Time for a Rights-Based Global Economic Stimulus to Tackle COVID-19

English
Safeguarding human rights in economic responses to the crisis demands governments finally lay to rest the prevailing dogma of austerity. Economic rescue packages—nationally and globally—must protect the socioeconomic rights of those most at risk.
 
March 27, 2020
 
By Ignacio Saiz
 
Governments around the world are scrambling to address the economic fallout of the COVID-19 crisis—with glaring differences in their responses. First, there is a stark contrast in their approaches to government-funded rescue interventions and whom these should benefit. Second, they have widely divergent capacities to put such interventions in place at all.  Human rights obligations have rarely been mentioned in debates about these interventions. Yet, they are crucial in determining what governments ought to do, individually and collectively, to protect those most at risk from the social and economic impacts of the crisis.
 
Common to all interventions is the welcome embrace – even by the staunchest deficit hawks—of  expansionary fiscal policy (i.e. stimulus). The spread of COVID-19 has laid bare the catastrophic consequences of contractionary fiscal policy (i.e. austerity) pursued aggressively since the global financial crisis, which has left health systems around the world strapped for resources necessary to tackle the disease. Even comparatively robust public health systems in wealthy countries such as Spain and Italy have been pushed to the brink—their resilience eroded through years of budget cuts.
 
 

Some bailouts are more equal than others

A number of countries currently at the epicenter of the pandemic are introducing comprehensive stimulus packages to mitigate the effects of the virus and the economic standstill it has prompted. While most of these “bailouts” include protections for workers and companies, their different emphases are striking. These differences largely correlate with how countries have integrated social rights commitments into their legal and policy frameworks.

Spain, for example, has assigned € 200 million to a “Social Shield” package. This enables a moratorium on mortgage payments and public utility bills and expands unemployment benefits, social services, and other protections for those most at risk for reasons such as age, disability or income status. The program, overseen by Spain’s Ministry for Social Rights and Agenda 2030, is explicitly grounded in social rights guarantees in the Spanish constitution. In other countries with strong social rights traditions, such as France and Denmark, the government has effectively stepped in as “payer of last resort” to stave off lay-offs or liquidations.

In the US, by contrast, a US$ 2 trillion economic relief package includes US$ 500 billion in assistance to the airline industry and other large corporations, with limited conditions for ensuring the protection of workers' rights or the reduction of carbon emissions. The plan includes important steps to cushion the economic impact of the crisis, such as increasing worker protections, extending unemployment insurance to those in the gig economy, and providing cash assistance to individuals. But other proposed social protection measures, such as expanding paid sick leave provision, were not included, leading to criticism that the bill is tilted more towards corporations than working families.
 
 
Legacies of austerity in the Global South
 
In less resourced countries, where health systems have been debilitated by IMF-backed austerity cuts, what comes next is terrifying to consider.  Scores of countries in the Global South are now bracing for the spread of the disease. Prospects for containment are far bleaker where hospitals are already overburdened, where much of the population lacks adequate access to hand-washing facilities, and where crowded conditions in informal settlements make “social distancing” difficult. In many countries, successive waves of fiscal adjustment have included reforms curtailing labor rights, weakening social protection schemes, and exacerbating already precarious work. These measures have left millions even more vulnerable to the economic effects of the pandemic—particularly women, who are heavily concentrated in the informal and service sectors.
 

Unlike rich countries, the fiscal space for low- and middle-income countries to mitigate the impacts of the virus is more constrained, frequently because of the policy choices of wealthier countries and international financial institutions (IFIs). These countries must urgently expand public spending on health and social protection. But this is an extremely challenging task amidst a cascade of associated shocks—including an economic recession, drops in commodities prices, devaluation of their currencies, significant capital flight, and the consequent increase in borrowing costs—and in a context of high levels of debt.

