Inequality, poverty, and austerity–I

Two reports recently released clearly indicate that in the wake of pandemic, not only has progress on sustainable development goals (SDGs) overall slowed down significantly, the very first goal in terms of ending poverty has met with a major dent in its progress, whereby absolute poverty, which was on a decreasing trend for a number of years before the pandemic, has, in fact, started to increase in the wake of the pandemic.

Highlighting the lack of performance with regard to SDGs, in the foreword of the report ‘The sustainable development goals [SDGs] report 2023: special edition’, United Nations, Secretary General, Antonio Guterres pointed out: ‘Halfway to the deadline for the 2030 Agenda, the SDG Progress Report; Special Edition shows we are leaving more than half the world behind.

Progress on more than 50 per cent of targets of the SDGs is weak and insufficient; on 30 per cent, it has stalled or gone into reverse. These include key targets on poverty, hunger and climate. Unless we act now, the 2030 Agenda could become an epitaph for a world that might have been.’

In addition, he highlighted the lagging level of multilateralism that was making it all the more difficult for developing countries to work more meaningfully towards attaining SDGs on one hand, and dealing with a difficult debt situation, on the other.

He indicated in this regard: ‘Developing countries are bearing the brunt of our collective failure to invest in the Sustainable Development Goals (SDGs). Many face a huge financing gap and are buried under a mountain of debt. One in three countries is at high risk of being unable to service their debt. …Climate finance is also far below commitments and developed countries have not delivered the $100 billion that was promised annually from 2020.’

The report ‘Global multidimensional poverty index 2023’ recently released with regard to the situation of global poverty at hand, and jointly published by Oxford Poverty and Human Development Initiative, and United Nations Development Programme (UNDP), highlighted the challenge of poverty had in fact increased since the start of the pandemic, and due to the climate change crisis, among other causes; in addition to pointing out that a significant proportion of poor people lived in Sub-Saharan Africa and South Asia.

It indicated in this regard: ‘In 2015 the 2030 Agenda for Sustainable Development and Sustainable Development Goal (SDG) 1 set out to overcome the greatest global challenge: ending poverty in all its forms. At the midpoint to 2030, people’s lives continue to be battered in multiple ways simultaneously.

Globally, an array of challenges impedes poverty reduction – widespread inequality, political instability and conflict, a climate emergency, Covid-19 pandemic recovery, and cost of living and other crises. Measures of multidimensional poverty attempt to offer clear priorities for addressing poverty, going beyond monetary deprivations. …Across 110 countries, 1.1 billion of 6.1 billion people are poor. …poor people live in Sub-Saharan Africa or South Asia: 534 million (47.8 percent) in Sub-Saharan Africa and 389 million (34.9 percent) in South Asia.’

Moreover, both the SDG goals of poverty and inequality have increased since the start of the pandemic as pointed by a letter signed by more than two hundred noted international economists.

A recent Guardian published article ‘Top economists call for action on runaway global inequality’ pointed out that the letter addressed to UN secretary general and president of World Bank highlighted the worsening situation of both poverty and inequality. It also highlighted the fact that sharp rise in inequality over the recent years has led to increase in poverty.

The article pointed out in this regard: ‘For the first time in a quarter of a century, global poverty and extreme wealth have been rising simultaneously, the letter says. …The letter demands better measurement of inequality and more ambitious targets for narrowing income and wealth gaps. “We are living through a time of extraordinarily high economic inequality.

Extreme poverty and extreme wealth have risen sharply and simultaneously for the first time in 25 years. Between 2019 and 2020, global inequality grew more rapidly than at any time since WW2,” it says.’

The letter, which according to the article has been signed by noted academicians/policymakers ‘… [and among others] include the former UN secretary general Ban Ki-moon, New Zealand’s former prime minister Helen Clark and the economists Jayati Ghosh, Joseph Stiglitz and Thomas Piketty’ called for better measurement and targeting of inequality, as follows: ‘In 2015, all the governments of the world made history by setting themselves a Sustainable Development Goal to reduce inequalities – “SDG10”. Yet since then, following the COVID-19 pandemic and now the global cost of living crisis inequalities have worsened, by many measures.

SDG10 remains largely ignored. Equally troubling, the main SDG10 target, based on the World Bank’s Shared Prosperity goal, does not adequately measure or monitor key aspects of inequality. …We must strengthen our existing goals. We must act this summer to secure agreement that the UN SDG 10 must also have strengthened targets and better metrics, looking at inequalities both between countries and within them by using indicators that track wealth as well as income inequality.’

An important reason for increase in inequality and poverty has been the deepening cracks due to lopsided policy prescription of Neoliberalism, which got mainstreamed around four decades ago in both the public policy of many countries, including Pakistan, and which has continued to form the basis of International Monetary Fund (IMF) programmes, and especially in terms of over-emphasis on austerity policies. Here, it needs to be pointed out that austerity is different from belt-tightening, or bringing expenditure efficiency, which needs to be increased for curtailing non-developmental expenditures.

Hence, greater reliance on austerity policies has resulted in increase in income and wealth inequality, and not dented inflationary pressures as such, for which these policies are basically brought. Hence, under the neoliberal thought process, over the years both globally in general, and including developing countries in Pakistan – under both the strong influence of ‘Chicago-boys’-styled domestic policymakers, and under the conditionalities of IMF programmes – inflation is mainly attacked through reducing aggregate demand in the economy.

For this, on one hand, monetary tightening or monetary austerity is followed, mainly by increasing policy rate and, on the other, development expenditures are curtailed through practicing fiscal austerity and achieved primarily through meeting primary surplus targets; where primary surplus is achieved by reducing expenditures, beyond spending on interest payments and current expenditures.

Both of these policies have been followed in general in Pakistan, while evidence of practice of such policies especially since the Global Financial Crisis of 2007/08, and in the clearly evident experience of such policies in Europe, and in practice of such policies in general in developing countries like Pakistan – with policy remaining strongly influenced by the austerity mindset, both in and outside of the IMF programmes – has been that it has in fact not really dented inflation in any sustained way, even when deep economic growth sacrifice was given, and has overall caused stagflation with negative consequences for even the quality and depth of democracy.

(To be continued)

Copyright Business Recorder, 2023