PHM-Exch> Austerity policies also hitting developing countries: effects on health and nutrition

[Claudio Schuftan]

From: South Centre <south at southcentre.org>
**
      SOUTHVIEWS .
Visit the South Centre’s website: www.southcentre.org.

Austerity policies also hitting developing countries
 While global attention on the crisis focuses on Europe, a new book by
UNICEF’s Policy Division details how the economic crisis continues to
inflict devastating social consequences worldwide.

“A Recovery for All: Rethinking Socioeconomic Policies for Children and
Poor Households” analyzes the latest international data to highlight the
alarming dangers posed by unaffordable food, pervasive unemployment and
dwindling social support. The book is edited by Isabel Ortiz and Matthew
Cummins.

In terms of access to food, after two major international price spikes in
2007-08 and 2010-11, populations in nearly 60 developing countries are
paying 80 percent more, on average, for local foodstuffs in 2012 compared
to pre-crisis price levels.

Regarding labor markets across the globe, they are characterized by fewer,
lower-paying jobs and proliferating the incidence of working poverty that
had already trapped nearly one billion workers and their families, with two
out of every five workers in the world currently unable to find a job.
Further, rampant youth unemployment coupled with a quickly expanding supply
of young labourers—more than one billion are expected to enter the world’s
labour market between 2012 and 2020—are only adding to ongoing labour
market woes.

Access to public goods and services is also increasingly being challenged
in the worldwide drive toward austerity. In 2012, 133 countries are
forecasted to reduce annual spending by 1.6% of GDP, on average, with 30%
of governments characterized as undergoing excessive contraction, defined
as cutting expenditures below pre-crisis levels.

Despite the world’s fixation on austerity in high-income economies, the
untold story is the scope and depth of austerity that is taking place among
developing countries, which are contracting at nearly double the rate as
their developed counterparts (-1.8% versus -1.0% of GDP in 2012,
respectively).

A review of 158 of the latest IMF country reports reveals that governments
are considering four main reforms:

   - Cutting or capping wage bills, which can impact the salaries of public
   sector workers that provide essential services to the population (under
   consideration in 73 countries)


   - Reducing or removing subsidies, including on food and fuel products at
   a time when food prices are at unprecedented highs in many places (in 73
   countries)


   - Targeting and rationalizing social protection programs, this is,
   reducing social protection coverage at a time when governments should be
   considering scaling up a social protection floor for all persons rather
   than scaling down benefits (in 55 countries).


   - Governments are also pursuing other budget slashing strategies that
   could lead to heightened vulnerabilities and cause further contraction of
   economic activities, such as tax increases on basic goods and services that
   are principally consumed by the poor (in 71 countries).


When combined, the cumulative and simultaneous effects of the price, income
and service delivery shocks have potentially severe and irreversible
consequences, especially for children. Among these include increased hunger
and malnutrition, worsening health outcomes, lower school attendance,
higher rates of child labor and domestic violence, rising vulnerability to
future shocks and widespread social unrest.

However, the current crisis also presents an opportunity to rethink
socio-economic policies for all persons. This requires shedding the myopic
scope of macroeconomic and fiscal policy decisions of the past and,
instead, basing them on their potential to achieve food security, full
employment, human development, and inclusive and sustainable growth.

There are alternatives, even in the poorest countries. It is often argued
that social and economic investments that benefit children and poor
households are not affordable or that government expenditure cuts are
inevitable during this adjustment period. However, there are six broad
areas that governments can explore to expand fiscal space today, which are
supported by policy statements of the United Nations. These include:
re-allocating public expenditures; increasing tax revenues; lobbying for
increased aid and transfers; tapping into fiscal and foreign exchange
reserves; borrowing and restructuring existing debt; and/or adopting a more
accommodative macroeconomic framework.

To do so, social and economic investments must be prioritized within a
flexible, longer-term framework, recognizing that there are a variety of
financing options available to bolster these much needed investments today,
even in the poorest countries. Hunger, disease, death, protests, loss of
faith in governments and public institutions, are all avoidable. There are
alternatives that should be pursued for an inclusive recovery—a “Recovery
for All”.

*The above is a statement by the publishers at the release of the book, “A
Recovery for All”.
The book can be downloaded at:
http://www.unicef.org/socialpolicy/index_62107.html.
  *
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