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HEALTH: Neoliberalism not Liberal Enough for AIDS Investments

Matthew Berger

WASHINGTON, Mar 2 2010 (IPS) - Neoliberal economic ideas have grown increasingly dominant over the last 30 years. During that same time, the spread of HIV/AIDS has reached an epidemic crescendo.

This is more than a coincidence, argues Rick Rowden, author of the new book “The Deadly Ideas of Neoliberalism: How the IMF has Undermined Public Health and the Fight against AIDS.”

Rowden, who is a senior policy analyst at ActionAid, has long been critical of the way in which the restrictive spending policies of the International Monetary Fund and the World Bank have, in his view, set up a framework in which public health priorities go underfunded in the countries which receive aid from these international financial institutions.

This argument is detailed in his new book and last week he made his case at the IMF itself.

“The development that is needed has been pursued by the IMF and World Bank over these last decades in a way that has led to an inability of countries to invest properly in health…and the consequences of that have unfortunately been felt by the people on the ground in those countries,” Rowden said in a panel discussion at the Fund’s headquarters here.

The problem seems to be the amount of space available for funding health priorities like combating AIDS under the public spending and inflation restrictions imposed by the Fund on the countries to which it lends.

The IMF’s development strategy has historically tried to encourage economic development through a neoliberal strategy that limits countries’ public spending for fear they will go too far into debt or that it will impede the development of the private sector. But Rowden says this philosophy is flawed and is a real hindrance to the developing world – both in their fights against AIDS and their general economic development.

“I think there was this mythology in neoliberalism where if you just got government out of the way business would flourish…but public investment is essential for long-term economic development,” he said.

He credits subsidies and public research policies for helping rich countries beef up their domestic companies and their economies, but these policies in which government is directly involved in the private sector are inimitable with the tenets of neoliberalism.

“What neoliberalism has done is create a false dichotomy between governments and their domestic companies,” Rowden said, explaining that neoliberalism has imposed a “divorce” between government and private firms in which “companies sink or swim.” He contends this relationship should instead be one in which companies and countries “rub each others’ backs.”

His critique of the IMF clearly goes beyond the institution’s impact on the spread of HIV. He argues that the spending and inflation limits it imposes directly impact the ability of countries to invest in researching better ways to combat the disease as well as to limit its impact on their populations.

But the international financial institutions (IFIs) appear increasingly open to criticism and new ideas, as evidenced by the Fund’s hosting Rowden last week.

Peter Berman, lead economist of the Bank’s Health and Nutrition Department, felt that “the broad attack on neoliberalism is a bit out of date… I think we’ve moved on in many ways.” Even countries that claim to adhere to neoliberal policies don’t actually all have the same policies, he noted.

Berman does not think “the world we’re living in is a world where the IMF and World Bank are imposing their will on countries.”

For his part, Rowden says he is “glad to see some new thinking coming out the IMF recently.”

AIDS killed two million people in 2008, according to the most recent United Nations estimates, released in November 2009. An estimated three-quarters of those deaths were in Africa. Another 31.1 to 35.8 million people were living with HIV or AIDS that year – between 20 and 24 million of those in Africa.

Sanjeev Gupta, deputy director of the IMF Fiscal Affairs Department, represented the Fund at last week’s discussion. He cited multiple studies, mostly to demonstrate that the IMF has spent significantly on health issues.

He argued that countries’ health budgets are domestic decisions. “If countries want to emphasise health, that should be reflected in their budgets,” he said, pointing out that countries generally allocate almost twice as much for education as for health. “I don’t know why, but that is the fact,” Gupta said.

Rowden contended that Gupta was largely missing the point of his argument, which is that “the tax base of developing economies is not growing, not that the IMF is not giving enough for health. The main question is why can’t domestic companies expand and contribute to the tax base. Are countries going to be dependent on aid forever? Show me how the tax base is going to expand.”

This tax base is crucial to funding public investment in health and elsewhere, but, he says, it is constrained by IMF restrictions on inflation and budget deficits.

He elaborated on this point in a December exchange on the IMF website: “The concern over such policies is that their degree of restrictiveness unnecessarily undermines the ability of domestic industries to generate higher levels of productive capacity, employment, and GDP output – and thus, tax revenues – than otherwise could be the case under more expansionary fiscal and monetary policy options.”

This means less revenue for everyday government expenditures as well as for long-term public investment.

“It is easy for the IMF to say, ‘We don’t tell countries not to spend enough on health’,” he said Tuesday, “but the problem is deeper.”

For him, it is the basic models of economic development that underlie IMF lending.

“What I would say to health advocates is you’re going to need a different approach,” Rowden said, explaining that it is not just about increasing the health budget but scaling up public investment as a whole. “If you want countries to really achieve any health goals over time…you need to ask what’s up with the model; where has it gone wrong?”

“Neoliberalism isn’t causative in the AIDS epidemic, but it couldn’t have come at a worse time” as far as public health is concerned, noted Health GAP Co-Chair Brook Baker.