Austerity for the poor

 

The world has multiple, compounding crises, from COVID-19, energy, inflation, debt, and climate shocks to unaffordable living costs and political instability. According to Oxfam, almost half of the global population is already living on less than $5.50 per day.

 A recent report, shows the looming wave of austerity that will be even more severe than the one that followed the 2008 global financial crisis. 

An analysis of IMF expenditure projections indicates that 143 governments will cut spending (as a share of GDP) in 2023, affecting more than 6.7 billion people – or 85% of the world's population.

 In fact, most governments started scaling back public spending in 2021, and the number of countries slashing budgets is expected to rise through 2025. With average spending cuts of 3.5% of GDP in 2021, this contraction has already been much bigger than in earlier shocks.

Even more worrying, upwards of 50 countries are adopting excessive cuts, meaning their spending has fallen below their (already low) pre-pandemic levels. These contains many countries – including Equatorial Guinea, Eswatini, Guyana, Liberia, Libya, Sudan, Suriname, and Yemen – with large unmet development needs.

The austerity measures that governments are considering or already implementing will be deeply harmful to their populations, and especially to women.

 Governments are planning to limit social protections for vulnerable populations; cut programs for families, the elderly, and people with disabilities; slash or cap the public-sector wage bill (implying a reduction of frontline workers like teachers and health personnel); eliminate subsidies; privatize transportation, energy, and water services; cut pension benefits; reduce labor protections and employers’ social-security contributions; and decrease health expenditures.

In addition, many governments are adopting short-term revenue-generation strategies that will also have detrimental social effects. These include increasing consumption taxes – such as regressive sales and value-added taxes (VAT) – strengthening public-private partnerships, and increasing fees for public services.

UNICEF finds that Eswatini (formerly Swaziland), Kenya, Madagascar, Rwanda, and South Africa are considering or implementing three categories of austerity measures, while Lesotho is pursuing four categories, and Botswana five. Botswana, Kenya, Madagascar, Rwanda, Uganda, and Zambia are each applying four or more categories of measures to boost revenue. Including spending cuts and tax increases, Botswana, Kenya, Madagascar, Rwanda, and Zambia are each considering at least seven categories of austerity measures that are known to have adverse social impacts.

Not only are these governments pursuing painful austerity at a time when the region is dealing with unprecedented droughts and a cost-of-living crisis. They also are showing little willingness to adopt policies – such as higher tax rates for corporations and wealthy individuals – that are critical to reducing their already-high levels of inequality.

Opinion | Billions in Global South Face Looming Wave of Austerity in 2023 | Common Dreams