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Greek Lending Institutions, Healthcare, Human Capital Research Paper


Introduction

The IMF is the largest and most well-known international lending institution in the world. Comprised out of 189 member countries, the organization is stated to serve the world economy by monitoring global risks and conditions, advising members on economic improvement, and providing technical assistance and short-term loans as means of stabilizing economies and avoiding large-scale financial crises. Many impoverished countries request the IMF aid when facing internal crises or are suffering from the aftermath of natural disasters, wars, and other events that bring upon massive casualties and devastation of the existing infrastructure (Ostry, Berg, & Tsangarides, 2014).

While the IMF has seen some success at stabilizing several countries, it faces political opposition in many of the impoverished countries it has pledged to help. Contrary to its projected image, the IMF is not a humanitarian organization. Taking a loan from the IMF means forfeiting certain aspects of national sovereignty, reduction of social programs, as well as less autonomy in adopting policies and making financial decisions. Stories of successes and failures, in many scenarios, are explained by the country’s ability or inability to follow the IMF’s prescribed regulations as well as the austerity of the conditions that accompanied the loans (Ostry et al., 2014). The purpose of this paper is to explore the influence of the IMF on social, economic, healthcare, and political development of Greece in order to determine whether receiving funding was beneficial or detrimental to the country’s long-term prosperity.

IMF Policies on Loaning

The unspoken rule behind IMF loans is that the country that accepts it voluntarily forfeits some of its national sovereignty to the IMF in order to achieve stability and be able to repay the debts in time. Despite claims made by the IMF that under their policies most countries in question increase the percentage of GDP spending on social programs and healthcare, the majority of independent researchers disagree with these claims (Ostry et al., 2014). In healthcare, one of the most significant socially oriented industries, IMF recipients are more likely to reduce their healthcare budgets when compared to non-IMF borrowers.

According to Reeves, McKee, Basu, and Stuckler (2013), this trend was not affected by governing party ideologies, magnitudes of economic recessions, or debt crises. This, it is possible to conclude that one of the main strategies of the IMF to reduce spending and get its money back is to force cuts in the social sector, namely healthcare. Other policies implemented in developing and impoverished countries include increasing taxes and opening markets to foreign businesses, imports, and investors. In many scenarios, these measures are fatal for the local economies, who are unable to compete with cheaper and more high-end products brought from abroad by the developed nations.

The Situation in Greece

Greece became the recipient of IMF loans after the economic crisis of 2009. It was largely motivated by the inability of Greek businesses to compete with other developed nations as well by the adoption of Euro as a common currency, which was viewed by many economists as a controversial decision (Knight, 2015). Other factors that influenced the crisis were governmental corruption and systematic underreporting of the existing debt. Ever since 2010, the IMF has been subsidizing the Greek economy in an attempt to prevent another economic crisis. The conditions prescribed by the IMF involved severe austerity in the social sector, increased taxes, and full compliance of the government. Despite these measures, the country’s GDP shrunk by more than a quarter in the following five years, while unemployment remained at a rate of 25% (Knight, 2015). World’s leading economists unanimously agree that austerity had been a wrong remedy for the wrong patient delivered at the worst time possible.

Greek Healthcare and the IMF

According to Meletis and Chatzidimitriou (2015), in return for the money provided to Greece, the IMF introduced harsh and restrictive policies on the country’s social and healthcare systems. Since 2010, consecutive Greek governments were forced to adopt harsh austerity measures, which limited healthcare funding to 6% of GDP or less. In addition to that, large insurance companies were forced to merge, pharmaceutical expenses were reduced, and recruitment of new personnel had been blocked, with the exception of highly specialized personnel (Meletis & Chatzidimitriou, 2015). Contract renewal options were dismissed until the end of 2014.

At the same time, wages in healthcare were significantly reduced, the retirement age was increased, which lead to many medical workers opt for early retirement before the law was introduced. This lead to a significant decrease in the quality and capability of the Greek healthcare system to handle the increasing number of patients. The private sector was unable to handle the pressure as the majority of the population was not capable of affording the costs of private health services. As a result, infant mortality has increased, average life expectancy had decreased, and the capabilities of the medical system to handle even such menial tasks like viral outbreaks were significantly reduced (Kondilis et al., 2013).

