Govt spending must target inequalities, not bail out riches

Geneva, 17 Apr (Kanaga Raja) – States need to invest massively in decreasing inequalities and poverty arising out of the COVID-19 pandemic, and not just bail out large corporations, banks and investors with no human rights or social conditions attached. Such public investments should also aim at reaching small and mid-sized enterprises, creating long-term sustainable employment, and prioritize the realization of human rights, in particular economic, social and cultural rights and the Sustainable Development Goals, while taking into account the environment to avoid future climate change disasters.
This is the recommendation of Mr Juan Pablo Bohoslavsky, the UN Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, in a letter to Governments and international financial institutions.
Some governments seem to promote an approach consisting of “saving the economy” at any costs, including by putting the health and lives of the majority of their populations at stake, said the UN rights expert.
By the same token, this economy-centred approach is often accompanied by a similar lack of enthusiasm to reduce inequalities, ensure the realization of economic and social rights of all or to reduce deaths or health problems from pollution and climate change.
Therefore, “saving the economy” also means prioritizing the benefit of a certain elite, he said.
States have to save lives and economies so there are jobs for people at the end and basic goods and services can be delivered during the crisis – but this must be done wisely and responsibly with health impacts as the primary consideration.
In this regard, Mr Bohoslavsky recommended a number of measures covering a wide range of economic, financial, monetary, fiscal, tax, trade and social policies to contribute to achieving these goals.
While the coronavirus is a threat to the rights to life and health, the human rights impact of the crisis goes well beyond medical and public health concerns.
The health crisis itself and the governmental measures implemented to face it are leading the world into an economic recession, he said.
While it is now clear that prevention and mitigating measures to contain the pandemic as soon as possible must be taken urgently, globally and in a coordinated manner by States, similar considerations should be given to address projected adverse human rights impacts of a drastic economic downturn.
“This is why the response must be framed and rooted in human rights law,” the independent expert underlined.
An economic crisis is rapidly coming on the horizon, with immediate economic impacts -that have already been felt through job losses.
“We are now experiencing a “coronavirus shock”, a phenomenon at risk of greatly affecting the global economy, societies and human rights. While the scale of the crisis cannot be precisely estimated yet, there seems to be a consensus as to expect more drastic repercussions than that of the 2008 financial crisis,” he said.
More specifically, the UN Department of Economic and Social Affairs anticipates, at best, a deceleration from the 2.5% growth previously forecast for 2020.
In a more pessimistic case, it forecasts a -0.9% global economic contraction. In terms of lost income, global economic costs linked with the pandemic are currently estimated at $1.1 trillion in 2020 in the most benign scenario, and to almost $3 trillion in the worst-case scenario.
There is no doubt about the large-scale impact of the latest (2008-2009) global economic crisis on human rights of people around the world, said the rights expert.
Equally, from a human rights perspective, potential impacts of the upcoming recession include challenges to access adequate housing, healthcare – including mental health – education, water and sanitation, social protection and work.
The impact of crises on inequality and human rights depends, to a great extent, on the existing social protection system in place, as well as the level of public spending, which serves as a stabilizer during recessions, including the way this public spending is financed, said the rights expert.
“The aftermath of the coming crisis is expected to be particularly devastating from a human rights perspective if special measures are not urgently adopted to compensate for past shortcomings and protect the population, while paying particular attention to the most marginalized and in vulnerable situations.”
According to Mr Bohoslavsky, a particular concern has been the outrageous overlooking of warnings to prepare for pandemics and the lack of effective public response from a number of governments to protect the public health through proven effective measures such as social distancing and quarantines to flatten the curve of the pandemic.
When life and health of populations are at stake, business as usual must not go on; there is a need to ensure that normal operations do not erode health policies to control the spread of the disease and the associated risk of a collapse of public health systems, he said.
Whether lives are protected or some more economic wealth is produced in a given year is a choice that has to be taken from a human rights perspective.
“The economy as such cannot stand in first position, especially since it did allow for the majority of people to have no personal safety net. Life, and human rights, must be in the centre of concern.”
Some governments seem to promote an approach consisting of “saving the economy” at any cost, including by putting the health and lives of the majority of their populations at stake.
By the same token, this economy-centred approach is often accompanied by a similar lack of enthusiasm to reduce inequalities, ensure the realization of economic and social rights of all or to reduce deaths or health problems from pollution and climate change.
In this sense, it is necessary to distinguish between big corporations’ claims to maintain their profits, from the needs of impoverished workers who try to earn their daily livelihood.