Both the IMF and World Bank have announced plans to mobilize significant resources to address the impact of the COVID-19 crisis on poorer countries. But they have also called for “structural reforms” to “create confidence” and “foster markets.”  This reluctance to depart from the dogmas of austerity suggests lessons have not been learned about how the failures of structural adjustment have exacerbated the current crisis.

Further, nationalistic responses from rich countries are hindering poorer countries’ capacities to protect people from the impact of the pandemic. For example, EU countries have adopted emergency export curbs on US$ 12.1 billion of hospital supplies. This could have a devastating impact on the right to health in poorer countries reliant on those imports.

The crisis of multilateralism has only hastened the spread of the disease. It’s time for rich countries, IFIs, and other economic actors to stop undermining the capacities of other countries to protect the socioeconomic rights of those most at risk in the COVID-19 crisis. This is not only a question of international solidarity—as the IMF has termed it—but an international obligation under human rights law. All governments have a duty to ensure their actions do not cause foreseeable harm beyond their borders, nor hamper the ability of other countries to honor their human rights obligations. Individually, and as members of IFIs, they are also obliged to cooperate internationally to safeguard the rights of those most at risk in contexts such as this.
 
 
Global stimulus as a matter of rights
 
Governments and IFIs should fulfill these obligations by immediately agreeing to a range of new instruments that would enable poorer countries to mobilize "maximum available resources" to protect those at risk during the pandemic. A number of promising measures have been proposed, including:
 
Debt restructuring and debt forgiveness: the IMF and World Bank-proposed debt moratorium for the poorest countries on all interest payments is a first step, but this call should be extended to all low and middle-income countries. The IMF should also extend its recent offer to Argentina to facilitate debt restructuring negotiations to more countries. Creditors should contribute to debt relief and forgiveness.
 
Issuing additional IMF Special Drawing Rights (SDR) and extending swap lines: the IMF has urged the G-20 to work together to boost global liquidity through a sizable SDR allocation. Experts have called for at least US$ 500 billion to be provided, combined with coordinated capital controls. This would expand the availability of IMF resources and alleviate pressure on the currencies of low- and middle-income countries. 
 
Directing G20 financial support to the Global South: the G20 leaders’ recent US$ 5 trillion pledge to fight COVID-19 should be directed to massively boosting health infrastructure and ensuring that vaccines and treatments are widely available as soon as possible, as the OECD Secretary General has advised
 
Contributing to the UN multi-donor fund: the Norwegian government has proposed a fund, similar to the Ebola response fund, to better equip the UN in assisting developing countries fight COVID-19.
 
Refraining from defensive trade and intellectual property measures and eliminating restrictions on the use of health technologies in the Global South: the Costa Rican government has asked the World Health Organization to create an intellectual property pool for sharing patents to develop COVID-19 drugs, vaccines and diagnostics. 
 
Enabling low and middle income countries to adopt emergency tax measures: OECD guidelines should be complemented with assistance on expanding fiscal space in equalizing ways, including digital economy taxation and wealth taxation, as well as reviewing unnecessary tax incentives. Countries must exclude tax avoiders from bailout benefits and accelerate long-overdue reforms on corporate taxation to tackle tax abuse. 
 
Beyond immediate relief, international cooperation must also include ambitious measures for transforming the global economy. The COVID-19 crisis has given renewed urgency to international cooperation on key rights-advancing initiatives. In particular, the need for prolonged stimulus is an opportunity to accelerate the transition to sustainable economies by advancing a Global Green New Deal. This would reduce the vulnerability of low- and middle-income countries to shocks due to heavy reliance on commodities and help diversify production. 
 
As we learned from the global financial crisis, moments of economic disruption can present a rare opportunity to tackle the status quo. But, they are often used by those with vested interests to entrench it. This time around, we must hold governments and international institutions accountable for the kind of recovery they pursue: either a just recovery that tackles the disparities the crisis has made manifest—within and between countries—or a “just-about” recovery that merely papers over the cracks.
 

 

Image of an empty street at dusk in Kolkata, India during the country's lockdown, courtesy of Deeptanshu Photography.

 

Related: