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Lending Institutions, Healthcare, and Human Capital

Free «Lending Institutions, Healthcare, and Human Capital» Essay Sample

Today, many countries owe their economic growth and success to the support given by the international lending institutions. The latter have helped boost economic and financial solidity, abetted trade, and provided means of recovery to economically weak states. However, there are accusations and criticisms against the function of such lending institutions. Somalia is a good example where these organizations, especially the IMF and the World Bank are accused of hindering social, economic and political development as will be seen in this essay. The paper further demonstrates the relationship between a healthy population and economic growth.

How Lending Institutions Have Hindered Development in Somalia

With a per capita income of $435, Somalia is one of the poorest countries globally (Coleman, 2015). This state has been marked by internal wars which have seen thousands killed, millions displaced, and infrastructure destroyed. Human capital has also been exterminated in the country. Statistics shows that by 2015, the state had an external debt scaling to about $5.3 billion, translating to about 93% of its total GDP (Coleman, 2015). The country owes many lending institutions including the IMF, World Bank, and the African Development Bank. However, it is evident that the international lending institutions have hampered the state’s development. Somalia has a pastoral economy the major GDP share of which is an exchange between the country’s nomadic pastoralists and the agriculturalists. In the 1980’s, the IMF and the World Bank threw the two groups into a crisis. Injurious economic policies put by the two were the onset of an agricultural crisis in the state. In the intervention, the Structural Adjustment Programs instituted resulted in Somalia depending on imported food. As a result, cheap local grain from food aid flooded the Somalian market, consequently leading to an expulsion of the local exporters (Lyons & Samatar, 2010).

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The Structural Adjustment Programs instituted by the IMF and the World Bank have hindered Somalia’s progress. These projects led to immense destruction in the country. The herdsmen in Somalia starved as their livestock continuously reduced, resulting in a breakdown in the economic exchange between them and the agriculturalists. Further, the balance of payments affected the markets and the domestic market which increasingly diminished. As with other developing countries, the IMF and World Bank weakened labor laws requiring the state and people to adopt privatization (Lyons & Samatar, 2010). The latter not only affected the political power of the nation but also influenced the quality of social life of the populace.

Socially, international lending institutions require governments to cut down on spending. As such, healthcare, environmental protection, education, social amenities, and children care among other services are affected (Paloni & Zanardi, 2012). The quality of life of the borrowing citizens as is the case of Somalia continues to decline. Privatization means that the needs of the people are placed in the hands of a few hence access to services such as water, electricity, and telephone becomes increasingly limited. Further, the country’s resources are exported to industrialized states (Paloni & Zanardi, 2012). These resources would have led to Somalia’s development if they were aimed towards supporting the family farms outside Somalia and hence, the nation has little left for its growth and development. The lending institutions also devalued the country’s currency in their efforts to promote exports (Coleman, 2015). Therefore, though Somalia’s slow development in political, social and economic areas may be attributed to other factors, the international lending institutions have undeniably played a chief role.


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Ways in Which a Healthy Population Strengthens the Economy

There exists an undeniably vital relationship between a healthy population and economic growth. Somalia has been war-torn for many years. The people thus need significant health services to promote their social and economic growth. There are different substantive ways through which a healthy population can help the economy develop. First, research shows that healthier individuals have longer lives than those less healthy ones. This not only guarantees a market for the country’s production but also leads to development in different sectors (Johnson, 2010). Due to the war, diseases such as HIV, malaria, and others continue to shorten the lifespan of the state’s populace. When many died from the starvation and famine facing the country, the market for local production reduced subsequently affecting the growth of the economy. This is, however, slowly changing, as the health system slowly improves to provide the populace with a longer life span.

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Second, healthier population translates to labor productivity. When people are physically and mentally healthy, their country has sufficient supply of labor (Pan American Health Organization, 2014). However, in Somalia, health care remains a challenge in the state. The country is characterized with poverty, translating to inadequate access to social amenities such as sewerage, medicine, and disease preventive services. With the working population facing numerous challenges in accessing health care, labor has continuously declined. As a result, Somalia’s per capita income continues to dwindle. The significant and positive development of the economy that is dependent on a healthy population does not materialize.

Third, healthy population translates to investments (Johnson, 2010; Pan American Health Organization, 2014). When people live longer and healthier lives, they are not only more productive, but also get to save and invest more in the economy. Investments translate to growth and development in an array of areas. Employment is created, and needs such as insurance policies and coverage become more affordable. Since the healthcare status in Somalia is poor, the rate of investment continues to be low but has improved from the earlier years.

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Last, institutional performance and development are reliant on healthier populations. Development of Somalia in the earlier years was hindered by diseases. For instance, the population had lower life expectancy than today. This discouraged adult training which, in turn, lowered productivity. Somalia has also seen an increase in communicable diseases and hence, sectors such as tourism have been hindered. However, this is gradually changing, and institutional development is increasing. National development is thus growing with the improving health of Somalia’s population.

How Somalian Government Has Used Foreign Aid to Improve the Health Care System

The Somalian government has used foreign aid to improve the country’s health system, albeit to a small extent. With the nation gradually becoming peaceful, the government has used funds from the IMF, the World Bank, and the African Development Bank to set up health centers in different parts of the state (Coleman, 2015). The populace in the rural parts of the country suffers the most from the poor healthcare systems. However, the state’s leadership makes efforts to provide healthcare services such as vaccinations, awareness services, maternity services and preventive services among others. Though the effectiveness of the government’s efforts is still low, there has been some slight progress compared to the early years. The life expectancy in Somalia is still lower compared to other developing countries. Insurance policies remain a major issue to be addressed in the nation as many people cannot afford them. Further, infant deaths, as well as facilities such as hospitals, continue to be major challenges in the state. Therefore, the government has not yet effectively used the foreign aid to improve the failing health system of the country.

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In conclusion, different states benefit variously from international lending institutions. Some benefit from the loans they get whereas others have their development hindered by the policies put in place by the lending institutions. As seen above, Somalia’s growth and economic development has, to a large extent, been impeded by the international lending institutions. The health system has been adversely affected as the government cut down spending on the same. There exists an undeniable interlink between the health system of a country and its economic development. Research demonstrates that wealthier and richer states have a population that is healthier compared to those characterized with high poverty levels. Healthier populations mean that education levels are high, investments grow, mortality decreases, life expectancy increases and malnutrition and mortality decrease. As such, productivity and labor increase, translating to a rise in a country’s national growth.

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