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Mass privatization and mortality

Ryan Hahn's picture

This January the British medical journal the Lancet caused a kerfuffle with an article that claimed that privatization in post-communist countries was responsible for massive numbers of deaths. The authors of Mass Privatisation and the Post-communist Mortality Crisis argued that privatization resulted in massive layoffs, which in turn resulted in a staggering increase in mortality rates, particularly in Russia. Could it possibly be true that privatization is that bad for the health? The Economist was quick to rebut the argument, pointing out both that correlation is not causation and that countries such as Poland that implemented shock therapy did not experience the rise in mortality that Russia did.

A new paper from John Earle, a Professor of Economics at the Central European University and a Senior Economist at the Upjohn Institute, extends the rebuttal much further. Earle points out that a very basic link in the chain of reasoning of the Lancet authors is missing - namely, mass privatization did not lead to substantial job loss. In fact, the effects on employment were typically neutral or positive (click on Figure 1 below). For the full argument, check out Mass Privatization and Mortality: Is Job Loss the Link? It's quick but well worth the read.

Fig 1


Submitted by Filip Drapak on
It is true that a lot of people in post communist countries did lose their jobs and this certainly had a negative effect on their health. However, linking this to privatization does not make any sense at all. With the change from a planned economy to a market economy naturally there was major change in the economy, all “planned” industrial sectors had to be restructured and refocused. The share of services in GDP grew rapidly and the share of industry fell. Naturally as result of this especially workers in the generation over 50 were in jeopardy of losing their jobs. It was necessary restructuring that had the effect not the privatization per say. People did not only lose their job but also their right to job. In communism people had the right to be employed and also the obligation to be employed (unemployment was a criminal act). Therefore there was natural over-employment resulting in mass layoffs after the regime changed.

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