Millions of people will join the ranks of misery around the world due to the pandemic, but it is not COVID’s fault.
There is no crisis without a good dose of euphemisms. “Austerity” equals cuts in public services, “negative growth” equals recession, and if people don’t have food they talk about “food insecurity.”
Millions of people are starving. Some suffer more than others, but they are all victims of the worst economic crisis since World War II.
More than 729 million human beings will be under the line of extreme poverty, which means they live with less than $ 1.90 a day.
They will represent 9.4% of the global population and will be 114 million more than predicted before the appearance of the virus. Many of them will die of hunger.
More than 265 million people, mainly in developing countries, are on the brink of starvation, according to estimates by the UN World Food Program.
The gale has wiped out two decades of fighting extreme poverty, according to World Bank economists, and it will be a serious setback for other people living on a budget below $ 5.50 a day, which makes up half the planet’s population. They will also suffer to meet their basic needs.
But some 500 million more could be added if the crisis worsens, says an analysis by the United Nations World Institute for Development Economics Research (UNU-WIDER). “We are seeing only the beginning of the tsunami,” warns Olivier de Schutter, United Nations Special Rapporteur on Extreme Poverty and Human Rights.
Returning to levels prior to the health crisis will not be easy. A huge amount of resources is needed and, above all, that the global economy advances at a speed never seen before, according to the experts consulted.
The UN goals for 2030 are a fading dream. They will only be fulfilled if global GDP grows at a rate of between 8% and 8.5% annually over the next decade, says Samuel Freije-Rodríguez, an economist specializing in poverty at the World Bank.
“That is five times higher than the historical rates experienced in sub-Saharan Africa,” he adds. The economic locomotive cannot run that fast. In 2021, global GDP will rebound to 5.2%, after having fallen 4.4% this year, according to the International Monetary Fund (IMF).
Faced with such an emergency, the United Nations Conference on Trade and Development (UNCTAD) launched the first cry for help in April: at least $ 2.5 trillion is needed to support citizens falling into extreme poverty.
“You have to act beyond avoiding hunger. Making people survive is a very low bar. We need to protect their health and livelihoods to have a good and sustainable recovery, and not to leave the crisis with more inequalities in the long term, ”says David Laborde, Senior Economist at the International Food Policy Research Institute.
Mobilizing such an amount of money requires a monumental effort. UNCTAD proposes the cancellation of external debt for the poorest economies and an increase in the provision of international aid, among other measures.
“Going into debt is not the option,” says Eduardo Ortiz-Juárez, an academic at King’s College London. “It would seem the most logical thing to do, but what are the macroeconomic conditions in these countries? Not everyone has privileged access to debt,” he argues.
While the world has fought back the virus with massive government spending in the form of unpayable debt most of these resources are from the richest economies. The fiscal response of low-income developing countries has remained at 1.2% of their GDP.
Public debt in low-income ones, in particular of the 47 least developed countries, most of them African, is considered unsustainable and therefore they cannot shoot it up.
Granting a temporary minimum income is seen as an answer to weather the storm, say the experts consulted. But this mechanism has its pros and cons, says Ugo Gentilini, a senior economist for Labor and Social Protection Practice at the World Bank.
The advantages, he alleges, include a contained fiscal cost and its “progressive” nature, because it is aimed at those who have the least. Furthermore, it is potentially acceptable to all political parties, the expert acknowledges.
Along the same lines, the United Nations Development Program (UNDP) launched a proposal in July: to give monetary aid of $ 62 per month, on average, to almost 2,780 poor people in 132 developing countries for six months.
The cost would imply a disbursement of about 200,000 million dollars a month, which is equivalent to 0.27% of the GDP of this hundred nations, or a third of the external debt that is due this year. But not everything is hunky with flakes.
Gentilini explains that there are other obstacles linked to the processing and design of this mechanism: the way in which the beneficiaries are chosen, the administrative requirements (cross-checks, updated documentation, etc.), and the disincentives that it can create in the search for employment.
