Paul Krugman’s right: Austerity kills

Austerity kills -- radical cuts destroy economies and lives, and the honest numbers and economics keep proving it

Topics: Austerity, Books, New Deal, Barack Obama, Great Recession, David Cameron, Editor's Picks, Paul Krugman, , ,

Paul Krugman's right: Austerity killsPaul Krugman (Credit: Reuters/Anton Golubev)

“I will never forgive them,” wrote 13-year-old Kieran McArdle to the Daily Record, a national newspaper based in Glasgow. “I won’t be able to come to terms with my dad’s death until I get justice for him.”

Kieran’s father, 57-year-old Brian, had worked as a security guard in Lanarkshire, near Glasgow. The day after Christmas 2011, Brian had a stroke, which left him paralyzed on his left side, blind in one eye, and unable to speak. He could no longer continue working to support his family, so he signed up for disability income from the British government.

That government, in the hands of Conservative Prime Minister David Cameron since the 2010 elections, would prove no friend to the McArdles. Cameron claimed that hundreds of thousands of Britons were cheating the government’s disability system. The Department for Work and Pensions begged to differ. It estimated that less than 1 percent of disability benefit funds went to people who were not genuinely disabled.

Still, Cameron proceeded to cut billions of pounds from welfare benefits including support for the disabled. To try to meet Cameron’s targets, the Department for Work and Pensions hired Atos, a private French “systems integration” firm. Atos billed the government £400 million to carry out medical evaluations of people receiving disability benefits.

Kieran’s father was scheduled for an appointment to complete Atos’s battery of “fitness for work” tests. He was nervous. Since his stroke, he had trouble walking, and was worried about how his motorized wheelchair would get up the stairs to his appointment, as he had learned that about a quarter of Atos’s disability evaluations took place in buildings that were not wheelchair accessible. “Even though my dad had another stroke just days before his assessment, he was determined to go,” said Kieran. “He tried his best to walk and talk because he was a very proud man.”

Brian did manage to reach Atos’s evaluation site, and after the evaluation, made his way home. A few weeks later, his family received a letter from the Department for Work and Pensions. The family’s Employment and Support Allowance benefits were being stopped. Atos had found Brian “fit for work.” The next day he collapsed and died.

It was hard for us, as public health researchers, to understand the government’s position. The Department for Work and Pensions, after all, considered cheating a relatively minor issue. The total sum of disability fraud for “conditions of entitlement” was £2 million, far less than the contract to hire Atos, and the Department estimated that greater harm resulted from the accidental underpayment of £70 million each year. But the government’s fiscal ideology had created the impetus for radical cuts.

*

Across the Atlantic in the United States, President Barack Obama spoke of the ongoing recession as the worst economic crisis since the Great Depression. The comparison was apt. People began looking to politicians and economists of the Depression era for guidance on how to proceed during this newest downturn. Republican President Herbert Hoover and Democratic President Franklin Delano Roosevelt had governed during the Depression in the United States, and the British economist John Maynard Keynes had championed an activist governmental policy of stimulus spending to end the Depression.

In the first panicked months of 2008, few people questioned a need to act swiftly to rescue the economy. The salient question was how: increased spending or budget cuts? There was a real fear that if the banks went under, entire national economies would collapse. The financial sector had become such a large part of economic life that politicians deemed some banks “too big to fail.” If we let them collapse, the damage would be even more catastrophic to the economy than the high price of helping them—there would be more panic, chaotic bank runs, and less money for entrepreneurs and small businesses.

The U.S. and European governments mobilized an unprecedented rescue package for the banking sector. Although the banks had lost private money, public funds from taxpayers would be used to bail them out—to the tune of over $2 trillion in the U.S. and UK. Witnessing this massive rise in government spending, Martin Wolf, a journalist at the Financial Times, proclaimed, “We are all Keynesians now.” He may have spoken too soon.

In response to the massive government debt, conservative politicians in the United States and Europe launched their new economic policy: a drive to reduce spending not by lowering entitlements to private corporations like banks, but by attacking social welfare spending.

