When Larry Summers and 266 other economists lobbied the UN for change, it wasn’t filled with the stereotypical phrases you would hear from a hard-headed economist. Summers and his colleagues talked about one topic: health. Health is an oft-neglected subject in discussions of economic growth in developing countries; access to financial markets, education, and gender equality tend to dominate. But it is perhaps the most effective of all tools for poverty reduction. And here’s why.
Education is considered the pinnacle of weapons in fighting poverty. In breaking the ‘poverty cycle’, qualifications are pivotal. It is not surprising that a person without high-school qualifications has a significantly increased risk of unemployment.[1] The differences become more pronounced when one considers tertiary education—a longer life expectancy has implications for the incentives for attaining higher education. Firstly, those who expect to live longer will have an incentive to invest in their own education, as they are more likely to reap the full benefits of their qualifications. Also, they can afford to sacrifice years of full-time work to achieve these aims, given that they anticipate higher future earnings. Secondly, a longer lifetime increases the ability to improve on one’s own human capital. Health influences how much an individual works, and therefore, how much ‘learning by doing’ they accrue throughout their working life. Thus well-being has a substantial effect on future earnings.[2] The negative relationship between illness and the accumulation of human capital means that a population without universal access to healthcare is in danger of losing international competitiveness.
Another key benefit of healthcare can be seen through the concept of externalities. A healthy population creates a positive externality; by preventing or quickly curing illness, governments can reduce the spread of disease (those who are as yet unaffected by the disease benefit in this case). The ability to stop a disease in its tracks can be the difference between an isolated outbreak and an epidemic. The concept of benefit can be seen clearly through the provision of vaccines. Vaccinations for prevalent illnesses are given at a young age to prevent people from contracting illness and spreading it to their peers (who are also likely immune). In fact, in the long term, vaccination actually saves money (by reducing the need for medical attention in the future).[3] The other aspect of this externality is that the market will not produce the socially optimal quantity. Hence the government is required to rectify the market failure through intervention (providing health services, in this case).
Health is even more relevant when one considers the type of communities that poor countries typically comprise. Affluent countries are privileged with ‘safety nets’, whilst individuals in developing states typically rely on family members to support their standard of living. When a person is struck down with a serious illness, the family is hit twofold; they need to pay the cost of medical attention, and (if the family member is income earning) they suffer a loss of total income. Whilst individuals may undertake some ‘consumption smoothing’ (attempting to maintain a consistent amount of consumption over a period of time), it is unlikely they will be able to fully compensate for the illness—nor will they be able to rely on private insurance markets to help them back onto their feet.[4] The population of a developing country is therefore dependent on the state to provide health services, in lieu of private alternatives. So why are governments so reluctant to contribute?
Though there are clear benefits to pursuing universal healthcare, it is not without fault. Governments may be reluctant to pursue the policy given it is costly in the short term, and the full benefits may not be seen for generations to come. In the era of short-termism for democracies this is a crucial sticking point. Further barriers can be found in the lack of organisational guidelines, social factors, institutions, and the political environment.[5] The under-supply of highly qualified professionals and necessary investment in costly infrastructure may put off governments from potentially pursuing healthcare reform. From this we can understand where Summers and his colleagues are coming from—if the goal of accessible healthcare is to be achieved, extra-institutional support is needed.
It is not enough for the United Nations to plead with governments for cooperation—they need to contribute if they are serious about eradicating poverty. Unfortunately governments in developing countries are not always willing to commit to such huge projects (for the reasons mentioned above). The United Nations has identified the provision of health services as one of its development goals. This is only talk. Concrete action is needed in an area which is all too often ignored. Ultimately we have to rely on institutions like the United Nations to give healthcare reform a real ‘shot in the arm’ it deserves.
References
[1] Caspi, A., Wright, B. R. E., Moffit, T. E., Silver, P.A. (1998) ‘Early Failure in the Labour Market: Childhood and Adolescent Predictors of Unemployment in the Transition to Adulthood.‘ American Sociological Review, Vol. 63, no. 3. pp. 424.
[2] Hokayem, C. & Ziliak, J. P. (2014) ‘Health, Human Capital, and Life Cycle Labor Supply.‘ American Economic Review. Vol 104, issue 5, p. 127–131.
[3] Chabot, I., Goetghebeur, M. M., Gregoire, J. P., (2003). ‘The Societal Value of Universal Childhood Vaccination.‘ Vaccine, Vol. 22, issue 15, pp. 1992–2005.
[4] Gertler, P., and Gruber, J. (2002). “Insuring Consumption Against Illness.“ American Economic Review, 92(1): 51–70.
[5] Barandaran-Sayed, Z., Nedjat, S., Yazdizadeh, B., Nedjat, S., Majdzadeh, R. (2013) ‘Barriers to Clinical Practice Guidelines Development and Implementation in Developing Countries: A Case Study in Iran.‘ International Journal of Preventative Medicine. Vol. 43, issue 3. pp. 340–348.