The Body Economic (29 page)

26
. Richard A. Melanson,
American Foreign Policy Since the Vietnam War: The Search for Consensus from Richard Nixon to George W. Bush
(New York, 2005). Graham Allison and Robert Blackwill, “On with the Grand Bargain,”
Washington Post
, Aug 27, 1991. L. Berry. “How Boris Yeltsin Defeated the 1991 Communist Coup,” The
Guardian
, Aug 18 2011. Available at:
http://www.guardian.co.uk/world/feedarticle/9803554

27
. Source for Figure 2.2: Authors, adapted from P. Hamm, L. King, D. Stuckler. 2012. “Mass Privatization, State Capacity, and Economic Growth in Post-Communist Countries,”
American Sociological Review
v77(2): 295–324. Central and Eastern European countries (CEE) include the Czech Republic, Hungary, Poland, Slovakia, and Slovenia. Former Soviet countries (FSU) for which data are available since 1990 include Armenia, Azerbaijan, Belarus, Estonia, Georgia, Latvia, Lithuania, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan. Percentage changes are scaled to GDP per capita in 1990 using constant 2000 international dollars as reported in the April 2008 edition of the UNICEF TransMonEE database.

28
. World Bank World Development Indicators (Washington, DC, 2013 edition); Penn World Tables. Center for International Comparisons of Production, Income and Prices. University of Pennsylvania. Available at:
https://pwt.sas.upenn.edu/

29
. Stuckler, “Social Causes of Post-communist Mortality.” See P. Klebnikov,
Godfather of the Kremlin: Boris Berezovsky and the Looting of Russia
(Boston, 2000). See M. Ellman. 1994. “The Increase in Death and Disease Under ‘Katastroika',”
Cambridge Journal of Economics
v18:329–55; C. Bohlen, “Yeltsin Deputy Calls Reforms ‘Economic Genocide',”
New York Times
, Feb 9, 1992. Available at:
http://www.nytimes.com/1992/02/09/world/yeltsin-deputy-calls-reforms-economic-genocide.html

30
. For a discussion see T. Meszmann, “Poland, Trade Unions and Protest, 1988–1993,”
International Encyclopedia of Revolution and Protest,
2009. Available at:
http://www.blackwellreference.com//files/19/89/73/f198973/public/tocnode?id=g9781405184649_yr2012_chunk_g97814051846491199

Also, see Stuckler, “Social Causes of Post-Communist Mortality.” See Klebnikov,
Godfather of the Kremlin
. See Ellman, “The Increase in Death and Disease Under ‘Katastroika'.” Polish government. Official promotional website of the Republic of Poland, Foreign Investment. Available at:
http://en.poland.gov.pl/Foreign,investment,468.html

As the Polish government's foreign investment website notes, “The foreign capital coming into the Polish economy has fulfilled a very important role in the process of
privatisation and restructuring. The majority of foreign investment to Poland has taken the most desirable form—direct investment (FDI). Such investments have meant new companies starting from scratch or enterprises already existing on the Polish market being taken over.”

31
. P. Hamm, L. King, D. Stuckler. 2012. “Mass Privatization, State Capacity, and Economic Growth in Post-Communist Countries,”
American Sociological Review
v77(2): 295–324.

32
. As Noreena Herz, who then worked for the World Bank explained, she was sent to Russia to oversee the implementation of privatization, living in the factories and feeding information back to headquarters. “I spent months in the factories. In one, I slept in an empty ward in the sanatorium. I realized very quickly that the master plan of privatizing Russian industry overnight was going to impose huge costs on hundreds of thousands of people. These factories were producing goods that once they were launched, no one would want in a too competitive market. They would have to slash tens of thousands of jobs. But also, these factories provided schools, hospitals, health care and retirement—cradle to grave. I raised these concerns in Washington, to say there weren't any safety nets in place. It became clear to me that it was really a political play, that they wanted to take assets out of the state's hands, so the Communist Party wouldn't come back.”

33
. O. Adeyi, et al. 1997. “Health Status During the Transition in Central and Eastern Europe: Development in Reverse?”
Health Policy and Planning
v12(2): 132–45.