In the UK, the Conservatives’ case for austerity was simple: the government had a huge debt overhang, and now that debt needed to be paid back. If it was not, it would become harder and harder to borrow money, and more costly to repay. No one, after all, wants to lend money to an entity living on credit, so interest rates would increase and make debt repayment even more difficult. If we simply printed money, our currency would be worth less because of inflation, creating hard times in an already troubled economy. So the only option left, they argued, was to cut back on welfare spending—the programs that Cameron argued were slowing down the economy.

This argument was simple, intuitive, and wrong. It was, as the Nobel Prize–winning economist Paul Krugman put it, akin “to the claim that soup kitchens caused the Great Depression.”

Government debt isn’t like personal debt. If one of us misses a mortgage payment, we risk damaging our credit rating, and possibly even losing our home. So if we owe money, we need to find a way to pay it back as soon as possible. But government debt does not need to be paid back overnight—in fact, it can be dangerous to do so. In an economy where we’re all in the same boat, one person’s spending is another person’s income. So when the government cuts spending, it reduces people’s income, leading to less business, more unemployment, and a vicious spiral of slowing down the economy.

The central goal in debt management is to keep debts sustainable. To be sustainable, government debt repayments should be kept lower than the rate of revenue from economic growth. If that happens, we will grow out of debt, as economic stimulus leads to more income and more tax revenues to reduce the debt. But budget cuts have slowed down growth—and this is precisely why, in spite of all the UK’s radical cuts, the latest data show that British debt continues to rise.

As public health researchers, we were shocked and concerned at the illogic of the austerity advocates, and the hard data on its human and economic costs. We realized the impact of the Great Recession went far beyond people losing their homes and jobs. It was a full-scale assault on people’s health. At the heart of the argument was the question of what it means to be a society, and what the appropriate role of government is in protecting people.

*

Economists were studying the Great Depression for guidance on how to end the Great Recession. They were poring through historical statistics on economic growth. We went in a different direction, and started digging through the archives of the United States Public Health Service to find out how and why people died during the Depression. The patterns we found were not all ominous—indeed, we found that some people actually became healthier during the Great Depression. What determined their health had not only to do with economic cycles, but critically depended on how politicians chose to respond to the crisis. The Depression revealed that some political choices can simultaneously improve health and help the economy recover.

The first clue came from understanding how the Depression itself started. The Depression can be traced back to the panicked selling of 16 million shares of stock on Black Tuesday, October 29, 1929. But the roots of the Depression lay in a series of events that are strikingly similar to the Great Recession—stark inequality, a real estate bubble, and a banking crisis.

During the late 1920s, the U.S. super-rich—the Fords, Vanderbilts, Carnegies, and Rockefellers—were the masters of the country’s financial markets. This top 1 percent of the population held over 40 percent of America’s wealth, and their investments drove the rise and fall of stock prices, as well as a real estate bubble. There was an “orgy of apartment building” in Florida during the Roaring Twenties, as lots in Miami were bought and sold as many as ten times in a single day. Commercial lending banks loosened loan conditions, and mortgages were easy to get. Mortgage-related debt doubled between 1922 and 1928.

Eventually the housing bubble burst, leading to the 1929 Crash. In the Depression that followed, more than 90,000 businesses went bankrupt and at least 13 million Americans—one in four workers—became unemployed. Half a million farmers lost their land. Three out of five Americans were classified as living in poverty. Shantytowns of ramshackle cardboard boxes and tents sprang up into slums called “Hoovervilles” in a nod to President Hoover. Soup kitchens and bread lines were everywhere.

As we looked through these poverty statistics from the Depression, we expected the impact on people’s health to be seismic, and tragic. And some of it was. After Black Tuesday, suicide rates rose. While reports of brokers and bankers jumping out of windows were rife, one of the first documented suicides was a construction worker helping build the Empire State Building: he had been laid off and jumped from it to his death. He was representative of the stress placed on the working class. The risk of suicide was actually concentrated not among those who lost their bets in the stock market, but among those with the least savings, the least opportunity to get a new job after being laid off, and the highest risk of losing their homes or being unable to feed their families if they lost their income.