While it is important to minimize social and economic impact of the economic recession, by providing employment and thus ensuring the survival of the business sector as a whole, alternatives do exist.
For example, they could include targeted, temporary and compulsory payment holidays from taxes, rent and mortgages, other debts owed or other types of relief.
The “economy first” approach should not mean leaving people on their own to cope with the pandemic, said the independent expert.
Besides, millions of people dying does not sound like a great contribution to the economy from a purely consequentialist viewpoint.
In turn, implementing robust public health policies that saves lives and prevent health systems from collapsing should be complemented by policies to make possible that the economic system produces and delivers goods and services to fulfil basic human rights while minimizing the long-term negative economic effects of the pandemic.
“Not putting public health at the centre of the governmental action plans does not save the economy, it only leads to the worst of both worlds,” said the rights expert.
According to Mr Bohoslavsky, an immediate emergency human rights and humanitarian response should be urgently deployed in areas and groups at heightened risks of the pandemic.
In particular, humanitarian efforts must urgently provide relief to all individuals including those living in informal settlements and in situations of homelessness, informal workers including domestic workers, landless farmers, indigenous communities, poor neighbourhoods, IDPs (internally displaced persons), refugees, migrants, persons with disabilities, older persons, children, women who are victims of violence and persons under detention and in State custody.
A welcome development is the $2 billion coordinated global humanitarian response plan to fight COVID-19 launched by the UN Secretary-General on 25 March 2020.
“Yet, this $2 billion plan is negligible given that a number of developing countries do not even have resources to obtain testing kits and other medical supplies,” said the rights expert.
An effective COVID-19 testing policy should be a priority and tests should be made available for the population free of charge, in particular for health workers and also the most vulnerable and marginalized, he added.
Acknowledging that the availability of test kits is linked to production, trade, distribution, economic resources and other concerns, a comprehensive approach should be envisaged by all States to provide effective solutions, including when it comes to international cooperation.
Such initiatives or any other initiatives to soften the economic fall-out of the crisis, such as cash transfers and subsidies, must be designed to urgently reach those in need (whether “banked” or “un-banked”) and benefit all those financially struggling, without any discrimination, including those who are self-employed, informal workers and unpaid care workers who are largely women.
This should be coupled with continued efforts to fight the pandemic from a human rights based approach, mitigating the consequences of any potential lockdowns and restrictions that were put in place to combat the pandemic resulting in adverse human rights impacts, which in turn are leading to economic and work disruption as well as a surge in domestic violence, said the rights expert.
As already adopted by many States, measures including unconditional cash transfers to maintain an adequate standard of living, avoid entrenching inequalities and preventing people from being pushed into poverty, must be adopted immediately.
While States have the duty to protect human rights, including from abuses from third parties, businesses must respect human rights in their operations, by seeking to prevent or mitigate human rights impact and by “doing no harm”.
In this regard, businesses should abide by the Guiding Principle on Business and Human Rights and WHO guidance for preventing the spread of COVID-19 at the work place.
Since adequate housing is the entry point to the exercise of numerous human rights, such as education, work or health, and key to the effective implementation of prevention efforts, a moratorium on evictions should be enacted.
It is of utmost importance to ensure that emergency economic policies adopted to keep the economy functioning are consistent with massive testing, physical distancing, isolation, health measures and caring for the isolated.
In the current crisis, such initiatives should also be envisaged as a vehicle to ensure that social policies can be implemented through higher budgets, and production and maintaining supply chains of basic goods keep, rather than simply stimulate, aggregate demand to the detriment of public health measures and human rights.
On another level, individual property rights (real, personal and intellectual) need to be aligned with other human rights.
As such, property rights are not absolute and, if duly justified, States should be able to take the necessary economic and legal measures to more effectively face the current health crisis.
In particular, no private economic entitlement and monopoly should trump the rights to health and life of all, said Mr Bohoslavsky.
In view of the life-threatening situation, including for medical staff, States should also envisage instructing or taking control of some businesses that are able to produce masks and necessary gears to do so if this leads to a more effective protection of the public health.
Owners should be compensated according to the respective constitutional standards.
“Along this vein, it is in times of such a global health crisis that there should be complete waiver of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) stipulations with respect to medicines and other related technologies.”
The proposal made by Costa Rica to the WHO, to create a pool to collect patent rights, regulatory test data and other information that could be shared for developing drugs, vaccines and diagnostics, is therefore in line with international human rights standards, said the rights expert.