34
. Sachs, “Shock Therapy in Poland.”

35
. Hamm, et al., “Mass Privatization, State Capacity, and Economic Growth in Post-Communist Countries.” The consequences would prove most severe for the employees of large-scale heavy industry and manufacturing enterprises. Of all the privatized firms, these large enterprises were the least equipped successfully to suddenly compete under real market conditions. Their greater inefficiency and technological backwardness meant they would suffer the greatest job losses while their employees, whose skills with Soviet technologies would become redundant, would have a hard time finding new jobs. L. King, P. Hamm, D. Stuckler. 2009. “Rapid Large-Scale Privatization and Death Rates in Ex-Communist Countries: An Analysis of Stress-Related and Health System Mechanisms,”
International Journal of Health services
v39(3): 461–89; we estimated this loss was about fifteen doctors per 10,000 population.

36
. A. Åslund,
Building Capitalism: The Transformation of the Former Soviet Bloc
(Cambridge, 2002); see also Anders Åslund, “Is the Belarusian Economic Model Viable?” in A. Lewis, ed., The
EU and Belarus: Between Moscow and Brussels
(London, 2002), p. 182.

37
. Stuckler, King, McKee, “Mass Privatization and the Postcommunist Mortality Crisis.”

38
. Source for Figure 2.3: Adapted from Ibid.

39
. See also P. Grigoriev, V. Shkolnikov, E. Andreev, et al. 2010. “Mortality in Belarus, Lithuania, and Russia: Divergence in Recent Trends and Possible Explanations,”
European Journal of Population
v26(3): 245–74. The paper's conclusion is consistent with ours: “differences in the speed and the extent of the move to a market economy resulted in quite different effects on mortality trends. Russia experienced the sharpest mortality growth in the beginning of the 1990s, caused by painful market reforms that were not accompanied by the creation of strong market institutions or by a commitment of the state to fulfill its social obligations. By contrast, Belarus, which followed the slowest transition path, suffered the lowest increase in mortality.”

40
. To put this effect in perspective, we found that military conflict in the region had caused a 20 percent rise in mortality. In other words, the choice to mass privatize had an impact almost as damaging as violent military conflicts in eastern Europe. Stuckler, King, McKee, “Mass Privatization and the Postcommunist Mortality Crisis.” L. King, P. Hamm, D. Stuckler. 2009. “Rapid Large-Scale Privatization and Death Rates in Ex-Communist Countries: An Analysis of Stress-Related and Health System Mechanisms,”
International Journal of Health services
v39(3): 461–89.

41
. L. Pritchett and L. Summers. 1996. “Wealthier Is Healthier,” The
Journal of Human Resources
v31(4): 841–68. Available at:
http://www.jstor.org/discover/10.2307/146149?uid=3739560&uid=2129&uid=2&uid=70&uid=4&uid= 3739256&sid=21101670942437
. At a population level, wealthier is also found to be healthier because governments have greater resources to invest in social protections. When statistical models are used to adjust for the benefits of greater social protection that accompanies increasing GDP, the association of GDP with better health drops by three-quarters. For more details see D. Stuckler, S. Basu, M. McKee. 2010. “budget Crises, Health, and Social Welfare Programmes,”
British Medical Journal
v340:c3311.

42
. When people's income doubled, on average their life expectancy improved by two years. Yet on average it takes two decades for economic growth to double, when the economy is growing at a rate of 4 percent. So it can safely be said that, by reducing life expectancy by two years, mass privatization amounted to setting back human development in Russia for at least 20 years. See Hamm, King, Stuckler, “Mass Privatization, State Capacity, and Economic Growth in Post-Communist Countries.”

