Can Europe Make It?

Understanding the endogenous nature of this health crisis

Why was the 2008 financial crisis able to erase the health security imperative recognized in the years 2005 -2007? Viewing the health crisis as exogenous obscures the sequence it is part of and how to get out of it.

Pascal Petit
12 May 2020
Hundreds of medical staff protest against ‘Hospital Break-Up’ before hospital Debre, Paris, February 2, 2020.
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Jerome Gilles/PA. All rights reserved.

Starting from the idea that the coronavirus crisis is an exogenous shock, we run the risk of preparing poorly for its exit. This is all the more worrying since this "silent" shock implies state interventions at levels exceeding those of the global financial crisis of 2008, or even of the 1929 crisis, which will have lasting consequences.

The root cause was clear of both the 1929 and 2008 crises, with stock market crashes sanctioning risk-taking by the financial sector that had become uncontrollable. History has shown that such exits can often be long and incomplete. A part of the developed world only emerged from the 1929 crisis after the Second World War, with a clear legitimization of welfare state projects. The exit from the 2008 crisis is looking incomplete, with increased banking control to be sure, but without putting an end to financial domination, widely vilified as a generator of inequalities and austerity policies.

Hence the importance of understanding how this poorly repaired ground could have led to this health crisis. Its endogenous nature is certainly partly linked to the damage caused by our modes of development to the environment, in this case through increasing deforestation and urbanization, multiplying contacts between virus strains and human environments – sources of contamination that the increased mobility of people and goods in the present phase of globalization is spreading with a speed that makes any attempt at isolation illusory. But the main cause of the health crisis of 2020 is to be read in the very imperfect way we emerged from the global financial crisis of 2008.

But the main cause of the health crisis of 2020 is to be read in the very imperfect way we emerged from the global financial crisis of 2008.

The fragility induced by the 2008 crisis

What can we learn from the rapid spread of the Corona virus in the first months of 2020? On the one hand, that faced with this pandemic, many health systems have no means other than more or less severe containment, to avoid being unable to treat the influx of serious cases. On the other hand, the equipment and medicines that would make it possible to contain this pandemic are often lacking, because stocks are insufficient and supply depends on a few countries, such as China and India, which are faced with strong global demand.

It is high time to investigate the causes of these bottlenecks. Health systems have suffered from austerity policies reinforced by government debt following the 2008 crisis. A whole arsenal of measures, ranging from fee-for-service charges to public-private partnerships, has brought increasing pressure to bear (e.g. reducing the hospital budget in France by some 12 billion euros in 10 years – see Senate Information Report No. 40 2019-2020).

The testimonies of healthcare personnel are eloquent and shed dramatic light on France’s strikes in the healthcare and other sectors prior to the crisis. The same observation applies to the relocation of equipment and drug production. In a world economy, with weaker growth after 2008, many companies, in order to sustain their profitability and the value of their shares, are relocating production to countries offering lower wages and opportunities for economies of scale.

Again, there is a wealth of evidence on how some dynamic companies have taken advantage of global value chains to preserve their profits in the context of a global economic slowdown after the 2008 crisis and increased pressure on health care spending. More or less the same scenario can be found in most countries, combining increased rationalization of budgetary choices and restructuring of global value chains.

People perceive these austerity measures without fully grasping the impact on their health systems. Italy and Spain are two countries whose 2008 crisis had sharply increased public debt and led to austerity policies. Yet it is true that performance assessments of Italy and Spain are now surprisingly high, (according to the Euro Health Consumer Index EHCI , and Spain's ranking in Europe is also confirmed by the Bloomberg index). In the same period, the Dow Jones index doubled (from October 2007 to December 2019), underlining the ability of an international finance industry to meet the challenges of the global economy.

So the story could end there and the endogenous nature of the health crisis would already be well established by the excesses of a neoliberal ideology, which by its short-termism has allowed the vulnerability of our economies to increase. But the story deteriorates if we look at the amnesia that accompanies this health crisis.

Criminal amnesia – opening the door to shock therapy

How can we explain such a vulnerability of our health systems when this pandemic is not the first one? Certainly the WHO should have been the international institution to sound the alarm, both on the risks of a pandemic and on the capacities of health systems. The questions hanging over this are rightly raised. But a look back at the experiences of pandemics at the turn of the century prompts us to formulate other questions.

While it was believed at the end of the twentieth century that the era of major pandemics was over, HIV/AIDS throughout the world in the 1980s, then the Ebola virus in Africa in the 1990s and finally the SARS virus in Asia in 2003 ended up worrying army staffs, international institutions and populations alike, leading to the creation of a set of institutions, international agreements and protocols in the middle of the first decade of the twenty-first century. NATO countries duly created the Euro Atlantic Disaster Relief Coordination Centre (EADRCC) in 1998. In 2005, the WHO adopted International Health Regulations, signed by most countries. In 2005, the European Union set up an agency, the ECDC (European Centre for Disease Prevention and Control). In this concert, France passed a law in 2007 on "preparing the health system for large-scale health threats" with a public institution for its implementation. The precautionary principle was even debated for inclusion in the constitution.

The financial crisis of 2008 seems to have erased this awareness of other imperatives that will, in a decade, considerably increase the vulnerability of our economies. How can this curious "versatility" be explained? Three factors seem to contribute to inaction in the face of these existential risks.

The first element refers to Naomi Klein's thesis (The Shock Doctrine, 2007) that crises are conducive to real change, which the followers of Milton Friedman, who wrote in 1982 "Only a crisis, actual or perceived, produces real change", took advantage of by imposing radical neo-liberalism after 2008.

The second factor is of a different nature, which calls into question the weakness of the democratic basis of international agreements such as those mentioned above. This criticism, developed by Aglietta and Leron in their book La double démocratie (2017) about the European Union, in this case explains the weak mobilization of national democratic bodies meant to ensure the effective implementation of international health security projects. The internal reports of the WHO, some ten years after the International Health Regulations of 2005, confirm this hypothesis (see here) – as does the fact that 80% of its budget is left in the hands of private funds.

The third element is more difficult to grasp because it refers to internal changes in each country, which can be seen mainly at the territorial level, marked differently by environmental challenges (as Bruno Latour points out in his book Where to land? How to orient oneself in politics. 2017) and by different inequalities in income and access to public services. This has led to numerous social movements (including the yellow vest movement in France) and a growing mistrust of public services, many of which have become instruments of the central government rather than democratically open organizations that respond to the needs of citizens (as understood by Pierre Dardot and Christian Laval in their contribution to AOC).

The recomposition of local/national/global relations, which is in gestation in this transformation, may open the way to a reconstruction of social compromises that respond to both health and climate challenges. To this end, it must find its own political expression. If the Return of the State is that of strategic-minded states, opening up democratic and innovative mediations, it can contribute to this reconstruction. The task is vast, but at the same time the crisis gives many examples of new solidarities. And the experience of the Citizens' Convention for Climate, launched in France in October 2019, shows how timely this awareness of the issues is. The window of opportunity for this political reshaping is nevertheless short, as the neoliberals' offensive to reduce environmental objectives has already begun, which Trump and Bolsonaro and others would gladly support.

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