The People Versus Austerity

  • Date: 18/10/2021
  • Author: Karol Balfe

Over the past 18 months, Covid has taught us, more than ever before, the importance of public sector services. We lit candles, clapped and paid tribute to frontline workers, the nurses and doctors who bore the brunt of the pandemic. Yet, across the globe, blunt and ineffective public sector wage cuts are damaging the very sectors governments claim to want to protect.

A new report by ActionAid, Public Services International and Education International, The People Versus Austerity, shows that International Monetary Fund (IMF) advice to cut government spending in 15 developing countries has wiped nearly $10 billion from public sector wage budgets – the equivalent of cutting more than three million jobs, including doctors, and nurses and teachers at the height of the pandemic. This has undermined progress on health and education and other Sustainable Development Goals and women’s human rights. There is an urgent need for a radical re-think. We need to place frontline public sector workers at the heart of the post-Covid recovery. And the transformative responses needed to reverse the climate crisis. After forty years of shrinking and squeezing, people are pushing back against the cult of austerity. We are reimagining the role of the public sector for a more caring, feminist, green and just future.

Last week, the 2021 World Bank Group and IMF Annual Meetings will take place in Washington. Despite some shifts in rhetoric, austerity and further public sector wage cuts will remain very much on the cards. The research in the People Versus Austerity shows that in 2020 the IMF recommended that governments either cut or freeze public sector wage bills in 90% of the countries where data was available. Likewise, the recent Global Austerity Alert suggests 154 countries face austerity in 2021. With this rising to 159 countries in 2022.

The Results of Austerity

The results of forty years of ‘Austerity’, ‘structural adjustment’, or ‘economic discipline’ globally are clear. The World Health Organisation (WHO) estimates there is a shortage of 5.9 million nurses. With almost 90% of those shortages being in low and middle income countries. Filling these shortages needs to be matched by addressing low pay across the nursing profession, of which 90% are women. The Irish Nurses and Midwives Organisation has also highlighted the chronic shortages of nurses in hospitals in Ireland.  

Meanwhile UNESCO estimates that 69 million more teachers need to be recruited in the next ten years to achieve the Sustainable Development Goal of universal access to primary and secondary education by 2030. 

When core education and health goals are not met, the impact is felt triply and most acutely by women and girls. Women and girls are more likely to be excluded from accessing basic services. They lose opportunities for decent work in the public sector. And women and girls bear a disproportionate share of the unpaid care and domestic work that rises when public services fail.

Rising Inequalities

In many cases this is happening in the context of wider regressions in women’s human rights and rising inequalities. While, at the same time, escalating profits that could finance public services are disappearing owing to weak tax systems, tax loopholes, avoidance and evasion. This enables wealth to be concentrated in the hands of a few multinational companies and billionaires. Tax dodging costs developing countries an estimated $300bn every year in lost revenues. Ireland has played a role in this, by acting as an entry point to Europe for big multinationals, allowing them to avoid paying tax in the poorest countries through loopholes, tax treaties and tax structures such as the “Single Malt,” which remains in use as recently exposed by Christian Aid. 

The central rationale for imposing austerity measures is to stabilise or decrease debt levels, to prevent defaults and to ensure countries can continue to service their existing debts – and access future loans. To achieve this, maintaining inflation in low single digits is seen as crucial by the IMF- and the imposition of public sector wage bill cuts and freezes.

Sierra Leone

The impact of this undermines global development efforts in very real ways. Even in the very countries that Ireland is supporting in bilateral aid. Sierra Leone receives bilateral funding annually from Ireland. Yet the IMF has advised Sierra Leone throughout the period 2016-2021 to cut the public sector wage bill to meet a target of 6% of GDP. The Sierra Leone civil war, which ended in 2002, left the country with some of the worst health and education outcomes in the world. Since then, ambitious initiatives have been introduced. This includes the Free Health Care Initiative for pregnant and lactating mothers and children under 5. And a commitment to free primary and secondary education.

But despite these ambitious targets (and many challenges), the IMF has called for public sector cuts. ActionAid’s research found that, because of this policy, the wage bill for health workers decreased in real terms by 15% between 2017 and 2021. This is a massive challenge in a country still reeling from Ebola when COVID hit. Meanwhile, the education sector wage bill, has in real terms decreased by 5% even though the pupil-teacher ratio has grown from 60:1 in 2017 to 75:1 in 2021. The teacher gap has also grown from 51,524 to 69,074 in the same period. Ireland needs to use its voice and influence globally to ensure that the global economic architecture does not undermine the very things we support.   

The People Versus Austerity: A Feminist Just Transition

Investment in public services is at the heart of many progressive movements for a feminist and just transition. Here, there is a recognition that responses to the climate crisis and an unequal and broken economic system are inherently linked. And these ideas on the importance of the public sector are no longer at the margins. Joe Biden’s multi-trillion recovery package focuses on infrastructure. But redefines this, regarding frontline public sector workers as part of the core infrastructure of the country. 

The orthodox austerity approach pursued by the IMF and too many Ministries of Finance, is supposed to promote the narrow goals of stability and aggregate growth. But in practice this actively constrains fiscal space and blocks public investment in public services and the public sector workforce. Both in the short and longer term. Key public responsibilities for health, education, social protection and other services are passed on to private households (adding to the unpaid work of women). Or the private sector (for profit extraction). Neoliberalism has been oversold for forty years and has stifled the very growth and development it was supposed to value. It is time for fundamental overhaul, for a system change focused on economic justice.

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