43
. Economist Elizabeth Brainerd, who had collaborated with other economists from the Harvard Shock Therapy team, replicated our results and drew the same conclusion as we had: “One indicator of the disruption in the working person's life is the extent of privatization of state-owned enterprises. While undoubtedly a beneficial development for the economy as a whole and a clear indicator of reform progress, privatization may also create additional stress and uncertainty for individual workers. This interpretation of privatization may explain the positive and significant correlation between the increase in private sector share and rising cardiovascular death rates.” E. Brainerd. 1998. “Market Reform and Mortality in Transition Economies,”
World Development
v26(11): 2013–27. Cited in E. Brainerd. 1998. “Market Reform and Mortality in Transition Economies,”
World Development
v26(11): 2013–27. Available at:
http://people.brandeis.edu/~ebrainer/worlddev198.pdf
. Stanley Fischer, another Shock Therapy
advocate, was by the late 1990s struggling to grapple with the fact that “countries that undertook the greatest degree of reform in this period (by this measure) appear to have experienced the highest increases in death rates. This is puzzling.” Cited in Brainerd, “Market Reform and Mortality in Transition Economies.” Friedman cited in M. Hirsh,
Capital Offense: How Washington's Wise Men Turned America's Future over to Wall Street
(New Jersey, 2010), p. 134.

44
. Source for Figure 2.4: Authors. World Bank World Development Indicators 2012 edition.

45
. J. Sachs, “‘Shock Therapy' Had No Adverse Effect on Life Expectancy in Eastern Europe,”
Financial Times,
Jan 19, 2009. Available at:
http://www.ft.com/cms/s/0/0b474e44-e5c9-11dd-afe4-0000779fd2ac.html
; C. J. Gerry, T. M. Mickiewicz, Z. Nikoloski. 2010. “Did Mass Privatization Really Increase Mortality?” The
Lancet
v375: 371. See also our response: Authors' reply. 2010. The
Lancet
v375:372–73.

46
. “Mass Murder and the Market,” The
Economist
, Jan 22, 2009. Available at:
http://www.economist.com/node/12972677
. See D. Huff,
How to Lie with Statistics
(New York, 1993). This classic book contains excellent textbook examples of data torture such as these, as a way to teach statistics student of what not to do with data and how to spot foul play.

47
. Our studies had also looked at countries implementing rapid privatization to understand why some fared worse than others. Russia, for example, had a steeper rise in deaths than Ukraine. While one driver of their differences was how rapidly they had privatized (Russia faster than Ukraine), another aspect was that Ukraine had better upheld its social support programs. It also had a higher degree of what social scientists call “social capital.” We had found that when people were members of social organizations such as churches, unions, or sports clubs, their risk of dying during rapid privatization was much lower than that of lonely, single people. Similarly, in the Czech Republic, where more than half of the population belonged to such community groups, privatization carried virtually no risks of stress-related deaths. In Romania, however, where fewer than 10 percent of people were part of a community organization of one kind or another, there was about a 15 percent increase in deaths from rapid privatization. As described by Bob Putnam in his book
Bowling Alone
, the benefits of social capital are strong: during hard times, it helps to have something or someone you can count on, whether a church pew to sleep on or a friend's shoulder to cry on, rather than drinking by yourself.

48
. Source for Figure 2.5: “Mass Murder and the Market.”

As one of the founders of sociology, Émile Durkheim, wrote in
Le Suicide
in 1897, “Whenever serious readjustments take place in the social order, whether or not due to a sudden growth or to an unexpected catastrophe, men are more inclined to self-destruction.” Rapid privatization was a case in point. While some short-term pain was predicted, the Shock Therapists never anticipated that their methods would cause quite so much harm. Economies may have been able to restructure, yes—but people were not
able to adjust so rapidly. The Russian transition showed us how dangerous it can be when policymakers make economic choices without regard to their potential effects on health.

49
. World Bank World Development Indicators 2013 edition. Available at:
http://data.worldbank.org/indicator/SP.DYN.LE00.IN

50
. However, there are some who question whether the transition fully occurred, as the social and political backlash against rapid reform has created pressure for the state to regain control over the economy. For details about TB spread in eastern Europe, see World Health Organization,
Global Tuberculosis Report
(Geneva, 2012). Available at:
http://www.who.int/tb/publications/global_report/en/
; D. Stuckler, S. Basu, L. King. 2008. “International Monetary Fund Programs and Tuberculosis Outcomes in Post-communist Countries,”
Public Library of Science Medicine
v5(7):e143.

51
. National Bureau of Statistics of China. 2013. Available at:
http://www.stats.gov.cn/english/statisticaldata/
; World Bank World Development Indicators 2013 edition.