The
majority of the world population lives with austerity cuts and see
their living standards deteriorating.
Since
2010, most governments in both high income and developing counties
have been implementing austerity policies, cutting public
expenditures. Surprisingly, this trend is expected to continue at
least until 2024, according to a
global study just published by the Initiative for Policy Dialogue
at Columbia University.
Based
on IMF fiscal projections, the study finds that a new fiscal
adjustment shock will start in 2020. By 2021, government expenditures
as a share of GDP will be declining in 130 countries, nearly
three-fourths of which are in the developing world. The reach of
austerity is staggering: nearly 6 billion persons will be affected by
2021. The G20 alone committed US$10 trillion to support the financial
sector in response to the global financial crisis, and then passed
the costs of adjustment to populations, with millions of people being
pushed into poverty and lower living standards.
In
practice, the most commonly considered adjustment measures in 2018-19
include: pension and social security reforms (in 86 countries);
cutting or capping the public sector wage bill, including the number
and salaries of teachers, health workers and civil servants
delivering public services (in 80 countries); labor flexibilization
reforms (in 79 countries); reducing or eliminating subsidies (in 78
countries); rationalizing and/or further targeting social assistance
or safety nets (in 77 countries); increasing regressive consumption
taxes, such as sales and value added taxes (in 73 countries);
strengthening public-private partnerships (PPPs) (in 60 countries);
privatizing public assets/services (in 59 countries); and healthcare
reforms (in 33 countries).
All
of these measures have negative social impacts. As a result, in many
countries older persons have lower pensions; there are not sufficient
teachers, medical and care staff, and the quality of public services
suffers; there are less jobs, and people work under more precarious
conditions; prices increase while wages are stagnant; and the low and
middle classes are squeezed and under pressure. The worldwide
drive toward austerity or fiscal consolidation can be expected to
aggravate the growth and employment crisis and diminish public
support at a time of high development needs, soaring inequalities and
social discontent.
Austerity is also being used as a Trojan Horse to
induce “Washington Consensus” policies to cut back on public
policies and the welfare state. Once budgets are contracting,
governments must look at policies that minimize the public sector and
expand private sector delivery, including PPPs.
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