Mass privatisation in the post-communist world may have cost up to one million lives

15 January 2009

As many as one million working-age men died due to the economic shock of mass privatisation policies followed by post-communist countries in the 1990s, according to a new study published in The Lancet.

The Oxford-led study measured the relationship between death rates and the pace and scale of privatisation in 25 countries in the former Soviet Union and Eastern Europe, dating back to the early 1990s. They found that mass privatisation came at a human cost: with an average surge in the number of deaths of 13 per cent or the equivalent of about one million lives.

The rapid privatisation programme, part of a plan known by economists as 'shock therapy', led to a 56 per cent increase in unemployment, which the study says played an important role in explaining why privatisation may have claimed so many lives. Many employers provided extensive health and social care for their employees, so through privatisation workers experienced the 'double whammy' of losing not only their livelihood but also their means of surviving the crisis.

David Stuckler from Oxford University, along with colleagues Dr Lawrence King from Cambridge University and Professor Martin McKee, from the London School of Hygiene and Tropical Medicine, took death rates reported by the World Heath Organisation for men of working age (15-59 years) in 25 post-communist countries and compared them to the timing and extent of participation in mass privatisation and other transition policies. To make the study as thorough as possible, the team also took into account other factors that might affect rising death rates (such as economic depression, initial conditions and health infrastructure). The team also examined other measures of privatisation from the European Bank for Reconstruction and Development, a bank which gave loans in support of radical mass privatisation.

During the 1990s, former communist countries underwent the world's worst peacetime mortality crisis in the past 50 years - with over three million avoidable deaths and 10 million 'missing' men, according to the United Nations. However, while life expectancy plummeted in some countries, like Russia and Kazakhstan; the populations' health steadily improved in other countries, such as Slovenia. Previous research shows that unemployment and levels of alcohol consumption are major factors behind these differences, but this study is thought to be the first to isolate aspects of the reforms process that might cause these variations. It finds that death rates may be linked to the speed and type of privatisation and resulting unemployment -- and also to the level of social support available to the population. If at least 45 per cent of the country's population were members of at least one social organisation, such as a church or trade union, they were better protected from the economic shocks, the authors found.

Lead author David Stuckler, from the Department of Sociology at the University of Oxford, said: 'Our study helps explain the striking differences in mortality in the post-communist world.  Countries which pursued rapid privatisation, or 'shock therapy', had much greater rises in deaths than countries which followed a more gradual path.

He added: 'Not only did rapid privatisation lead to mass unemployment but also wiped out the social safety nets, which were critical for helping people survive during this turbulent period.'

Dr Lawrence King said: 'We should be extremely cautious any time reformers seek radically to overhaul society's economy, promising long-term gains at the expense of short-term harms - and at the very least, assess the potential impacts on health.'
 
Professor Martin McKee said: 'As variants of rapid reform policies are being debated in China, India, Egypt and other developing and middle-income countries, including Iraq, our study reminds us that radical economic reforms affect ordinary people and, in some cases, cost them their lives.'

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Notes for Editors

  • The report, Mass Privatisation and the Post-Communist Mortality Crisis, by David Stuckler et al will be published in The Lancet on 15 January.
  • The full report is available upon request from The Lancet: tony.kirby@lancet.com
  • The world's top economists, including Jeff Sachs, Lawrence Summers and Stanley Fischer, invented the radical 'Shock Therapy' plan, which centred on mass privatisation. Writing in The Economist, Jeffrey Sachs argued: 'The need to accelerate privatisation is the paramount economic policy issue facing Eastern Europe.' Critics like Joe Stiglitz and Noreena Hertz pointed out that these untried policies risked not only devastating the economy but also wiping out healthcare provided by Soviet firms, causing millions of people to lose their jobs, and shattering social safety nets. Yet, the exponents of shock therapy expected these initial shocks, claiming that these 'short-term pains' would be far outweighed by the 'long-term gains' brought by the introduction of the market.

David Stuckler is a Research Fellow in Sociology at Oxford University and a Junior Research Fellow at Christ Church, Oxford. He holds a MPH in health policy from Yale. His research integrates political economy and public health.

Lawrence King is a Reader in the Department of Sociology and a Fellow of Emmanuel College at the University of Cambridge. He studies comparative political economy and has published extensively on transition policies and their impact on firm restructuring in post-communist countries.

Martin McKee CBE is Professor of European Public Health at the London School of Hygiene and Tropical Medicine where he co-directs of the European Centre on Health of Societies in Transition (ECOHOST), a WHO Collaborating Centre. He is also research director of the European Observatory on Health Systems and Policies.