COVID-19 has unleashed global domino effects. Health impacts understandably dominate the news, but the economic impact is where the big dominoes are falling, due to restrictions on people traveling for their livelihoods and social interaction. Jobs have evaporated, remittances dried up, access to affordable food is compromised. Oxfam’s proposal suggests six pathways for navigating the immediate effects on women and men coping with poverty. The crisis offers an opportunity to rebuild the world back better.
The Impact on Poverty
The economic crisis that is rapidly unfolding is deeper than the 2008 global financial crisis. In new analysis published by the United Nations University World Institute for Development Economics Research (UNU-WIDER), Andy Sumner and Eduardo Ortiz-Juarez of King’s College London and Chris Hoy of the Australian National University have estimated that as many as half a billion people could be forced into poverty, or 8% of the world’s population. This is a much higher number than the very cautious IFPRI estimate of 14-22 million people from late March. Any number will be speculative, hence the value of the scenario approach taken by the UNU-WIDER study.
The UNU-WIDER analysis estimates the potential short-term impact of Covid-19 on global monetary poverty, using the three World Bank poverty lines of $1.90, $3.20 and $5.50 a day and contractions in per capita household income or consumption. The estimates show that, regardless of the scenario, global poverty could increase for the first time since 1990 and, depending on the poverty line used, such an increase could represent a reversal of about a decade of global effort to reduce poverty. In some regions the adverse impacts could result in poverty levels similar to those last recorded 30 years ago. Under the most serious scenario of a 20% contraction in income, the number of people living in poverty could increase by 420 million to 580 million, relative to the latest official recorded figures for 2018.
Source: A. Sumner, C. Hoy and E. Ortiz-Juarez. (2020). Estimates of the Impact of COVID-19 on Global Poverty. UNUWIDER: Helsinki, p.14.
How Much is Needed to Fix it?
At least US$2.5 trillion. UNCTAD has called for $2.5 trillion to rescue the economies of developing countries. This would be made up of $1 trillion in debt relief, $1 trillion in additional liquidity mobilized through SDRs and $500bn in aid to support developing country health systems. Oxfam has called for aid to double health spending for the world’s 85 poorest countries, which would cost $160bn. Kristalina Georgieva, Managing Director of the IMF, has also said that emerging markets will need $2.5 trillion in support. Twenty experts, among them four Nobel Prize winners, including Joseph Stiglitz, Lord Nicholas Stern and seven chief economists from the World Bank and other development banks, have written to G20 leaders to warn of ‘unimaginable health and social impacts’ and have called for ‘trillions to be mobilised’.
How Should it be Spent?
Oxfam’s Economic Rescue Plan for All identifies six actions.
Actions to help people and businesses:
1. Give cash grants to all who need them. Countries should prioritize a massive increase in social protection benefits, providing large-scale cash grants to enable people to survive and subsidies to workers to keep businesses afloat.
2. Bail out businesses responsibly. Priority must be given to supporting small businesses who have the least ability to cope with the crisis. Bailouts of big corporations should be conditional on measures to uphold the interests of workers, farmers and taxpayers and to build a sustainable future.
Actions to help low-income economies:
1. Suspend and cancel debts. All debt repayments of recipient countries should be suspended for a year and, where needed, debts should be cancelled.
2. Issue ‘Special Drawing Rights’. The IMF should issue $1 trillion in Special Drawing Rights (SDRs) as a one-off global economic stimulus.
3. Increase aid now. High income nations should immediately increase aid to support the lowest income nations, meeting their commitment of 0.7% of GDP now, including by funding the COVID-19 Global Humanitarian Response Plan.
4. Adopt emergency solidarity taxes. Mobilize as much revenue as possible by taxing on extraordinary profits, the wealthiest individuals, speculative financial products and activities that have a negative impact on the environment.
Critically, COVID won’t affect everyone the same. Nor will a bailout – there is no such thing as a gender-neutral bailout targeted at marginalised households. Any measures agreed will have different impacts on women and on men. Will cash transfers find their way as easily into the hands of women, not just male heads of households? Will female street vendors have as ready access to any business support as more formal businesses? Will frontline health workers, overwhelmingly female and more likely to get sick, get cash for care? Bailouts can exacerbate existing gender-based inequalities unless gender-responsive perspective informs how they will work out for different people.
Here’s the full 18 page briefing