US Interests Have Had Their Sights Set on the NHS from the Beginning
With the UK's National Health Service now in the hands of a Tory government, the US health-care industry will look to exploit every opportunity to squeeze profits out of the system. But this is nothing new: the US has always had its sights set on the NHS.
Protesters demonstrate for the NHS at Trafalgar Square as NATO leaders attend a Buckingham Palace banquet on December 3 in London. (Peter Summers / Getty Images)
One of the most contentious issues in the British general election was the possibility of US pharmaceutical companies driving up National Health Service (NHS) drug prices in a post-Brexit US-UK free trade agreement. In late November, Labour Party leader Jeremy Corbyn announced that a trove of leaked documents proved that drug pricing was already on the table in preliminary negotiations, and he repeatedly accused Boris Johnson of planning to “sell off” the NHS to US corporate interests. Indeed, the US government and pharmaceutical companies have made no secret of their ambitions to open the NHS up to US investment under new trade arrangements; Johnson himself has denied that the NHS will be on the table in trade negotiations.
Johnson isn’t to be believed — not only because of his known mendacity and opportunism, but because history shows that the NHS has long been vulnerable to pressure and interference from US interests. From the beginning of the NHS in the late 1940s, the health service has often been at the center of US-UK diplomacy and trade agreements, with far-reaching consequences for NHS funding and patient care.
In a mirror to today’s post-Brexit tumult, the NHS was founded in 1948 in the context of unprecedented trade and financial arrangements with the United States. Clement Attlee and the Labour Party had won the 1945 general election largely on the promise of building an expansive welfare state with a free and universal National Health Service as its centerpiece. Yet in an economy still devastated by the war, it remained an open question as to how the country could finance it.
Facing an unprecedented trade deficit, many in the British Treasury, including economist John Maynard Keynes, were convinced that the financing of Labour’s platform was unfeasible without aid from the United States. Keynes told the Labour cabinet shortly after the election in 1945 that without assistance from the US, “there would have to be an indefinite postponement of the realization of the best hopes of the new government.” It was clear that the Atlee government needed a massive infusion of dollar aid to not only correct the trade imbalance, but also to help generate revenue for planned social services like the NHS.
When the Truman administration abruptly cut off Lend-Lease aid in August of 1945, this problem became unavoidable, and the Labour cabinet sent Keynes himself to Washington to negotiate. Keynes had originally hoped for an interest-free loan of $5 billion. But in the US, a conservative Congress and a resurgent business community were intent on rolling back the New Deal and thwarting progressives’ demands for a universal system of health insurance. The Wall Street Journal wrote that “opponents of socialism here cannot understand why the United States should finance socialism in Britain.” Conservatives balked at the idea of subsidizing, as one Republican congressman put it, “grandiose schemes of extravagance” that included a “cradle-to-the-grave program to pay the doctors’ bills of all British citizens, rich and poor alike.”
But many in the US Treasury and the State Department saw an opportunity in the Atlee government’s desperate need for a loan. The US side of the loan negotiations was led by Assistant of State for Economic Affairs William Clayton, a Texas cotton tycoon and a staunch advocate of multilateral free trade. Clayton offered Keynes a $3.75 billion credit, but at a high rate of interest and with additional strings attached: the UK would have to dismantle trade barriers, end currency controls, and open the domestic economy to US markets and investment.
The Labour cabinet reluctantly instructed Keynes to accept the terms, and the Anglo-American Financial Agreement was finalized in December 1945. It was the largest-ever peacetime intergovernmental loan up to that point.
The Marshall Plan
The UK began drawing on the credit as soon the agreement went into effect in the summer of 1946. As Keynes and the Labour cabinet had hoped, the loan did ease the balance of payments crisis, and it also helped pay for social spending by bolstering employment and generating tax revenue on imported consumer goods.
But the agreement’s harsh terms proved disastrous. When the government introduced sterling convertibility in the summer of 1947, it led to a run on the pound as investors surged to convert their sterling holdings into dollars. Facing a devastating “dollar drain,” the British Treasury suspended currency convertibility. It was only the Marshall Plan aid — which arrived the following year, over $3.2 billion of which went to United Kingdom between 1948 and 1951 — that prevented a further depletion of the country’s currency reserves.
The terms of the Marshall Plan required recipient countries to balance internal budgets and to provide the United States government with information about their internal economies and domestic policies. The British domestic economy – including the welfare state – was now under direct American scrutiny.