A Healthy Population Means a Healthy Economy

The overall health of the population is interlinked with long-term economic growth for several reasons. The first and the most important reason is that disease prevention is cheaper and less taxing on the system and the population than full-scale treatment. At the same time, healthcare cuts are aimed to save money. The contradictions of this strategy are obvious – saving money on healthcare would force the population to increase spending on healthcare due to a drop in quality, which would defeat the purpose of austerity reforms in the first place (Colombo, Garcia-Goni, & Schwierz, 2016).

The second connection between a solid healthcare system and a healthy economy is fairly obvious – healthy people work better. The availability of healthy young men and women to perform physically and mentally intensive jobs is good for economic growth. Labor-intensive industries, such as farming, mining, and construction all rely on health workers to perform their duties (Colombo et al., 2016).

The third connection between healthcare and economy lies in a long-term perspective. Increased infant mortality rates directly influence demographics and the future labor market. Countries with negative demographic rates risk facing a crisis in the future, where there are plenty of old men and women requiring social protection, and not enough young people to maintain economic growth (Colombo et al., 2016).

Lastly, diseases have a negative effect on institutional performance. Lower life expectancy makes long-term career and family planning pointless, which damages economic productivity. At the same time, viral outbreaks and the emergence of deadly airborne diseases threaten the tourism industry, which is crucial for Mediterranean countries such as Greece (Colombo et al., 2016).

Conclusions

The only objective that the IMF managed to accomplish through its loans to Greece is postponing a default by forcing austere measures on Greek social and economic sectors while forcing the country to go deeper into debt. The healthcare industry suffered significantly, as none of the money lent by the IMF actually went into improving healthcare – instead, the industry was used as a means to an end – to save money to pay for other obligations Greece already had towards its donors. It is possible to conclude that lending money from IMF only made things worse in both the short-term and the long-term perspective. The magnitude of problems suffered by the country increased, the solutions offered were flawed, and the overall debt increased tremendously. Austerity is not a panacea. An alternative solution is required.

References

Colombo, F., Garcia-Goni, M., & Schwierz, C. (2016). Addressing multimorbidity to improve healthcare and economic sustainability. Journal of Comorbidity, 6(1), 21-27.

Knight, D. M. (2015). History, time, and economic crisis in Central Greece. Gordonsville, VA: Palgrave.

Kondilis, E., Giannakopoulos, S., Gavana, M., Ierodiakonou, I., Waitzkin, H., & Benos, A. (2013). Economic crisis, restrictive policies, and the population’s health and healthcare: The Greek case. American Journal of Public Health, 103(6), 973-979.

Meletis, G., & Chatzidimitriou, D. (2015). Long-lasting austerity in the Greek health care system: Could it influence the efforts to limit the spread of carbapenem-resistance in Europe? Hippokratia, 19(4), 291-292.

Ostry, J. D., Berg, A., & Tsangarides, C. G. (2014). Redistribution, inequality, and growth. New York, NY: International Monetary Fund.

Reeves, A., McKee, M., Basu, S., & Stuckler, D. (2014). The political economy of austerity and healthcare: Cross-national analysis of expenditure changes in 27 European nations 1995–2011. Health Policy, 115(1), 1-8.

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IvyPanda. (2020, September 24). Greek Lending Institutions, Healthcare, Human Capital. Retrieved from https://ivypanda.com/essays/greek-lending-institutions-healthcare-human-capital/

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1. IvyPanda. "Greek Lending Institutions, Healthcare, Human Capital." September 24, 2020. https://ivypanda.com/essays/greek-lending-institutions-healthcare-human-capital/.


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IvyPanda. "Greek Lending Institutions, Healthcare, Human Capital." September 24, 2020. https://ivypanda.com/essays/greek-lending-institutions-healthcare-human-capital/.

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IvyPanda. 2020. "Greek Lending Institutions, Healthcare, Human Capital." September 24, 2020. https://ivypanda.com/essays/greek-lending-institutions-healthcare-human-capital/.

References

IvyPanda. (2020) 'Greek Lending Institutions, Healthcare, Human Capital'. 24 September.

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