These efforts need to be complemented by both a short and long term investment in public health and epidemiology research as well as cash injection in the public development of vaccines and drugs.
The independent expert also said that private debt-servicing should be suspended for individuals who would otherwise be unable to cope with the public health crisis and be without income.
During this period these loans should not bear interest. In this regard, a suspension of mortgage payment should be introduced, like it is already the case in a number of European countries and Argentina.
In the same vein, those in need should benefit from individual and certain corporate tax cuts or delays.
It is also crucial to suspend for at least six months debt payments and services to the financial sector by low-income families and poor households to avoid that emergency cash transfers from States end up entering financial circuits rather than fuelling the real economy and helping the families.
A moratorium on sovereign debt repayment for debt-distressed developing countries, countries with a majority of poor population (to avoid future debt distress) and countries heavily suffering from the economic fallout of the pandemic should be immediately implemented, said the rights expert.
International financial institutions (IFIs) and other creditors should urgently mobilize their financial resources to help countries combating the pandemic, and ensure that the release of any loans or grants do not depend on the implementation of any type of conditionalities, such as austerity measures, privatization and structural adjustment, risking negatively impacting human rights.
Funds provided by IFIs and other donors to the countries requesting their help to deal with the pandemic should be free of such conditions as these too often have negative effects on human rights.
If any, debt cancellation could be tied to substantive increase in domestic spending on social protection with emphasis for instance on health, education and nutrition.
When it comes to the financial sector, the lack of or weak regulation has been fuelling the anticipated crisis, allowing high speculation.
According to some studies, capital outflows from the emerging market economies have exceeded $70 billion since the beginning of the coronavirus outbreak.
In order to prevent capital flight, capital controls should be applied as a global group of academics have called for.
The independent expert also said that States need to reconsider their fiscal policies to finance social policies, and ensure that monetary policy in consistent with both of them. Financing fiscal deficits can be legitimate if it ensures access to basic human rights for the population.
It is unacceptable in human rights terms that a few people, and in particular the richest “1%”, benefit from crises through speculation and other means. In this connection, immediate measures should be taken to combat such financial manoeuvres, including when it comes to COVID-19 related products and basic commodity prices.
“It is of unfortunate concern that, despite the broad agreement on the need to strengthen the fiscal space of States, the World Bank continues to promote structural reforms during the COVID-19 outbreak, which, if done as in the past, will negatively impact human rights worldwide.”
According to Mr Bohoslavsky, the current health and economic crisis shows two things:
First, some aspects of the economic, social and cultural rights of immediate effect do not require resources. For instance, the treatment of the COVID-19 patients cannot be denied based on gender, age, race, origins, class, caste, religion or belief, and other grounds under the prohibition of discrimination.
Second, this crisis has demonstrated that money can be found, when there is a sense of danger and need.
Governments and the international community are pledging to inject trillions of dollars; in fact, the G20 has promised to inject $5 trillion in the global economy and “do whatever it takes to overcome the pandemic.”
“This way of thinking is reactive rather than proactive. If even a fraction of that amount had been used proactively for the realization of human rights, to build a robust public health sector instead of subjecting it to marketization, privatization and cuts, to combat inequalities and poverty and the related underlying systemic issues, we would currently not be in such a dire situation,” he said.
States now need to invest massively in decreasing inequalities and poverty, and not just bailing out large corporations, banks and investors with no human rights nor social conditions attached.
“We know well that they will not immediately nor spontaneously share these resources with those in most need. Public investments should also aim at reaching small and mid-size enterprises, creating long-term sustainable employments, and prioritize the realization of human rights, in particular economic, social and cultural rights, and Sustainable Development Goals while taking into account the environment to avoid future climate change disasters.”
One important aspect that is missing in the policy debates is the ultimate source of the funds to be injected into the economy.
For sure, in the short term, the State will have to run a wide deficit as higher expenditure will not be checked by higher revenues (rather the opposite).
But at a second stage, it will be necessary to reduce this deficit and face new payments on the public debt front.
Given the exceptional situation, States could set a one-off wealth tax; but it can also undertake a more ambitious reform.
Indeed, this is the right time to seriously engage in structural reforms for re-distributive justice including progressive taxation reforms, where millionaires and billionaires and large corporate conglomerates are requested to contribute to the society in a proportional measure to their fortunes, said the independent expert.
(Published in SUNS #9103 dated 20 April 2020)
– Third World Network