But we were surprised by some counterintuitive findings as well. For example, Dr. Louis Dublin, an actuary at the Metropolitan Life Insurance Company, announced in 1932: “Never before have there been such satisfactory health conditions in the United States and Canada as during the first nine months of this year.” His job was to track death rates for the company’s 19 million policyholders. He found that mortality among white policy-holders was well below the previous minimum in 1927; among blacks, the death rate was the lowest in a decade.

Perhaps our assumptions about financial crises and health were wrong. Stress alone might not explain the deaths of people during recessions. Something else might be at play. But first we had to determine if Dublin’s statistics were accurate. One possibility was that statistics from people who had insurance might tell only half the story. People with insurance were probably better off, and so data from insurance companies might be hiding the full picture of suffering among poorer people who were not part of Dublin’s datasets.

Digging deeper, however, we found that other data sources confirmed the insurance company’s reports. Dr. Edgar Sydenstricker, a statistician for the U.S. Public Health Service who independently examined death certificates from the entire country, came to the same conclusion. In 1933 he wrote, “1931 was one of the healthiest years in the history of the country,” adding that “After several years of severe economic stress, the gross death rate has attained the lowest level on record. Infant and tuberculosis mortality have not increased in the country as a whole; on the contrary they have continued to decline.”

Public health experts were puzzled by the trends in the data. The U.S. Surgeon General attributed the health improvement to a mild winter, suggesting that it might have staved off an “unpreventable epidemic,” such as typhoid or whooping cough. Not everyone was convinced by this explanation, especially since a mild winter one year during the Depression was actually contrasted by harsher winters during the other years. An alternative argument was that the Depression itself was the reason for health improvements, although the reasons why were not obvious. Perhaps laboratory studies might shed light on why death rates improved during hard economic times. In 1928, the American biologist Raymond Pearl had published a classic study of fruit flies that found the flies that grew the most rapidly had the shortest lifespans. Applying these arguments to humans, some commentators proposed that society’s fast pace of living during the Roaring Twenties—the fast and furious lifestyle of alcohol and cigarettes—had produced backward trends in health, which began to reverse as the Depression produced a calmer, more “normal mode of living.” When people lost jobs, rather than working long hours, they might spend more time with their families or choose to exercise more. And when people lost income they would drink and smoke less, or walk instead of drive. All these changes would act to improve their health.

To find out if this explanation was plausible, we turned to the most reliable source of data available from the period: death certificates compiled by the U.S. Centers for Disease Control and Prevention (CDC). These data covered 114 cities in thirty-six states over the decade from 1927 to 1937, before and after the Great Depression. The data allowed us to compare what happened to people’s health in a variety of places, and analyze the different causes of death to find consistent patterns. Moreover, they allowed us to understand what the trends in life expectancy were before the 1929 Crash, so that we could see if events during the Great Depression were changing pre-existing trends or were just part of a broader pattern of public health trends unrelated to the economic crisis.

We first analyzed the CDC data to check the accuracy of the public health reports from the insurance industry and the Public Health Service. We were able to confirm that mortality rates fell by about 10 percent during the Great Depression across the United States. As the numbers show, when the Great Depression started in 1929, average income fell by about one-third, but death rates also began to fall. And when recovery began in 1933, death rates began to rise again.

When we looked at the different causes of death, we found that many complex health changes were occurring at the same time. The most important was a basic trend that we regularly teach our public health students: the epidemiological transition. The epidemiological transition refers to an overall trend in developing societies, in which people die less and less from infectious diseases like tuberculosis but die increasingly from non-infectious diseases like diabetes and cancer. That is, as societies build sewer systems and improve hygiene, live in cleaner conditions and get better access to nutritious food, people experience fewer deaths in infancy and childhood from diarrhea or under-nourishment. Most people live longer and experience more diseases seen in middle and older age.

During the Great Depression, most of the changes in death rates apparently weren’t being caused by the economic downturn itself. The main causes were due to long-term trends that had already been occurring as part of this epidemiological transition. For example, rates of pneumonia and flu had fallen by over 10 percent, and deaths from cancer and other non-infectious diseases were increasing in parallel over the long term—before, during, and after the Depression.

We wanted to know how the Great Depression impacted people’s health. Perhaps it just came at a time when other disease rates were changing due to long-term factors unrelated to the Depression per se. To find out, we used statistical models that could filter out the long-term pattern of epidemiological transition from the short-term fluctuations related to the Great Depression. We focused on leading causes of death that have plausible mechanisms linking them to financial problems—like the connection between job loss and suicide, or the connection between acute stress and heart attacks. A clear pattern emerged: while overall death rates decreased during the Depression, there were some increases in death rates that were masked by this overall death rate decline. During the Depression, suicide rates saw a significant increase, which was hidden beneath the overall decline in death rates. Starting in 1929, suicide rates rose by about 16 percent from 18.1 per 100,000 population to 21.6 per 100,000 population at the peak in 1932.

Yet when we looked more closely at the data, we saw there were huge variations across the thirty-six states in the CDC database, with suicides rising to different degrees at different times. In Connecticut, suicides spiked by 41 percent, but in New Jersey, they actually fell by 8 percent. Using statistical models, we found that those states, like Connecticut, that had more bank failures had larger spikes in suicides.

However, suicide is a relatively rare cause of death. So even though we found that the economic crash was associated with more people taking their lives, something else was happening to compensate and outweigh the rise in deaths from suicides, leading to an overall decline in death rates during the Depression.

A close look at the data revealed that the increase in suicide was hidden behind a large decrease in death rates from road traffic accidents. Road safety in the early decades of the twentieth century was a barely understood concept; car accidents had become a leading cause of death. Across the U.S., deaths from automobile accidents in the 1930s exceeded those from typhoid fever, measles, scarlet fever, diphtheria, whooping cough, meningitis, and childbirth combined. But as the Depression took hold, trends changed: the early 1930s saw the first decrease in traffic fatalities in history. Most Americans could no longer afford cars or gasoline, so there was, quite simply, less traffic. When we looked across states, we found the states where the economy slowed down the most were those states where traffic declined and traffic deaths dropped in parallel. This occurred most prominently in states where road safety was the worst to begin with (in other words, where the risk of death through a traffic accident was the highest). In this case, it seemed, recession was good for people’s health.

We wondered whether these historical health trends could also apply to the current Great Recession. When we looked at data from the current recession, we found that the evidence from the Great Depression did indeed presage a rise in suicides and a fall in road traffic deaths during our current recession. Across the United States, during the current Great Recession, suicide rates accelerated above their previous rates. Before the foreclosure crisis that started in 2007, suicides were already increasing at a rate of one per every 10,000 people per year. When the recession began, the rate jumped to five per every 10,000 per year. Overall, we estimated that there was a statistically significant increase of about 4,750 “excess” suicides during the recession, which means that these were suicides that would not have been expected if the recession had not occurred. In the UK, too, we estimated roughly 1,000 excess suicides during the same period.

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If mental health trends from the Great Depression also applied to the current recession, then we might expect road traffic deaths would also fall. Indeed, U.S. automobile deaths dropped by 3,600 deaths in 2010—reaching a sixty-year low. There was less traffic on the road, especially when wages dropped and gas prices increased during the recession, which statistically correlated to the drop in automobile deaths. Similar reports of reduced traffic accidents came in from Europe. Northern Ireland reported the lowest road traffic deaths on record, experiencing an unprecedented 50 percent decline in fatalities and 20 percent decline in serious injuries. Ironically, this drop led surgeons in London to complain about a lack of organs for transplant surgeries in 2008, because their usual source of supply—road traffic deaths—had dried up.

Some observers have interpreted these trends quite favorably. NBC News ran the headline “Good news! Recession may make you healthier.” But such interpretations were missing the bigger lessons from the Great Depression. While the Depression seemed to be a mixed blessing for health, what appeared to be far more important—both during the Depression and in the decades that followed—was how the U.S. government chose to respond to the crisis.

We studied two major policy debates that took place in the United States during the Great Depression. The first was about alcohol. The timing of the Great Depression overlapped with Prohibition on alcohol. The Volstead Prohibition Act, passed in 1919, mandated that “no person shall manufacture, sell, barter, transport, import, export, deliver, furnish or possess any intoxicating liquor.” The act, however, divided the country. In those states that enforced Prohibition rigorously, people abstained, or were forced to buy alcohol (sometimes quite toxic homebrews of methanol or bathtub gin) at illegal underground bars, speakeasies. But other states—like Connecticut and California—were “wet” throughout. Mixing business failures with alcohol partly contributed to these wet states’ higher suicide rates than dry ones. But during the Great Depression, those states with the most stringent Prohibition campaigns experienced one positive trend: significantly fewer drinking-related deaths. Wet states like Connecticut had 20 percent higher death rates from alcohol than did dry states. Thus, Prohibition prevented about 4,000 deaths in dry states from hazardous drinking during the Depression. If it had been applied equally throughout the country, Prohibition would have saved at least 7,300 lives (not that we’re advocating a return to Prohibition—just gleaning a lesson from it).

Perhaps the most convincing piece of evidence that Prohibition protected people from harm was revealed after it was lifted. In the early 1930s, there was public outcry against Prohibition. It was viewed as a source of rising crime, as gangsters like Al Capone operated illicit smuggling from the Canadian and Mexican borders. In addition, Prohibition had also highlighted government interference in people’s lives. But the policy argument that led to the end of Prohibition ultimately had to do less with ethics or criminal justice and more with the politics of debt. President Roosevelt wanted to gain votes from the working classes, but also stimulate the faltering U.S. economy by boosting consumer demand. His answer was for people to buy more alcohol and pay a tax on it. Alcohol-related deaths during the Great Depression didn’t spike until 1933, when Prohibition was repealed. Alcohol-related deaths immediately rose sharply, a trend that continued for the next several decades.

But the second policy debate had even greater implications for public health than the politics of alcohol. It centered on the appropriate role of government during an economic crisis.

In the lead-up to the 1932 election, the American electorate was polarized. The economy was in shambles, and total U.S. debt had jumped from 180 percent of GDP in 1929 to 300 percent of GDP in 1932, its highest ratio ever (that is, until the current recession). A political war raged over austerity, with the country divided between those calling for budget cuts, and others calling for social protection programs to help the millions who had lost jobs and homes during the Depression. Should government step in to rescue the American economy with more spending? Or was it necessary to cut budgets to prevent a further collapse?

The election pitted the incumbent president, Republican Herbert Hoover, against Democrat Franklin Delano Roosevelt. To the millions of Americans plunged into poverty, Hoover’s campaign advice that people should “pull themselves up by their bootstraps” seemed singularly out of touch. Hoover believed that if anyone should provide relief to the unemployed and homeless, it should be private charities and local governments, not the federal government.

While Roosevelt was initially not far from Hoover in this opinion, he experienced enormous political pressures from the nation’s left. Much of this pressure came from a groundswell of labor unrest. Between 1929 and 1931, the wages of auto workers in Michigan had dropped by 54 percent. By 1932, more than 200,000 people in the auto industry had lost jobs, a third of whom had been laid off from Ford’s factories. On March 7, 1932, in Dearborn, Michigan, 4,000 unemployed workers led a hunger march. They had come together to protest their shared fate: hunger, poverty, and unemployment. The workers carried banners bearing slogans such as “Give Us Work, We Want Bread Not Crumbs” and “Tax the Rich and Feed the Poor.” Their march was peaceful until Ford security guards and police tried to stop it. They fired tear gas into the crowd. Marchers responded by throwing stones. And then Ford security guards shot into the crowd, killing fourteen and wounding fifty. What had started as the Ford Hunger March had ended as the Ford Massacre.

