Austerity: a weapon to attack public services

“The unity and determination of nurse and healthcare worker unions to come together and push to protect all our people is a profound expression of how deeply the neoliberal agenda is devastating countries and lowering standards worldwide.” — RoseAnn DeMoro, Executive Director National Nurses United
“The unity and determination of nurse and healthcare worker unions to come together and push to protect all our people is a profound expression of how deeply the neoliberal agenda is devastating countries and lowering standards worldwide.”
— RoseAnn DeMoro, Executive Director National Nurses United

Australia came through the global financial crisis largely unscathed. Not so other countries, where austerity policies introduced in the wake of the GFC are being used to dismantle public services including healthcare systems.

For many nursing unions throughout the world, the dominant theme of the Global Nurses United day of action on September 17, was opposing their government’s austerity policies, which are corroding their public health systems.

In New York, members of National Nurses United led a large coalition of community organisations opposing austerity and advocating for an alternative economic strategy, including the implementation of a financial services tax. This “Robin Hood” tax would reduce the volatility of the financial markets and provide a substantive revenue stream for governments to fund decent public health systems.

“The unity and determination of nurse and healthcare worker unions to come together and push to protect all our people is a profound expression of how deeply the neoliberal agenda is devastating countries and lowering standards worldwide,” said RoseAnn DeMoro, executive director of National Nurses United.

This sentiment was echoed across the Pacific in the Philippines.

“Filipinos and others in developing countries can never have healthy living with the worsening economic and political situation that further deprives them of their right to health. Health, being a basic right, should never be used for profit and should remain mainly as a state responsibility,” said Jossel Ebesate, national president of the Alliance of Health Workers (Philippines).

Nursing unions in Europe, Latin America, Asia and Africa face similar threats and challenges arising from austerity.

A response to the GFC

Austerity policies were implemented as a response to the global financial crisis, which began in 2007 and remains unresolved today in many countries. In the following four years, according to the International Monetary Fund, systemic banking crises occurred in 17 countries. The initial strategy in response to the GFC was stimulus spending by governments. However, from 2010 on, austerity became the core policy in many places.

According to a new report by the European Strategies Unit at the University of South Australia, austerity was intended to rapidly reduce public debt by a combination of cuts to public spending, reducing or freezing labour costs, tax increases and privatisation, alongside reconfiguring public services and the welfare state.

“This was despite the fact that the crisis was essentially a private sector failure caused by a failure of markets and deregulation, not by excessive government spending,” says the report.

“Austerity agreements brokered by the International Monetary Fund and the European Union include public spending cuts, tax increases, wage and pension cuts, public sector reform and privatisation. Public sector cuts account for 75% of austerity measures in the UK between 2010-11 and 2014-15.

“The socialisation of losses and privatisation of profits is the prime political and economic objective of austerity. Working people and the poor are made to pay for the failure of the banks, financial institutions and regulatory regimes.”

Attacks on pay and pensions

Austerity policies have reduced the take home earnings of workers by between 5% and 20% in most European countries since 2008. They include pay cuts, reducing the starter pay of new workers, pay freezes, the withdrawal or reduction in allowances, bonuses and overtime payments.

Ireland imposed a pension levy equivalent to an average of 7.5% of pay, changed pension arrangements, raising the minimum retirement age from 65 to 66, and based pension payments on career average earnings instead of final salary.

In the United States the iconic industrial city of Detroit filed for bankruptcy in 2013 with $18.5 billion debt. The city of Stockton in California and Jefferson County in Alabama preceded it. Another 28 utilities, water districts, hospital authorities and other municipal bodies went bankrupt in the same period.

Bankruptcy and financial crisis has meant renegotiation of employment contracts, drastic cuts in services, reduction of pension fund obligations for current workers, outsourcing and privatisation.

Health systems devastated

Many European countries have reduced per capita spending on healthcare. According to the World Health Organisation health systems have suffered closures, increases in a wide range of patient charges, and longer waiting times. Spain shifted health coverage from a universal to an employment-based system in 2012.

Recession has led to increased suicide rates in Europe and the US. A long-term decline in infant mortality in Greece has reversed since 2008, with two consecutive years of increases. The number of stillbirths increased by 38% since 2008 (WHO 2013).

The internationally renowned health economists Stuckler and Baus concluded that not only did “the IMF underestimate austerity’s economic harms but it overlooked the even greater damage that resulted from cutting public health.”

The economic and social effects of austerity

2.2 million public sector job losses have followed deep cuts in public spending in Britain, the United States and Spain.

5.5 million young people are unemployed in the European Union.

Cuts in wages, benefits and pensions have reduced take home earnings by up to 20%.

The financial crisis led to the bankruptcy of several US towns and cities including Detroit, once an icon of US industry.

10-31% of mortgages were in negative equity in Britain, US, Spain and Ireland in 2012-13.

Austerity has increased poverty and widened inequality.

Public services and the welfare state are being reconfigured to embed marketisation and privatisation in parallel with austerity.