Its financing, moreover, is not simple. The UNDP proposes to reuse the money destined to pay the external debt (through temporary suspensions).
“A minimum income is a help, not the solution to the problem of poverty,” says Deepak Xavier, an inequality expert at Oxfam Intermón. “It’s fighting for the parrot’s chocolate. The only thing it achieves is that people do not have a miserable life, but it is not the only answer. “It is a tool that could help people to mitigate scarcity, but not precariousness.”
So far, more than minimum income with a permanent vocation, there are several mechanisms of punctual transfers aimed at the poorest citizens, of different nature and duration.
Since the pandemic broke out, for example, some 200 jurisdictions on the planet have launched 1,500 measures to support society, a third of them non-contributory cash transfers, according to the World Labor Organization (ILO).
“In Latin America money transfer measures have been announced for 84,000 million dollars, which are fundamentally going to shore up the income of the poorest families,” says Alicia Bárcena, executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC).
This could reduce the number of poor people expected this year: 231 million people in Latin America, 96 million of them in extreme poverty, indicates the head of the institution.
“We expect estimates to drop two or three percentage points by the end of the year,” she adds. But ECLAC experts go further and advocate for a true unified emergency basic income for the region, of about $re120 a month on average, for the entire population in difficulty.
This can cost 2% of the GDP of the entire region if applied for just six months. If it extends to nine, it would imply an expense of 3.6% of the regional GDP, highlights Bárcena. “It is not cheap, but it is very important,” he stresses.
“We must go beyond short-term solutions,” says De Schutter of the UN. “The real key to reducing poverty is attacking inequality,” she says.
While it is true that in the last 30 years emerging and developing nations have taken advantage of the economic boom to reduce extreme poverty, the greater benefits of that growth have remained in few hands.
The Gini index, where zero equals perfect equality and 100 equals maximum inequality, only registered a reduction of three percentage points between 2002 and 2018, going from 44% to 41%, according to the IMF. And the current economic crisis will only widen the gap, as the index is expected to return to 2008 levels.
“One of the ways to attack inequality is through economic democracy,” says economic historian Richard Wilkinson, co-author of Equality: “We need more progressive taxes.”
“Fighting inequity also means taking away privileges,” says Oxfam’s Xavier. “I mean, big corporations pay their fair share of taxes,” he adds.
According to the NGO, an increase of just 0.5% in the rate of tax on the wealth of the richest 1% would go a long way: if applied over the next 10 years, it would raise funds to invest in the creation of 117 million jobs in sectors such as education, health, and care for the elderly, among others.
“The world, in the last 30 years, has been the victim of regulatory competition,” adds De Schutter. “The ability of countries to maintain progressive taxation schemes has been challenged by the rich, who can easily transfer their companies to other jurisdictions such as tax havens or territories with very low corporate rates,” he highlights.
For example, the average legal rate of corporate tax has gone from 28% in 2000 to 20.6% in 2020, according to the Organization for Economic Cooperation and Development (OECD).
The OECD’s proposal to introduce a global digital tax, which forces big tech companies to pay taxes where they make their profits, is on the right path to tax justice, experts note.
Building a better life is getting harder and harder. Inequalities make it difficult to find a job to build a future for yourself. “This is a worrying conclusion that has serious repercussions for social cohesion,” says the ILO.
In developing countries the situation is fragile. “There are a high number of women and men working informally without any social protection. That makes them vulnerable. They are not poor, but they are not financially secure either,” argues Ortiz-Juárez, from King’s College London.
More than 1.6 billion employees in the underground economy were affected between April and May by the pandemic, according to the ILO. The income of informal workers in middle-income nations such as Mexico, Ecuador, Romania, Thailand fell 27.7%.
The most affected were those of the poorest countries such as Haiti, Malawi or Ethiopia, India, Indonesia, with a drop of 82%.
Even when these people are employed, they still face significant barriers: more than 630 million workers in the world do not earn enough from their activity to lift themselves out of poverty, neither they nor their families, according to the ILO.