The Ford March was followed by similar battles across the country. Workers began to join together, in some cases forging new collective organizations such as the United Auto Workers Union in 1935. The super-rich came to be viewed as drivers of the crisis, given their involvement in the risky land deals and financial transactions that had precipitated Black Tuesday. This popular criticism of the rich led to a swelling of support for the U.S. Socialist Party, largely composed of farmers who had lost their land and factory workers who had been laid off.

The political left became more powerful than ever before in U.S. history. Roosevelt grew concerned that union support for Socialist presidential candidate Norman Thomas would split the left-wing vote and give Hoover a second term. And so Roosevelt promised to implement social protection programs to help farmers and factory workers recover from the Depression. His promise tipped the balance in his favor, and he won the election. In his inaugural address, Roosevelt said: “I pledge you, I pledge myself, to a New Deal for the American people.”

The New Deal would eventually include such ground-breaking programs as the Federal Emergency Relief Act and Works Progress Administration, which gave 8.5 million jobless Americans work by creating new construction projects; the Home Owner’s Loan Corporation, which prevented at least a million foreclosures; the Food Stamp Program, which gave vouchers for basic foods to those who could not afford them; the Public Works Administration, which built hospitals and provided immunizations for Americans who could not afford them; and the Social Security Act to combat poverty among senior citizens.

The New Deal had a momentous effect on the public’s health. Although it was not designed with public health in mind, its support meant the difference between losing healthcare and keeping it; between going hungry and having enough food at the table; between homelessness and having a roof overhead. In providing indirect support to maintain people’s well-being, the New Deal was in effect the biggest public health program ever to have been implemented in the United States.

To study the effects of the New Deal on public health, we scrutinized the differences between death rates that emerged after the New Deal was implemented. But we could not simply look across the entire country, because health was being affected by the ongoing recession and epidemiological transition. We needed to measure variation in each state’s exposure to the New Deal in order to statistically isolate the effect of Roosevelt’s programs.

Here, we looked to the politics of the New Deal for clues. There were major differences among states in the extent to which they implemented FDR’s programs. In general, we found that states with left-leaning governors, who were politically aligned with Roosevelt, tended to invest more in New Deal programs than their Republican counterparts did. The New Deal–supporting politicians funded more housing programs, invested more in construction projects to generate jobs, and supported food stamps and welfare aid. By contrast, conservative governors sought to minimize New Deal programs, even cutting many of their state budgets to reduce deficits.

The stark contrasts between states’ responses to the Great Depression created variation in the degree to which the New Deal was implemented across the country. In social science research, we call such an historical episode a “natural experiment,” because it gives us an opportunity to identify the effects of a policy. While it would be impossible to randomize some U.S. states to participate in the New Deal and others not to participate, as in a medical experiment, the choices of these politicians created a real-world laboratory where we could see whether those states that had more New Deal spending gained better health as a result. Statistically, we accounted for a number of other factors that could affect these results, like different demographics, different pre-existing health conditions, education levels, income, and a variety of other control variables that we included in our analyses.

Louisiana became a prime showcase for the New Deal. Governor Huey Long was one of its most vocal supporters, but he felt it didn’t go far enough. So he launched the Share Our Wealth movement in 1934 and called for higher taxes on the wealthy and corporations in order to fund public works, schools, and pensions. Under Long’s leadership, Louisiana invested about $50 per person per year in social protection spending, whereas the governors of Georgia and Kansas devoted about half as much to such spending. Under Long, Louisiana created new programs for nutrition, sanitation, and public health education, doubled funding for the public hospital system, and provided free immunizations to nearly everyone who couldn’t afford them. Long started night schools that taught 100,000 adults to read, founded the Louisiana State University School of Medicine, doubled funding for the public charity hospital system, and extended free immunizations to 70 percent of the population—all during the worst economic crisis in history.

New Deal and Share Our Wealth programs made a difference. It was so big a difference that a major gap developed between states that supported the New Deal and those that did not, even among states that started out in similar public health and economic situations. People in Louisiana and other states implementing New Deal measures benefited from significantly greater declines in infectious diseases, child mortality, and suicides, particularly when compared with people in states like Georgia and Kansas that didn’t implement these measures.

