the future envisioned by the Commission, what is the future of health equity in Ontario? And who will decide?


* For readers unfamiliar with the history of structural adjustment, two excellent recent review are Babb, S. (2005), The Social Consequences of Structural Adjustment: Recent Evidence and Current Debates, Annual Review of Sociology, 31, 199-222 and Pfeiffer, J. & Chapman, R. (2010), Anthropological Perspectives on Structural Adjustment and Public Health, Annual Review of Anthropology, 39, 149-165. Unfortunately, so far as I know neither of these is available on an open-access basis.

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“Divided we stand”: OECD on inequality, and reasons for caring

Posted by Ted Schrecker
Ted Schrecker
Ted Schrecker is a clinical scientist at the Élisabeth Bruyère Research Institut
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on Vendredi, 06 Janvier 2012
in CHNET-Works!

The Organisation for Economic Co-operation and Development (OECD) is a group of high-income (and some middle-income) countries that historically has paid attention mainly to conventional economic indicators such as growth, productivity and innovation. It does other things as well, including providing some of the best statistical overviews and assessments of its members' foreign aid performance. And recently, it has been addressing the consequences of increasing economic inequality within the borders of many of its members.

Divided-we-stand-pic-1Ermenegildo Zegna Boutique in Chile, one of the OECD’s most unequal countriesA December 2011 OECD report provides a description of those increases, an analyses of their causes, and country-by-country data that have some sobering implications for Canada. The report finds that income inequality increased in most OECD countries over the past three decades, although the level of inequality varies widely. The average income (adjusted for household size) of the richest 10 percent of the population is 5 or 6 times the average income of the poorest 10 percent in the Nordic countries, but 10 times that of the poorest in Canada, 14 to 1 in the United States, and 27 to 1 in Mexico and Chile. The report identifies a number of contributors to rising inequality of market incomes, including several aspects of globalization; technological change (which to the authors' credit it describes as hard to disentangle from globalization); changes in hours worked, which have favoured higher earners; and changes in household structure.

There is much room for debate here, notably about the role of globalization and the reasons for rising labour market incomes at the top of the income distribution, which have played a major role in increasing inequality, but also about the OECD's view that inequality can be reduced through raising workers' educational levels. This is worth doing, but effects on inequality are likely to be offset by growth in the kinds of work susceptible to 'offshoring'. For policy purposes, a point of particular interest is how taxes and benefit systems change the distribution of income, and how their effect varies across countries and over time. Like earlier analyses, the report points out that taxes and benefits in some countries (many in Continental Europe) are more strongly redistributive than in others (like the United States and Chile). Generically: "Until the mid-1990s, tax-benefit systems in many OECD countries offset more than half of the rise in market-income inequality. However, while market-income inequality continued to rise after the mid-1990s, much of the stabilizing effect of taxes and benefits on household income inequality declined."

The country note for Canada points out that the share of all income flowing to the richest 1% of Canadians grew from 8.1% in 1980 to 13.3% in 2007 – a trend that closely parallels an even more extreme pattern in the United States, where the income share of the top 1% is now higher than at any point since the Great Depression. (Readers interested in exploring comparative trends in top incomes may want to explore the World Top Incomes Database.) The OECD also points to the declining redistributive effect of Canadian taxes and transfers – a point made a few years ago in a Statistics Canada study, which observed: "Redistribution grew enough in the 1980s to offset 130% of the growth in family market-income inequality -- more than enough to keep after-tax income inequality stable. However, in the 1990-to-2004 period, redistribution did not grow at the same pace as market-income inequality and offset only 19% of the increase in family market-income inequality." The OECD note identifies a somewhat less dramatic retreat from redistribution, reflecting the fact that many ways of doing such calculations exist - for example, the OECD study restricted its analysis to the population aged 15-64 - but the general trend is clear.

Why should population health researchers be concerned with rising economic inequality? There are several reasons, most of which are familiar. First, rising inequality may lead to increases in poverty, however it is defined, although that is not necessarily the case. Second, socioeconomic gradients in health usually exist across the entire income spectrum. Intuitively, we would expect these gradients to be steeper when economic gradients are also steeper, other things being equal, although this is a difficult proposition to test because of the impact of policies that do not directly affect income distribution. Third, income inequality is only part of the story: wealth inequality, which the OECD study did not address, is normally greater than income inequality, and insecure and precarious jobs (which have their own health implications, including higher exposure to on-the-job hazards) are concentrated at the bottom of the income scale. Fourth, it is argued – notably by Richard Wilkinson and colleagues – that higher levels of economic inequality within a society lead to overall lower levels of health, although the mechanisms of action remain unclear.

Divided-we-stand-pic-2Photo by Paul Keller, reproduced under a Creative Commons LicenceA final reason has received less attention in the context of health policy; it involves a phenomenon that former US Cabinet secretary Robert Reich called the "secession of the successful". Past a certain high level of income and wealth, people need less from government, and different things. As one Arizonan interviewed for an article on politics in that state put it: "People who have swimming pools don't need state parks. If you buy your books at Borders you don't need libraries. If your kids are in private school, you don't need K-12. The people here, or at least those who vote, don't see the need for government." To which we could add: people who can afford to drive or fly everywhere don't need public transportation; people with secure incomes gain little from public financing of social or subsidized housing; people who could afford private insurance may resist paying taxes to keep a public health insurance system afloat for the less healthy and less wealthy; and so on.

