Today the world faces a severe austerity pandemic: the high levels of expenditures needed to cope with COVID-19, the resulting socioeconomic crisis and other shocks due to structural imbalances combined with reduced tax rates have left governments with growing fiscal deficits and indebtedness. Starting in 2021, this initiated a global drive toward fiscal consolidation whereby governments began adopting austerity approaches exactly when the needs of their people and economies are greatest.
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A long list of austerity measures is being considered or already implemented by governments worldwide. This includes eleven types of austerity policies that have negative social impacts on their populations, especially harming women: (1) targeting and rationalizing social protection (in 120 countries); (2) cutting or capping the public sector wage bill (in 91 countries); (3) eliminating subsidies (in 80 countries); (4) privatizing public services/reform of State-Owned Enterprises (SOEs) (in 79 countries); (5) pension reforms (in 74 countries); (6) labor flexibilization reforms (in 60 countries); (7) reducing social security contributions (or “tax wedge,” in 47 countries); and (8) cutting health expenditures (in 16 countries). In parallel, three prevalent measures to raise revenues in the short-term that also have detrimental social impacts include: (9) increasing consumption taxes, such as sales and value-added taxes (VAT) (in 86 countries); (10) strengthening public-private partnerships (PPPs) (in 55 countries); and (11) increasing fees/tariffs for public services (in 28 countries).
Rather than investing in a robust post-pandemic recovery to bring prosperity to all citizens, governments are considering austerity measures that will harm populations. These adjustment measures are not new: the same policies have been advised over the years by the international financial institutions (IFIs). Austerity is an outdated policy that has become the “new normal,” an IFI strategy to minimize the public sector and the welfare state –to support the private sector. Countries constrained by debt and deficits are told to adopt fiscal consolidation or austerity measures rather than identifying new sources of fiscal space. Once budgets are contracting, governments must look at policies that minimize the public sector and expand PPPs and the private delivery of services, often promoted and/or assisted by multilateral development banks. These policies principally benefit corporations and the wealthy –they are “pro-rich policies” that exacerbate inequalities. To compensate for the negative social impacts, particularly on women, the IFIs often advise a small safety net targeted to only the poorest populations, which excludes the vast majority of people, punishing the low and middle classes. Pro-corporate policies accompanied by a small safety net targeted to the poorest do not serve the mainstream population; they are detrimental to the majority of citizens, especially women. The worldwide propensity toward fiscal consolidation is expected to aggravate social hardship at a time of high development needs, soaring inequalities and social discontent.