Overall, New Deal programs not only helped avert further economic disaster but also were statistically correlated to large and lasting public health improvements. The Great Depression created conditions that public health experts expected would spread infectious diseases, but infections fell steadily—with the biggest declines in the cities and states where New Deal housing programs helped prevent excessive crowding. Across the United States, each $100 per capita of New Deal spending was, on average, linked to declines in pneumonia by about eighteen deaths per 100,000 people—a remarkable improvement at a time when effective drugs to combat the disease were not widely available.

The New Deal also helped improve children’s survival, as construction and rebuilding programs prevented shantytowns from becoming slums where stagnant water and overcrowding often led to diarrhea and childhood respiratory tract infections. Across the United States, each $100 per capita of New Deal spending was on average linked to reductions in infant deaths by eighteen per 1,000 live births.

And the New Deal was associated with reduced suicide rates. As the numbers show, the first year of the New Deal (1933) marked the turning point in the rise in suicides. Using extensive statistical models controlling for alternative explanations, we found that each additional $100 per person of New Deal spending was associated with a significant decline in suicides by four per every 100,000 people.

At the time, the American medical community was impressed by the results. Dr. William Welch, president of the American Medical Association, maintained that government investment in public health programs was not only a matter of saving lives and improving people’s quality of life, but also making sound investments that would benefit the economy. “Any undue retrenchment in health,” said Welch, “is bound to be paid for in dollars and cents as well as in the impairment of the people’s health generally. We can demonstrate convincingly that returns in economic and social welfare from expenditures for public health service are far in excess of their costs.”

Welch was right—the New Deal programs were affordable even during Depression times. By today’s standards, they still offer good value for the money. The social protection programs were as cost-effective, with similar costs per life saved, as common medications.

Overall, the size of these New Deal relief programs constituted less than 20 percent of the gross domestic product. And they not only reduced deaths but also sped up economic recovery. The New Deal brought an immediate 9 percent rise in average American income, increasing people’s spending and helping to create new jobs. Rather than creating a vicious negative spiral of increasing debt and deficits, as critics of the New Deal had predicted, the stimulus helped the U.S. economy grow out of debt.

At the time, politicians and the public didn’t have access to data that we have at our disposal. In hindsight, it is possible to see clearly the lasting benefits of the New Deal, both to the economy and to public health.

Undoubtedly, many of the health effects of the Great Recession will differ from those of the Great Depression. Prohibition is no longer in place, and our investigation into alcohol-related deaths during the Great Recession has found that more Britons and Americans are choosing to abstain from alcohol to save money. But we also found that a small, at-risk group has had the opposite reaction to our current recession: when faced with unemployment, they began drinking heavily. In the UK, where most people are still employed and drinking less overall, those people who lost work during the recession were much more likely to binge drink. Similarly, most Americans are drinking less during the Great Recession, but there is a hidden group of about 770,000 who now drink more dangerously, often landing in emergency rooms. These Americans have experienced a spike in death rates from acute intoxication and alcohol-induced liver failure.

Political leaders on both sides of the Atlantic now face choices similar to those confronted by Hoover and Roosevelt. Another large, natural experiment is being unleashed on the people of both countries. Under Prime Minister Cameron’s austerity measures in the UK, we see more and more sad stories like that of Brian and Kieran McArdle. The UK economy has yet to recover, as its debt continues to rise. Meanwhile in the U.S., President Obama is constantly battling with Republican deficit hawks, but has insisted on keeping and strengthening the safety net. And while not quite going so far as a New Deal, the U.S. stimulus has helped lead the country to a slow but real recovery so far.

What the Great Depression shows us is that even the worst economic catastrophe need not cause people’s health to suffer, if politicians take the right steps to protect people’s health. The Great Recession involves a fundamental political choice: whether to apply the lessons of the Great Depression and the New Deal, or to chart an altogether different path that could have dire consequences.

Taken from “The Body Economic: Why Austerity Kills” by David Stuckler and Sanjay Basu. Available from Basic Books, a member of The Perseus Books Group. Copyright © 2013.

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