Time for a rights-based global economic stimulus to tackle COVID-19

During this pandemic, economic rescue packages—nationally and globally—must protect the socioeconomic rights of those most at risk.



Nathalia Aguilar/EFE


 

This article is a part of OGR's Imagining our Post-Pandemic Futures series on the human rights practice needed for creating a better world during and beyond the COVID-19 pandemic.

 


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 between different government-funded rescue interventions and their human rights impacts.

Second, governments 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 have introduced comprehensive 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, assigned € 200 billion to a “Social Shield” package, which includes a moratorium on mortgage payments and public utility bills and expands other social security protections for those most at risk. 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 approved in late March included 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 included 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 was 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, 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. In countries such as Brazil, Ecuador, Egypt, and South Africa, austerity commitments embedded in constitutions, IMF loan agreements, and budgets are proving to be a lethal strait-jacket on public spending, preventing vital investments in health, social protection and other redistributive measures needed to address the current crisis.

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.

The fiscal space for low- and middle-income countries to mitigate the impacts of the virus is further constrained by factors such as capital flight, drops in commodity prices, high levels of debt and tax abuse by multinational corporations, frequently resulting from the policy choices of wealthier countries and international financial institutions (IFIs). 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,” setting conditions in their COVID-related lending and assistance programs that show a stubborn reluctance to depart from the dogmas of austerity which 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. International cooperation is an 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.

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. Such measures include:

  • 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 should be extended, with debt restructuring offered to more countries. Creditors should contribute to debt relief and forgiveness.
  • Issuing at least US$500 billion worth of the IMF’s in-house currency, known as Special Drawing Rights, to help low- and middle-income countries stabilize their economies, stem financial outflows and finance domestic stimulus packages. 
  • Directing G20 and UN financial support to massively boosting health and social protection infrastructure in the global South, and to ensuring that vaccines and treatments are widely available as soon as possible.
  • Refraining from defensive trade and intellectual property measures and eliminating restrictions on the use of health technologies in the Global South: for example by creating 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 to raise the revenues they need:  in line with OECD guidelines, these could include solidarity, wealth and carbon taxes, eliminating unnecessary tax incentives and clamping down on cross-border tax abuse. Companies using tax havens should be excluded from government bailouts.

Beyond immediate relief, international cooperation must also include ambitious measures for transforming the global economy. 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.

 


An earlier version of this article was published by CESR on March 27th.

 

 

ORIGINALLY PUBLISHED: May 22, 2020

Ignacio Saiz is executive director of the Center for Economic and Social Rights and former director of policy at the international secretariat of Amnesty International.


 

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