How COVID-19 Has Busted the Myth of ‘Neo-Liberal Economy’

The pandemic has highlighted some major loopholes in the Neo-Liberal Economy. The private sector, despite its greater efficiency and better resources, has been unwilling to step up to the task.

Privatisation of healthcare is not new in India; however, the scale of it has reached an all-time high in the last few years. Because those of us living in cities are so used to seeking treatment from private clinics and multi-storied hospitals, we rarely pay attention to how the private sector came to dominate healthcare in India.

Source: Reuters

This privatisation has to do for the most part with international financial organizations like the World Bank and the International Monetary Fund (IMF). The World Bank has been tasked with the job of providing loans and grants to countries for development purposes. Similarly, the IMF works towards helping out countries by giving them loans when they face a balance of payment crisis.

Their primary aim is to reduce poverty and maintain financial stability. While this may sound like a very noble cause, things are not so black and white. Countries can’t simply go to these institutions and ask to be bailed out. Both organisations have a long list of ‘conditionalities’ that a state must fulfill in order to get a loan, either for a project (as in the case of the World Bank) or to tide over their balance of payment crisis (in the case of IMF).

The neo-liberal economic order, which, simply put, is about promoting privatisation, a free market, de-regularisation, etc. with minimal government interference, is perhaps the biggest ‘gift’ these agencies have given to the world. This economic model puts its faith largely in the market, with the belief that the private sector is more efficient, and essentially pushes back against the idea of a welfare state where the state takes the primary responsibility of looking after the needs of its citizens. The market is expected to take care of imbalances that may emerge.

Of course, there are a lot more nuances involved in these models, but from the 1980s, these financial institutions have been pushing for this neo-liberal model when countries approached them for financial aid and assistance.

A state needs to prove that it will be able to pay back these huge amounts (running into a few hundred million dollars) to these institutions. And how would the state prove that? By incorporating these neo-liberal ideas, by allowing financial advisors to essentially dictate terms that overhauled their existing economic models.

India was no different. When India faced its balance of payment crisis in 1991, it took a loan of about 2.2 billion USD by pledging gold reserves to the IMF. It was at that point that the economy was opened up and this ushered in an era of liberalisation and privatisation. While there is no doubt that this loan pulled India out of the crisis, and led to a revamping of the Indian economy, etc., one must not overlook the wealth disparities it created and reinforced.

Demonstrators in Athens, April 2014, protesting against austerity policies imposed by Greece’s foreign creditors. Source: Reuters

The coming of the privatisation meant that the urban-rural divide grew, so did the disparities between different sections of the society- those who could access these new opportunities mostly lived in the cities and were fairly well educated. This led to the transformation of the middle class in India’s cities. When the market is given a free reign, it is hardly a surprise that marginalised sections get left behind.

Markets are not bound by responsibilities of social welfare, and less inclined to undertake ventures focussing on public welfare. This privatisation was visible in education and healthcare.

The government, as part of the loan agreement, agreed to step back from these sectors and allow in private entities. This led to a burgeoning of private schools, of which most of us are products and massive privatisation of essential healthcare services. Today, private hospitals account for about 2/3rd of hospital beds in India. Approximately 60-70% of all patients avail of the services of private clinics. It is private hospitals and clinics which have high-quality medical equipment, including the much-needed ventilators, and employ about 80% of India’s doctors.

One would assume that at a time like this, the private sector would step in for the rescue. Unfortunately, this has not been the case. Across the country, most private hospitals have shut their doors to incoming patients citing reasons like the lockdown and lack of clarity from the government. Those that are open have been allegedly charging exorbitant amounts of money to treat COVID-19 patients. There are multiple reports of hospitals turning away people showing COVID-19 symptoms, including a pregnant woman from Telangana who was denied admission and gave birth to a stillborn child and ultimately died due to COVID-19.

Source: Reuters

The government has made use of legislation like the National Disaster Management Act (2005) allowing it to take over private hospitals if need be, but this still isn’t enough. Private labs have been unwilling to conduct free testing as this would affect their profits. The Maharashtra government recently brought out a notification mandating all private doctors below 55 years of age to treat COVID-19 patients or risk revocation of their medical license.

With so many resources at its disposal- from trained doctors, technicians, to necessary equipment, it appears that the private sector is the one taking social distancing to heart, quite literally.

One cannot help but picture an angry parent dragging a reluctant child to do a chore when one thinks of how the government has had to threaten the private sector with dire consequences if it does not take on some share of responsibility during this unprecedented crisis.

Source: Reuters

Meanwhile, it is the public healthcare system in India that has been bearing the brunt of the pandemic. With the government spending less than 2% on healthcare, it is not unsurprising that the public healthcare system is struggling to cope. There aren’t nearly enough beds, doctors, equipment (especially PPE kits) for those on the frontlines, including Anganwadi workers who’ve received nothing except virtual training over the internet on how to work during this crisis. With the number of cases rising each day and the curve showing no signs of flattening anytime soon, it is essential that we realise that we cannot continue to function this way. There is a need for a major overhaul in the public healthcare system.

Across the world, countries with well-funded public healthcare systems have been better equipped to deal with the pandemic. In Scandinavian countries like Norway, Finland, the public healthcare system is significantly well funded. The torchbearer of neo-liberalism- USA, hasn’t fared well, not only because of lack of a universal public healthcare program, but unwillingness on the part of big businesses to shut down their operations citing potential financial losses.

In India, Kerala, which has been in the news for managing the crisis most efficiently, boasts of a robust healthcare system with an emphasis on decentralised governance and primary healthcare. Such infrastructure is missing in most parts of India, and then is it really a wonder that most of us turn to the private sector for our health woes?

Source: PTI

This crisis has shown us the major loopholes in the neo-liberal system. The private sector, despite its greater efficiency and better resources, has been unwilling to step up to the task. The government cannot wash its hands off of its responsibility to look after its citizens and must take steps to revamp the public healthcare system. We need the government to not only invest more in public healthcare but also to improve its efficiency and make it more accessible to the millions who continue to rely on it because they cannot afford to go to private clinics. The market cannot be given a free hand when it comes to the provision of basic human necessities.

Madhura Naniwadekar
Madhura Naniwadekar

Madhura is currently pursuing her M.Phil in International Organization from the School of International Studies, JNU. When she is not crying over her coursework, she can be found watching sitcoms or obscure historical documentaries and boring those around her with frequent rants about the current state of affairs in the world.

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