Home >Politics >Policy >Austerity sparks suicides when recession hits, shows research
Protesters and foreign workers gather at a central Athens square during a  general strike against prolonged austerity on May Day. Photo: AFP
Protesters and foreign workers gather at a central Athens square during a general strike against prolonged austerity on May Day. Photo: AFP

Austerity sparks suicides when recession hits, shows research

The number of Spanish patients with clinical symptoms of minor depression climbed to 48% from 29% between 2006 and 2010

London: In a book to be released this month, professors David Stuckler and Sanjay Basu say suicide rates in both the US and the UK increased after the end of 2007, which marked the beginning of the recession in the US They calculate there were 4,750 excess suicides during the slump in the US, compared with average rates before the recession. For the UK, they estimate a 1,000-suicide rise.

They also say use of antidepressant medicine rose 22% in the UK from 2007 to 2009. The number of Spanish patients with clinical symptoms of minor depression who visited doctors climbed to 48% of patients from 29% between 2006 and 2010.

The rate of HIV infection has risen in crisis-stricken Greece by more than 200% since 2011, driven by increased drug use via injection amid a 50% youth unemployment rate and reductions in HIV prevention budgets, they say in The Body Economic: Why Austerity Kills. The Mediterranean nation also experienced its first malaria outbreak in decades following reductions to mosquito-spray programs.

Oxford University’s Stuckler and Basu, an assistant professor of medicine at Stanford University near Palo Alto, California, argue there could have been another approach. During the Great Depression, each $100 of relief spending from the New Deal led to fewer deaths and cut suicides, they say. Sweden also suffered an economic crash in the 1990s, as did Iceland more recently. Both countries maintained social welfare programs and saw no spurt in deaths.

What we’ve learned is that the real danger to public health is not recession per se, but austerity, the authors said.


Japan’s economic slowdown from 1974 to 1985 has lessons for modern-day China, where growth last year was the weakest in 13 years.

That’s because, as with Japan three decades ago, there is room for factory automation to spread in China after years of strong economic growth, said Nomura Securities Co. analysts Katsushi Saito, Masayasu Noguchi, Hanshu Zhang and David Wang.

During Japan’s slowdown, its auto production continued to increase, as did demand for factory-automation advances such as pneumatic equipment and industrial robots. Machine-tool demand also grew as the economic structure changed from one based on primary industries such as steel to one driven by autos, machinery and electronics.

That suggests to the Nomura analysts that auto production in China will return to double-digit growth in 2013 and average about 10% in the next three to five years, while automation advances. Chinese factories will also become more sophisticated and diverse as they transitions from heavy industry to electronics, energy-saving and environmental fields.


There may not be a manufacturing renaissance under way in the US after all.

Rebutting speculation that American industrial companies are repatriating production from abroad, Morgan Stanley economists and strategists say in an 29 April report that there is little real evidence of a resurgence in US factory output.

Capital spending is still at depressed levels, while private sector investment in areas outside of construction and technology is also at the lower end of the weak range of the past decade.

Morgan Stanley polled 266 companies and found larger manufacturers expected to allocate a stable proportion of budgets to the US in the next five years. At the same time, executives continue to view China and emerging markets as superior growth regions and so need to be based there.

In weighing how much to produce overseas, companies say an acceleration in the US economy and lower corporate taxes would influence their decision more than lower US energy costs and cheaper Chinese labour.


The increasing dominance of asset prices and the declining importance of consumer inflation have left the US economy more fragile.

In an 26 April report, Joseph G. Carson, director of global economic research at AllianceBernstein LP, said housing and equity prices have gained an average 6.5% each year since the early 1980s. That’s a percentage point faster than in the previous two decades, even with the recent subprime-led housing crash.

It’s also more than double the 3% gain in consumer prices and wages. By contrast, those indicators rose about 1% faster a year than asset prices from the mid-1960s to the early 1980s.

The changes show that growth is now more influenced by asset prices. Consumers often use the resulting wealth gains as debt collateral to drive more spending and investment, Carson said.

The health of the economy is therefore more volatile than when it was driven by employment-based income growth, he said. Economic growth has been left more susceptible to setbacks, he said.


Signs of corporate optimism are growing in the US and Europe as businesses increase capital spending and reduce cash holdings, a positive sign for economic growth.

Forced by the financial crisis to build up precautionary cash holdings, pay down debt and avoid investment, companies are now starting to emerge from the hibernation, HSBC Holdings Plc equity strategists Daniel Grosvenor and Garry Evans wrote in a 1 May report.

In the US, capital spending as a percentage of cash from operations rose for a second year straight in 2012, to its highest level since the early 2000s. The proportion also has returned to pre-crisis levels in Europe.

Cash, which reached a record of 12% of total assets in the US in 2010, has fallen by almost 2 percentage points and Europe’s stockpiles remain below historical highs. Companies are also beginning to raise new capital for investment through debt and buying back equity, HSBC said.

We see these as encouraging signs as they suggest companies are starting to think about growth again, said Grosvenor in London and Evans in Hong Kong.


India, China and Turkey have led the way in export growth since the financial crisis began in 2007, according to a scorecard from Barclays Plc.

Indian shipments rose an average of about 6% a year between 2007 and 2012 as emerging markets gained market share against advanced nations, London-based economists Julian Callow and Tal Shapsa said in an 29 April report.

Developing economies accounted for more than half the 13%, or $5 trillion, increase in export volumes for goods and services over the past five years.

Exporters to Asia were the big winners as the sale of goods to the continent accounted for 40% of the $4 trillion rise in goods exports since 2007.

Venezuela, South Africa and Greece saw exports shrink the most. Overseas shipments barely rose in the US and those from the euro area fell.


Sweden demonstrates to central banks such as the US Federal Reserve that it is possible to reduce a balance sheet without shaking the economy or financial markets.

In an 28 April blog, Insead business school professor Antonio Fatas showed that the Riksbank bloated its balance sheet from the equivalent of about 5% of gross domestic product to more than 20% in late 2008, mainly through loans to commercial banks.

Since the middle of 2010, those loans have been repaid, leading to a halving of the portfolio to less than 10% of GDP last year.

The exit strategy is likely to be different for other central banks that have relied more on asset purchases, but it’s useful to see a recent historical example of a large and quick reduction in the central bank balance sheet without negative consequences on financial or macroeconomic stability, said Fatas. Insead is in Fontainebleau, France, and Singapore.


A company’s youth is more of a driver of job creation than its size.

That’s the finding of Bank of Ireland economist Martina Lawless, revealed in a new study based on a panel of Irish businesses covering four decades. She found that younger firms were the largest contributors to the generating of new jobs, concluding that’s because they are consistently more dynamic than older rivals.

The lesson for policy makers is that they should cultivate an environment that supports business startups, she said.

If taxation or technical assistance policies towards existing firms are to be targeted at a particular group of firms to maximize return on limited public resources, this suggests that a age criterion rather than one based on size should be considered, she said. BLOOMBERG

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