15 October 2020
Extraordinary times, extraordinary measures: requiring stimulus packages, recovery packages, crisis packages, take your pick. As a pushy virus gatecrashed almost every sphere of human activity and took hostage much essential economic activity, the scramble to avert a plunge far, far worse than the 2008 crash began.
The nations of the G20 group of the world’s largest economies had by the end of March 2020 already committed to government spending totalling $5 trillion to keep their own financial gears turning. Then along came the United Nations Conference on Trade and Development (UNCTAD) with an indecent proposal regarding much of the rest of the world.
It called for a $2.5-trillion coronavirus crisis package for what it still calls developing countries, broken down thus: $1 trillion as debt cancellation, $1 trillion made available through the use of special drawing rights with the International Monetary Fund (IMF) – a kind of ‘liquidity injection’– and a further $500 billion dispersed as grants for immediate health recovery. UNCTAD even rather niftily pointed out that the amount proposed would have been delivered to these countries over the last decade if the wealthy nations had met their overseas aid targets.
Needless to say, the proposal has had little traction. Barely a month later, another communiqué issued from UNCTAD, with Richard Kozul-Wright, director of its globalization division, saying: ‘Recent calls for international solidarity point in the right direction but have so far delivered little tangible support for developing countries.’ It also revealed that in 2020 and 2021, expected repayments by developing countries on their public external debt are estimated at nearly $3.4 trillion, with about a third of that sum to be wrung out of the poorest nations.
If the bald numbers aren’t bad enough, providing context makes it worse. These are the countries that have already been doubled over, some for decades, by high levels of debt servicing – to the extent that a big proportion of the taxes they raise goes towards that end rather than being invested in ways that benefit their people. The international institutions that have brokered loans, often to just continue this debt service, have insisted on privatizing everything as a condition, thus wrecking public services, including healthcare. All this before Covid-19.
Then the virus hits. A huge amount of capital immediately takes flight (so much for this being considered ‘investment’) – to the tune of $88 billion by March. This pushes down the value of local currencies against the dollar, making both debt service and imports costlier. With lockdowns coming in, tax revenues drop while the need to provide social protection becomes urgent. Large parts of the population (up to 90 per cent in some poor countries) who have what are known as ‘informal jobs’ – day-to-day wage-earning jobs with no contracts of employment or safeguards – are suddenly prevented from working to survive. It’s hell in a handcart any way you look at it – and still there’s that debt chewing away.
Debt is a prism that reveals the kind of injustice that already existed in international economic relations before Covid-19 came along to make things much worse
In July the G20 finance ministers gathered, amid growing calls from campaigners for debt cancellation, to discuss their Debt Service Suspension Initiative (DSSI) which could apply to up to 73 countries. What emerged from their deliberations was a decision to allow up to $5.3 billion worth of debt repayments by these countries to other governments to be suspended – not a cancellation – from May to December 2020. (These payments would still need to be made at a later date, adding to future debt stock.)
And they did nothing to force private creditors and multilateral institutions to do the same – this lot are due $19.9 billion of payments over this period. Meanwhile the IMF has been agreeing new loans to highly indebted countries, basically further cranking up the pressure for them to cut spending and increase taxes just to try to keep up with repayments. The loans themselves are likely to be used to keep previous lenders at bay.
‘This is not just about the capacity to pay for many countries but in fact essentially a question of justice,’ says Lidy Nacpil of the Asian People’s Movement on Debt and Development. ‘We are posing a fundamental question, and that is: “Why are we being made to pay for debt most of our people have not benefited from?”’
Debt is a prism that reveals the kind of injustice that already existed in international economic relations before Covid-19 came along to make things much worse (to say nothing of the depredations of unfair trade rules, tax avoidance by transnational corporations, etc; see NI 524). It’s a problem that seems intractable unless we apply notions of justice or what it means to be truly social to the inevitable negotiations of process. That is something we cannot lose sight of – in a world changed so far much for the worse by the pandemic – in the rush to ‘normal’.
Yet the way ahead has never been clearer. US writer Rebecca Solnit has written: ‘I have often thought that the wave of privatization that has characterized our neoliberal age began with the privatization of the human heart, the withdrawal from a sense of shared fate and social bonds. It is to be hoped that this shared experience of catastrophe will reverse the social bonds.’
Social bonds do not mend in a vacuum, however. They have a chance when governance intervenes to value the active participation of everyone in society. Or as Indian intellectual Arundhati Roy puts it: ‘We have to include everyone in the consideration of what justice looks like.’
Our current economic system rewards those who live off wealth disproportionately compared to those who live off work. It is designed to funnel the maximum financial reward to those who already have the most, usually gained from the labour and productivity of those who have the least. In July a group of super-rich individuals called, in an open letter, on their governments ‘to raise taxes on people like us. Immediately. Substantially. Permanently.’
Aware that the pandemic is predicted to push half a billion more people into dire poverty, they added: ‘The problems caused by, and revealed by, Covid-19 can’t be solved with charity, no matter how generous. Government leaders must take the responsibility for raising the funds we need and spending them fairly.’ The letter ends: ‘So please. Tax us. Tax us. Tax us. It is the right choice. It is the only choice. Humanity is more important than our money.’
Later that same month the United Nations Development Programme (UNDP) urged the introduction of a six-month, temporary basic income scheme for the world’s poorest 2.7 billion people, who are not covered by any social-welfare programmes, in order to slow the surge of Covid-19 cases. Modest cash transfers would allow people to meet their basic needs, even if unable to work. According to the UNDP: ‘This is not a finance story but rather a human story. This measure could be seen as a “Marshall plan”, but not for countries or businesses, but rather for people.’
Calls for the introduction of basic incomes (not just temporary), wealth redistribution by taxing the rich, investing again in public services and public goods and strengthening them, protecting workers’ rights, and greater government intervention in the economy, have come, even from some surprisingly conservative quarters, ever since it became evident that a pandemic was upon us. Calls for international solidarity were fewer but came not just from the radical Left but also important international institutions. What is required has, thus, been clear from the start and it was the opposite of what the neoliberal consensus had been dictating for the past four decades with such crap results.
But, as Filipino academic and activist Walden Bello points out, significant change for the better will come about only when there is a synergy between two elements: ‘an objective one, meaning a systemic crisis, and a subjective one, that is the people’s psychological response to it’.9
Covid-19 has so far only widened inequalities, both within and between countries. Will the greater social sense the crisis has provoked lead us to demand change to that? Or will we say, ‘Back to normal asap, just as we were before’?
Could welcome government interventions – at least in some wealthier countries – to protect jobs and rescue industry be made to leverage more control in terms of labour conditions, what gets produced and curb executive pay packets? Can we demand that any recovery be based on the principle of sustainability, of living better on less, on more equal shares for all, on a focus on the essential rather than growth-based overconsumption which is killing the planet? Can we demand that in the time of economic shrinkage that is upon us?
All roads lead back to fairness, justice, vision – concepts that have had no place in our economic and financial systems for too long.
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