As it happened, the NHS became operational in 1948 just as a flood of US State Department economic advisors and corporate “productivity” experts landed in the country to oversee aid and to ensure the economy was operating in accordance with US standards. Unsurprisingly, State Department officials bristled at the Atlee government’s “doctrinaire” commitment to programs like the NHS, and fretted that high levels of social spending were impeding economic recovery and creating a “psychological obstacle” to US investment in British industry.
But the Cold War had begun, and the Soviet Union and European Communist parties were declaring the Marshall Plan to be a tool of US ideological and economic imperialism. Marshall Plan officials were thus initially reluctant to lend credence to these charges by overtly interfering in British domestic policy. “While the US would not adopt for her own certain of the internal economic and social legislation which the British have adopted,” the Start Department said in an internal memo in 1948, “it is not our policy to interfere with or attempt to direct [their] domestic legislation or policies.” After all, they admitted, social protections like the NHS might even prove to be “a good antidote to Communist appeal.”
So, at first, Marshall planners mostly stayed out of the way. In fact, to the horror of conservatives in Congress, the first years of the NHS were partially funded by sterling revenue generated by excise tax on US goods that had been purchased with Marshall aid.
That ended in the summer of 1950 with the outbreak of the Korean War. The UK had joined the North Atlantic Treaty Organization (NATO) the previous year, and the US put pressure on the country to divert resources away from social services and put them into rearmament. At Washington’s insistence, defense spending rose from 6 percent of GDP in 1950 to a peak of 11 percent in 1952. To offset the cost, the cabinet put a £400 million ceiling on funding for the NHS in 1951 and introduced new patient charges for ancillary medical services such as dentures and spectacles.
Aneurin Bevan, the pugnacious minister of labor who had earlier overseen the creation of the NHS as the minister of health, was outraged. Bevan was opposed to the scale of rearmament and entanglement in the American Cold War mission, especially if it were to come at the expense of the NHS. For Bevan, the British welfare state and the NHS in particular lent the country the “moral leadership of the world,” offering a “third way” that was distinct from the brutal poles of American market capitalism and Soviet authoritarianism.
Bevan wondered aloud if the American Medical Association — which was fiercely opposed to government-managed health care at home and abroad — had finally succeeded in its desire to undermine the NHS. In the spring of 1951, Bevan resigned from the cabinet in protest, lamenting in a fiery parting speech that the NHS had been “dragged too far behind the wheels of American diplomacy.”
It was far from the last time the US tried to put pressure on the NHS. When Foreign Secretary George Brown announced in 1968 that due to the demands of social spending the UK was pulling military forces out of Southeast Asia and the Persian Gulf, US secretary of state Dean Rusk replied that he could not believe that “free aspirins and false teeth were more important than Britain’s role in the world.”
Thatcher’s NHS
Despite America’s long shadow, until the 1980s the operation of the NHS itself was largely insulated from US market ambitions, protected by the safeguards and capital controls of the Bretton Woods system.
But during the neoliberal Thatcher revolution of the 1980s, US utilities and transportation companies began to buy out newly privatized services. Beginning in 1985, the Thatcher ministry invited US healthcare companies to bid for contracts for privatized services such as psychiatric hospital management. By 1994, 19 percent of NHS spending went to the private sector, up from 7.5 percent in 1984.
Even though the NHS remained relatively protected due to the regulatory mechanisms of the EU common market, much of this private spending has gone to contracts with US companies under “Private Finance Initiative” schemes.
In 2007, US-owned Quest Diagnostics won a lucrative contract to provide laboratory services for 215,000 NHS patients. Today, 13 percent of NHS inpatient mental healthcare beds are contracted out to US corporations like Nasdaq-listed Acadia International and New York Stock Exchange–listed Universal Health Services. In certain cities like Bristol, the percentage is as high as 60 percent. Undercover exposés have shown that many of these privatized mental health services are rife with abuse.
With the NHS now in the hands of a Tory government, cut adrift from EU protection, and exposed as never before to the neoliberal financial order, it should come as no surprise that the US healthcare industry will exploit every available opportunity to squeeze new profits out of the system, regardless of the social costs.
It’s true, of course, that even the worst possible post-Brexit trade deal won’t undermine the NHS overnight. But it’s worth remembering Aneurin Bevan’s warning upon his 1951 resignation from the cabinet: that once the NHS was exposed to the “anarchy of American competitive capitalism,” a pebble of concessions could become an avalanche of marketization. In the hands of US capital, Bevan said, the NHS would eventually share the fate of Lavinia from Shakespeare’s Titus Andronicus: “all the limbs cut off and eventually her tongue cut out, too.”