Mass privatisation and the post-communist mortality crisis: a cross-national analysis

Summary

Background

During the early-1990s, adult mortality rates rose in most post-communist European countries. Substantial differences across countries and over time remain unexplained. Although previous studies have suggested that the pace of economic transition was a key driver of increased mortality rates, to our knowledge no study has empirically assessed the role of specific components of transition policies. We investigated whether mass privatisation can account for differences in adult mortality rates in such countries.

Methods

We used multivariate longitudinal regression to analyse age-standardised mortality rates in working-age men (15–59 years) in post-communist countries of eastern Europe and the former Soviet Union from 1989 to 2002. We defined mass privatisation programmes as transferring at least 25% of large state-owned enterprises to the private sector within 2 years with the use of vouchers and give-aways to firm insiders. To isolate the effect of mass privatisation, we used models to control for price and trade liberalisation, income change, initial country conditions, structural predispositions to higher mortality, and other potential confounders.

Findings

Mass privatisation programmes were associated with an increase in short-term adult male mortality rates of 12·8% (95% CI 7·9–17·7; p<0·0001), with similar results for the alternative privatisation indices from the European Bank for Reconstruction and Development (7·8% [95% CI 2·8–13·0]). One mediating factor could be male unemployment rates, which were increased substantially by mass privatisation (56·3% [28·3–84·3]; p<0·0001). Each 1% increase in the percentage of population who were members of at least one social organisation decreased the association of privatisation with mortality by 0·27%; when more than 45% of a population was a member of at least one social organisation, privatisation was no longer significantly associated with increased mortality rates (3·4% [95% CI −5·4 to 12·3]; p=0·44).

Interpretation

Rapid mass privatisation as an economic transition strategy was a crucial determinant of differences in adult mortality trends in post-communist countries; the effect of privatisation was reduced if social capital was high. These findings might be relevant to other countries in which similar policies are being considered.

Funding

None.

Introduction

The transition from communism to capitalism in Europe and central Asia during the early to mid-1990s has had devastating consequences for health: UNICEF attributes more than 3 million premature deaths to transition;¹ the UN Development Programme estimates over 10 million missing men because of system change;² and more than 15 years after these transitions began, only a little over half of the ex-communist countries have regained their pretransition life-expectancy levels.³ But were these excess deaths inevitable?

Probably not. Not all countries have fared so poorly: although in Russia, an extreme case, the population lost nearly 5 years of life expectancy between 1991 and 1994, Croatia and Poland recorded steady improvements of almost 1 year of life expectancy during this same period.

What accounts for these differences in the pace of change in mortality rates across countries and over time? Research comparing Russian regions has identified the pace of transition, which was assessed by measures such as job gains and losses, as an important factor.4, 5 Yet little attempt has been made to assess empirically the effects on health of the underlying policies pursued by governments and, as a result, the wider determinants of the mortality patterns across the post-Soviet world. One possible answer, we suggest, lies in the economic strategies that countries used to build capitalism out of communism.

There were two approaches to capitalism. Radical free-market advisers argued that capitalist transition needed to occur as rapidly as possible.6, 7, 8 The prescribed policy was called shock therapy, with three major elements: liberalisation of prices and trade to allow markets to re-allocate resources, stabilisation programmes to suppress inflation, and mass privatisation of state-owned enterprises to create appropriate incentives. When implemented simultaneously, these elements would cause an irreversible shift to a market-based economy. By contrast, gradualist economists, also known as institutionalists, called for a slow transition, recommending that countries gradually phase in markets and private property while allowing time to develop institutions that are needed to make markets work well.9, 10

In most countries, the shock therapy approach was put into practice. Russia fully implemented shock therapy by 1994, and most countries implemented some or all of the programme by the mid-1990s, although the greatest variation was in privatisation.1, 11

Has rapid privatisation affected mortality rates? Because rapid privatisation of thousands of inefficient firms from the Soviet era would have cut many jobs before new firms would have emerged, the resultant short-term increases in unemployment might have led to short-term increases in adult mortality rates, in view of evidence from other settings of the effects of unemployment on individual health.12, 13 The results would be most severe for employees of large-scale capital-intensive heavy industry and manufacturing enterprises that were least able to offer their employees, few of whom had transferable skills, reasonable chances for success in retraining or finding new jobs.

We tested the hypothesis that the implementation of mass privatisation programmes accounts for differences in mortality increases in post-communist countries.