Washington DC and London — After years of austerity, a number of Eurozone countries are now considering expansionary fiscal policies. And in the UK, government spending is set to return to levels last seen in the 1970s. But austerity abounds elsewhere in the world, including in some of the poorest countries.
Since 2010, governments around the world have been cutting public expenditure. New research found that about 75 per cent of the global population, or 5.8 billion people, will be in countries undergoing austerity by 2021.
This new wave of austerity will commence next year and will affect 130 countries, most of which are in the developing world. As many as 69 countries will undergo "excessive contraction", cutting expenditure below levels achieved prior to the global financial crisis of 2007. The list includes countries with dire development and human needs, such as Burundi, Djibouti, Eritrea, Iraq, the Republic of Congo, and Yemen.
In the developing world, the International Monetary Fund (IMF) advises governments to undertake austerity reforms either as part of its regular surveillance missions, or when countries have to sign up to its structural adjustment programmes to borrow money.
While the IMF claims to protect social spending in these programmes, independent research proves otherwise. IMF-mandated policy reforms led to cuts in government education and health (pdf) spending, increased income inequality (pdf), reductions in labour rights (pdf), declining access to healthcare, and a rise in neonatal mortality in developing countries.
Even in the poorest countries, governments can create fiscal space. Public services and investment can be funded through progressive taxation, a crackdown on illicit financial flows, improved debt management, more accommodative macroeconomic frameworks, and -- in the case of the poorest countries -- lobbying for more aid. For example, more than 60 countries have renegotiated sovereign debt in recent years, allowing governments to spend less in debt service and more in necessary development expenditures.
Meeting these internationally agreed development goals means putting-to-bed the damaging austerity policies of the past decade. Most importantly, it entails recognition that an austere future is an avoidable catastrophe.
Isabel Ortiz, a former director of the International Labour Organization and UNICEF, is director of the Global Social Justice Program at the Initiative for Policy Dialogue, Columbia University.
Thomas Stubbs is a Senior Lecturer in International Relations at Royal Holloway, University of London, and a Research Associate in Political Economy at the Centre for Business Research, University of Cambridge.