The World Health Organization (WHO) claimed recently that “social injustice is killing people on a grand scale”. Its major report on the “Social determinants of health” concludes that social and economic inequality is a major global cause of disease and that only massive government intervention and redistribution of wealth can improve the health of the poor. But, as with many prescriptions, the side effects would be worse than the disease.
The report revolves around the idea that relative poverty—as opposed to absolute poverty—is an important determinant of health. This is based on medical research of the 1990s that purported to show that people lower on the socio-economic ladder suffer more stress and thus more disease. They are more likely to have worse diets, suffer the stress of greater job insecurity and so on. WHO recommends a host of policies to iron out inequality. These include squeezing the rich with tax; universal state-owned health and education; greater state control of urban development, businesses and the sale of food and alcohol; stricter employment regulations; stepped-up government welfare and an end to global free trade. The comrades in the old USSR would have loved this manifesto. Those inhabiting the real world should be far more sceptical.
First, the picture of global inequality is not as bad as painted. Thanks to the economic globalization much derided by WHO, the number of poor people in the world is declining, by 375 million people since 1981, even as the world population grew by 1.6 billion. The rate of growth in poor countries is now outstripping that of rich countries for the first time in history, while global disparities in health and education are rapidly improving.
Second, WHO’s insistence that economic growth is not necessarily good for overall health is wrong. The evidence shows that economic growth is a cause of improved health, largely because it allows people to afford better living conditions, sanitation and health technology. One study shows that if rates of growth in less-developed countries had been only 1.5% better in the 1980s, at least 500,000 infant deaths could have been prevented. Without growth, there will be no money for the clean water and electricity crucial to good health in the poorest parts of the world.
Many of the recommendations seem to be specifically designed to undermine economic growth and increase unemployment. Take taxation: International evidence strongly correlates high levels of taxation with economic decline and unemployment, yet WHO says this is a key to tackling inequality. The only equality high taxation brings is equality of impoverishment, as individuals and businesses pack up shop and leave. The report also claims that generous unemployment benefits and strict employment regulations will reduce the likelihood of job losses and cushion those unfortunate enough to become unemployed. But wherever tried, it caused high levels of structural unemployment. Regulations that make it tough to fire make it less likely that firms will hire. This makes it more difficult for the inexperienced young to find jobs—as in Germany and France. Countries with the lowest unemployment—the US and Australia—have the most flexible labour markets combined with welfare systems that incentivize work rather than indolence.
WHO’s rejection of free trade is even more baffling. Free trade has been demonstrated to be the biggest weapon ever against poverty. Since China recommenced international trade in the 1980s, 400 million people lifted themselves out of poverty in that country alone. The real problem is that the poorest countries do not trade nearly enough.
In the end, the whole inequality premise is a chimera. If we were to guillotine every wealthy hedge fund prince and captain of industry, relative poverty would decline, but absolute poverty would remain. Trying to abolish inequality would wreak devastation on the global economy and cost millions of jobs.
Exclusive to Mint for India. Philip Stevens is director of policy at International Policy Network, London. Comments are welcome at email@example.com