What happens to the political prospects for reducing health inequity by way of social policy when a small but highly influential segment of the population needs government mainly for roads, police and prisons – and perhaps regards enhancing its own security through private purchases as routine? I recently returned from a workshop in Johannesburg, one of several South African cities that are more economically unequal than any other developing world cities included in United Nations Human Settlements Programme study (p. 73). The workshop was held in a guest house with an electronically activated gate, in a suburb where many properties were fenced with razor wire, and almost every one boasted a private security service's "armed response" sign. This is commonplace in South African cities. From Arizona to South Africa, does the interaction of inequality and privatization suggest a self-reinforcing process that can only be reversed through internal revolt or catastrophic external events (think the Great Depression and the second World War)? Health economist Robert Evans, quoted in a previous posting, wonders: "If we are back to a pre-war income distribution, how much of our post-war social policies can survive?" We should pay more attention to this question.

1The Gini coefficient, a standard measure of income inequality, in Johannesburg is 0.75 according to this study – more unequal than the national distribution of income in any country in the world. By comparison the Gini coefficients in Mexico and Chile, the two most unequal countries in the OECD, were 0.494 and 0.476 in the late 2000s, according to the OECD.

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“Logics of expulsion”

Posted by Ted Schrecker
Ted Schrecker
Ted Schrecker is a clinical scientist at the Élisabeth Bruyère Research Institut
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on Vendredi, 09 Décembre 2011
in CHNET-Works!

saskia-sassen-picAt the Global Health Conference in Montréal last month, I had the privilege of being on a panel with Saskia Sassen, the Robert S. Lynd Professor of Sociology at Columbia University. She is one of the most intellectually sophisticated scholars writing in English (and indeed in various other languages) about how globalization is transforming societies rich and poor alike – and in the process affecting who has the chance to live a long and healthy life.

Saskia Sassen is perhaps most closely identified with her research on the global cities (New York. London, Tokyo) that function as command centres for the world economy. Her subsequent research expanded, in various ways, on how global reorganization of production and (especially) finance has redistributed power. In a 1996 book called Losing Control? Sovereignty in the Age of Globalization, she wrote about the shift of power from citizens to unaccountable coalitions of investors who comprise "a sort of global, cross-border economic electorate, where the right to vote is predicated on the possibility of registering capital." In the preceding year, a Wall Street Journal editorial warned financial markets of the need for "dramatic action" in the federal budget; political scientist Donald Savoie argues that this warning played a major role in the $29 billion in federal spending cuts that followed. At a time when bond markets and credit rating agencies have more say over the fate of many European governments than their own electorates, Sassen's observation is more important than ever.

Her most recent project is even more relevant to population health. She argues that contemporary globalization is generating "a savage sorting of winners and losers" within as well as across national borders, continuing and intensifying a pattern that began with the use of structural adjustment programs – familiar to many in the global health field – as a "disciplining regime" in the aftermath of debt crises. More specifically, she describes new and often brutal "logics of expulsion". One of these involves the phenomenon of land grabs: large-scale purchases or long-term leases of productive agricultural land by food-importing countries or transnational agrifood corporations. North American media have been predictably silent on this topic, but it has received considerable coverage in The Guardian, which is the English-language paper you need to read if you really want to know what is going on in the world.

Another logic of expulsion arises from the aftermath of the 2008 collapse of the market for securities backed by sub-prime mortgages. In a remarkable video of a presentation to a September, 2011 homelessness conference (basically a longer version of her Montréal presentation), Sassen points out that subsequent foreclosures in the United States have created a largely invisible army of close to 30 million displaced people, including many who were renting properties that were foreclosed. The state, through law, has been an active participant in these expulsions. We have, as she points out, gone far beyond the anodyne language of social exclusion that has recently become popular in some social and health policy circles.

Sassen also makes the critical point that profits made from the securities in question were completely unrelated to whether or not the people originally taking out the mortgages had any hope of making the payments; profits were made, rather, by packaging and selling on the mortgages. Predictably, homelessness – which is not good for your health – is on the rise in the United States. Another illustration of the consequences of the crisis in the country where it originated: in September 2011, a record one in seven Americans was receiving the food vouchers commonly known as Food Stamps, and millions more were eligible. Like the proliferation of foreclosures, this new pattern of impoverishment can be traced directly to domestic and international policy choices designed to create new profit centres in the global financial services industry, on the principle that markets know best.

Photo by Joseph Bergantine,
licensed under a Creative Commons United States licence

In intellectual terms, the events of 2008 confirmed that idea's zombie status (as Bob Evans, featured in my previous posting, would say), but the zombie masters have revived it with frightening tenacity. The statistics from the United States also show that the study of globalization and health can no longer focus on distant countries 'out there'. In the future, wherever we are in the high-income world (think about the 46 percent youth unemployment rate in Spain), globalization's casualties will live among us, sometimes literally in the shadows of the glittering towers where globalization's winners live, work and play.

I have only scratched the surface of Saskia Sassen's work, but have tried to show why everyone concerned with health equity should consider it indispensable. Read it, and you'll quickly understand why the December, 2011 Foreign Policy "top 100 global thinkers" features her as the first sociologist to make the list.

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  • Paul Hasselback
    Paul Hasselback says #
    Thanks Ted for continuing the excellent dialogue on linking economic, trade and globalization policies to the inequitable distribu...
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