Responses to the Covid-19 Crisis in Europe: What Can We Learn From the 2008 Financial Crisis?

This blog is based on an article in the Journal of Social Policy by Johanna Hornung and Nils Bandelow. Click here to access the open access article.

The covid-19 pandemic is not the first crisis that put pressure on national healthcare systems in the 21st- century. Similarly, the financial crisis of 2008 can serve as an example of how the population’s access to healthcare deteriorated under financial constraints. During times of crisis and uncertainty, arising problems are often associated with a lack of money, or at least their solutions imply spending more resources on healthcare. In light of the disastrous events following the outbreak of covid-19 in Europe, including swamped hospitals, cases of triage, and increasing numbers of deaths due to the virus, countries face the question of how to adequately react to the emerging challenges. So what can be learned from the health policy responses to the economic crisis a decade earlier?

Indeed, the situation of the financial crisis was different from the current covid-19 pandemic. While the latter brings about a health and epidemiological crisis in the sense that a virus is infecting people and running the danger of overloading the health care system, the 2008 crisis weakened the financial resources of governments, citizens, and healthcare providers. Different problems require different solutions.

Yet the covid-19 pandemic illustrates existing structural problems in the healthcare systems that were present beforehand but that policy actors were not as aware of or did not manage to address. As opposed to these structural challenges, the economic crisis of 2008 rather resulted in financial challenges and these were not necessarily related to the healthcare structures. As a result, the strategies followed by governments as a reaction to the financial crisis focused on the financial aspect: they either increased or decreased public spending. But what explains which strategies were employed and what implications come with these insights?

By taking a look back, our article analyses the reactions of EU countries to the economic crisis starting in 2008. Given that these responses are nation-specific and require an in-depth consideration of the context within which they were adopted, we choose a research design that adheres both to extensive case knowledge and the search for patterns in the country reactions. In doing so, a fuzzy-set Qualitative Comparative Analysis (fsQCA) identifies the configuration of explanatory conditions that explain the outcome of health policy strategies chosen to combat the crisis.

What are these strategies that we look at? A review of health policy instruments that the states relied on to contain costs in healthcare did not reveal major varieties in the type of policy instruments used. However, we see substantial differences in the levels of spending. Even more puzzlingly, countries that were severely affected by the financial crisis, such as Ireland and Greece, showed opposing ways of dealing with the crisis. We therefore test various theoretical explanations that in combination may have led to the observed outcomes. These theoretical perspectives on public policy include socioeconomic conditions, such as the share of elderly, the development and current figures of GDP and debt, as well as unemployment rates. On a systemic side, this encompasses the degree to which corporatist actors are involved in decision-making, and which type of government (majoritarian or consensus), market economy (coordinated or liberal) or healthcare system (Bismarckian or Beveridge) is present in a country. Finally, we seek a political answer in the assessment of whether the government was primarily composed of left-wing or right-wing parties.

Our results reveal that a majority of left-wing parties in government was systematically linked to a more expansionary policy in the aftermath of the financial crisis. Healthcare spending was increased to buffer the challenges arising from the financial constraints otherwise imposed on the countries. At the same time, governments in coordinated market economies also tended to increase healthcare expenditures as a consequence of the crisis (see Figure 1). Coordinated market economies are amongst others characterized by low levels of inequality and collaborative relations between firms and other actors, including a central role of unions. While we can thereby identify a pattern of crisis reaction across EU countries, it remains an open question to what extent these reactions had normatively favorable effects on access to health care.

Figure 1: Conditions Linked to Increased Public Health Spending

In the current crisis of covid-19, the measures aimed at mitigating the spread of the virus have important financial consequences for the national budgets. This will most likely lead to similar if not even more severe financial pressures in healthcare systems that governments will face in the years to come. To address these challenges, our research leads us to expect left-wing governments and coordinated market economies to likely react with expansionary health policy and augmented levels of public spending on healthcare, whereas right-wing governments and liberal market economies will keep levels of public spending constant, or even decrease expenditure to cope with budgetary constraints. Considering that at this point in our knowledge, we cannot say anything about what the impact of increasing or decreasing public health expenditures is on social cohesion and public health, our research findings call on us to intensify research in this direction. That way, we can use the predictions derived from our insights to make a substantial contribution to the evaluation of strategies following the covid-19 pandemic.

About the authors

Johanna Hornung is Research Associate at TU Braunschweig.

Nils Bandelow is Professor at TU Braunschweig.

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