The research evidence that public policy and investment directed towards reducing poverty and income inequality, improving early childhood development, ensuring affordable housing and addressing other social determinants of health will have a significant and long-term impact on improving health outcomes is clear and incontrovertible. A common argument made against such policy action is economic: the necessary investments would cost too much or would require too high levels of taxation, and as a result would dampen economic growth.
Two recent reports from Canadian social policy think tanks indicate that such economic arguments are not convincing. The first, from the Canadian Policy Research Networks, examines the economic case for investment in the social determinants.
Many policy makers have argued that social policy should be seen as a ‘productive factor’. This survey of the literature finds that the research is somewhat inconclusive on the overall effect of social policy in general, but is very clear on the economic benefits of investment in human capital such as education, training and early childhood education.
One component of these economic arguments is whether there are trade-offs between equity and economic growth or efficiency. A report from the Canadian Centre for Policy Alternatives analyzes whether countries with more comprehensive and progressive social policy, and higher taxes to pay for it, do worse economically. It compared OECD countries on a wide range of social and economic indicators. It found that the high tax’ Nordic countries do significantly better on social goals related to poverty, income inequality, education, health, social cohesion, etc. and that these social benefits do not come at the expense of economic goals. The low tax Anglo-American countries have had slightly greater economic growth, but it would appear the Nordic countries are better placed for greater growth in the future. The low tax countries lead on 14 of 33 economic indicators studied and the Nordic on 19. The Nordic countries have marginally higher GDP per capita, lower labour unit costs and inflation, higher budget surpluses, higher labour force participation rates especially of women, higher rates of saving, higher innovation, higher proportion of GDP spent on research and development, denser IT connections, and higher rankings on several international competitiveness and creativity indexes. The lower tax countries have had a higher rate of growth of GDP per capita, lower national debt, lower unemployment and higher investment.