The rapid and massive privatisation of state assets that took place after the break-up of the Soviet Union was an important factor in the dramatic increase in death rates that followed the political transition in the early 1990s. This has important lessons for other countries thinking of embarking on similar transformations of their industries, such as China, and India. These are the conclusions of authors of an Article published Online First and in an upcoming edition of The Lancet, written by David Stuckler of the University of Oxford, UK, Dr. Lawrence King of the University of Cambridge and Professor Martin McKee, CBE, of the London School of Hygiene and Tropical Medicine, UK.
The authors analysed death rates among men of working age (15-59 years) in post communist countries of eastern Europe and the former Soviet Union between 1989 and 2002. Mass privatisation took place when at least 25% of large state-owned enterprises were transferred to the private sector within a two year period, typically by giving away shares, either to the public or to employees and managers. The authors adjusted for other possible explanations, such as trade and price liberalisation, income change, initial conditions, and historical levels of health.
They found that the presence of a mass privatisation programme was associated with a marked increase in deaths of 12.8%. More detailed analyses indicated that the 56% increase in unemployment during this period played an important part in the increased mortality, an unsurprising finding as many employers had provided extensive health and social care for their workers. However those living in some countries were able to withstand the shock much better than in others — here, the presence of social support networks seemed to be an important protective factor, as seen in the membership of church groups or labour unions. In countries where 45% or more of the population were members of at least one such social organisation, mass privatisation did not increase mortality. This study of the underlying determinants of increased mortality complements others that have looked at the immediate causes, in particular the role played by high levels of alcohol consumption and failings in health-care systems.
The five countries that experienced the worst mortality crises all implemented extremely rapid privatisation. Russia, Kazakhstan, Latvia, Lithuania and Estonia suffered a tripling in unemployment (up 305%) and a 42% increase in male mortality between 1991 and 1994. But other post-communist countries that adopted a much slower pace of change, gradually phasing in free-market conditions and developing appropriate institutions, fared much better. The best five performing countries were Albania, Croatia, Czech Republic, Poland, and Slovenia. These countries actually experienced a 10% fall in male mortality and only a 2% increase in unemployment.
The authors refer to a 1990 quote by the economist Jeffrey Sachs, who said in the London-based publication The Economist: "The need to accelerate privatization is the paramount economic policy issue facing Eastern Europe."* The authors conclude: "Did slow privatisation hurt the prospects for capitalism? ...Countries that privatised more slowly managed to reach a capitalist endpoint but did not absorb nearly the same amount of social costs along the way."
"The policy implications are clear. Great caution should be taken when macroeconomic policies seek radically to overhaul the economy without considering potential effects on the population's health. As variants of rapid reform policies are being debated in China, India, Egypt, and several other developing and middle-income countries—including Iraq—which are just beginning to privatise their large state-owned sectors, the lessons from the transitions from communism should be kept in mind."
In an accompanying Comment, Professor Martin Bobak and Professor Sir Michael Marmot, University College London, UK, discuss the other factors that could have contributed to mortality differences, for example, that countries that were most affected started from a lower economic baseline. They conclude: "With all the caveats, Stuckler and colleagues' study is relevant beyond eastern Europe. Countries in other regions are, and have been, undergoing economic and social transitions. That the extent and speed of such changes are important is increasingly apparent. Additionally, however, the social and health effect of transition depend on specific historical and political contexts."
University of Oxford, UK, Press Office T) +44 (0) 1865 280534 E) maria.coyle@admin.ox.ac.uk
David Stuckler, University of Oxford, UK T) +44 (0) 7726 422212 E) david.stuckler@aya.yale.edu / david.stuckler@chch.ox.ac.uk
Lawrence King, University of Cambridge, UK T)+44 (0) 7912892788 E) lk285@cam.ac.uk
Martin McKee, London School of Hygiene & Tropical Medicine T)+44 (0) 7973832576 E) martin.mckee@lshtm.ac.uk
Professor Martin Bobak, University College London, UK T) +44 (0) 20 7679 5613 (+44 (0) 20 7679 1694 for Professor Marmot) E) m.bobak@ucl.ac.uk
For full Article and Comment see: http://press.thelancet.com/privatisationfinal.pdf
Notes to editors: * Sachs J. "What is to be done?" Economist (London), Jan 13, 1990: 19��.
Journal
The Lancet