This is a joint post with David Goldsbrough.
As the possibility of a one trillion dollar supplement in IMF funding comes closer to fruition in the midst of alerts about the possibility of a new pandemic of influenza, some of us at CGD have been asked about the possibility of connections between IMF adjustment programs and health. Some of the questions are a bit loopy, like: Did the IMF cause the current flu epidemic? And even weirder: should the IMF prevent future flu epidemics?
Did the IMF cause the flu epidemic? Get a grip!
This is a version of the decades old question of whether the IMF’s macroeconomic policies have unduly constrained national health systems. The most recent version of this claim was in a paper by David Stuckler, Lawrence King and Sanjay Basu entitled “International Monetary Fund Programs and Tuberculosis Outcomes in Post-Communist Countries." This paper used methodologically sophisticated but conceptually dubious statistical techniques to show that IMF programs in post-communist countries had “the effect” of increasing tuberculosis mortality.
Like other studies which purport to show negative effects of IMF programs on the health sector, the Stuckler, King and Basu paper insufficiently controls for the underlying macroeconomic instability which led to the IMF programs in the first place. Thus the econometrics attribute the negative effects of macro-instability to the IMF program and the authors fail to address adequately what would have happened to health programs in these countries if the IMF had never become involved.
This is like noting that most of the people who party heavily on Saturday night, and then blearily take a few aspirin before staggering into bed, have headaches the next day and concluding that the aspirin caused the headache. The benefits of the aspirin can only be inferred by comparing these folks to those who partied just as hard but did not take the aspirin.
The authors use some statistical techniques to attempt to correct for this problem, but the extensive cottage industry that has grown up around efforts to identify the impact of IMF programs on growth etc has shown that the results are highly sensitive to the statistical techniques used. One important reason is that there are two very different groups of countries that don't have IMF programs--those with truly terrible policies and those that are so well run that they never get into trouble. (Think the Congo that never took the aspirin and Botswana that stayed home and went to bed early.) Controlling for these influences is very difficult. (See the similar comment by CGD colleague April Harding and the working group report by one of us)
This is not to let the IMF completely off the hook. Nora Lustig notes in a recent CGD blog, “in the past, the IMF did not make an effort to identify a pro-poor “triage” in the budget cuts that were part of its stand-by loans conditions.” Our experience from decades at the World Bank and the IMF is that, in the context of a specific country program, the IMF would ally with the nation’s finance ministry in insisting on budget cuts and then rely on the social sector ministries in alliance with World Bank staff to perform the triage function. The hope was that this purposefully engaged Hegelian dialectic would result in the proper trade-off between macroeconomic and sectoral considerations.
Bank staff typically took this task seriously and attempted to protect from the budget cuts infectious disease control and programs that benefit poor people, pushing the finance ministry and IMF to look elsewhere for the necessary expenditure reductions. But this process did not necessarily achieve the “right” balance in each case. Ultimately the governments of the countries determine spending priorities and are responsible for the consequences.
We join Nora in welcoming IMF 2.0, especially the idea of socially responsible macroeconomics. While it would be inefficient for the IMF to attempt to assume all of the World Bank’s sectoral responsibilities, it makes sense for the IMF’s mandate to shift somewhat so that addressing these sectoral concerns (probably through collaboration with the World Bank and other sector experts) is recognized by senior IMF management as a legitimate expenditure of staff time and resources.
But the IMF causing disease spread? Get a grip! And look for a proximate cause.
Should the IMF be charged with preventing future epidemics? No, WHO’s on first!
The short answer is “no.” WHO, that is the World Health Organization, hosts the “Epidemic and Pandemic Alert and Response” and is the lead agency in the United Nations for the “prevention, detection and timely response” for epidemics. For influenza, this is done by a an organization called UN System Influenza Coordination headed by a former WHO staffer, David Nabarro.
If WHO is on first, then it would be the World Bank that’s on second. The World Bank is charged with supporting the United Nations Office of Flu Preparedness in assessing the needs of countries for international support for their surveillance and containment strategies. The US Centers for Disease Control and Prevention, as the world’s premiere center of epidemiology excellence, is on third base and provides crucial technological support and manpower to field operations such as those currently underway in Mexico.
Since preventing and preparing for a future flu epidemic requires coordinated action by all countries in the world, all of them are or should be contributing to this team effort.
The IMF is not on this baseball team; nor should it be. Would you want the Federal Reserve Bank managing your family’s health care? The financial institutions of the world have enough to do to keep our banks healthy and credit flowing. Let’s not confuse the situation by mixing up discussions of IMF funding with pandemic preparation.