Inequalities, half of the poor countries in the world have imposed severe cuts in social spending: and inequalities are growing

ROME – Half of the poor countries cut public spending on health during the pandemic. As many as 77 of the 161 countries analyzed were affected by cuts in social spending and 70% reduced their spending on education. 95% of the nations analyzed did not increase the tax levy on higher incomes and assets or on the extra-profits made by large multinationals in the ’20 -’21 pandemic two-year period. In 2021 alone, low-income countries spent twice as much on debt servicing as education, 4 times as much as healthcare and 12 times as much as social protection. Meanwhile, in Italy, measures to combat inequality appear outside the intentions of the new majority

The 161 countries analyzed in the dossier. The pandemic – it is often reiterated – has sharpened socio-economic gaps in many countries, especially in the most vulnerable contexts of the world, where public interventions to combat inequalities have in many cases shown levels of serious inadequacy. This is revealed by the new report by Oxfam And Development Finance International (DFI), published on the occasion of the annual meetings of International Monetary Fund and of World Bank, scheduled for October 14-16 in Washington. The dossier reviews fiscal and labor policies and some chapters of public spending (education, health and social protection) in 161 countries around the world during the first two years of the pandemic. Although the world has had to face the worst health crisis of the last hundred years, half of low- and middle-income countries have experienced a contraction in health expenditure, in relation to total public expenditure: in Jordan, for example, the decline is status of 20%.

2/3 of the countries have not raised minimum wages.

While in-work poverty has reached record levels and today the surge in inflation erodes the purchasing power of workers, two thirds of the countries analyzed have not raised minimum wages in the two-year period 2020-2021. In developing countries such as Nigeria, the legal minimum wage has not been updated since before the outbreak of the pandemic. Even in advanced economies like the United States, the federal minimum wage level has remained unchanged since 2009.

143 out of 161 nations did not tax the highest incomes and wealth.

Despite severe public finances in many countries, 143 out of 161 governments have not resorted to tax increases on higher income or wealth, and 11 countries have even reduced the tax burden on wealthier citizens. “The report shows how in too many countries governments have not acted decisively to counter the widening of inequalities – said Gabriela Bucher, executive director of Oxfam International – many governments have reduced investments in public services when they are most needed and have not resorted to levies on the fortunes and profits of those who have benefited from the pandemic ”.

The state budgets of the poorest are crushed by debt. Unlike advanced economies like Italy – where the interventions of welfare emergency measures temporarily eased the explosion in inequality – the poorest countries found themselves without liquidity available for similar income support measures. To a large extent, their large debt exposures weigh on the room for maneuver in developing countries.

For every $ spent on healthcare, $ 4 goes into repaying debts. In 2021 alone, the predominantly low-income populations spent 27.5% of public resources on domestic and foreign debt service: double the amount spent on education, four times the expenditure on health care and 12 times the expenditure on healthcare. social protection. “For every dollar spent on public health, developing countries spend four dollars to repay their debts mostly to rich foreign creditors. – said Matthew Martin, director of the DFI – An immediate suspension of the debt service must be guaranteed and fair agreements favored for its restructuring ”.

The extra profits linked to the pandemic are not taxed. Despite countless historical precedents – what happened in the aftermath of the Spanish flu or at the end of the Second World War – most countries did not opt ​​for an increase in taxation on higher incomes or assets or for the Extraordinary taxation of pandemic extra-profits forfeited by operators in economic sectors, such as the pharmaceutical sector, IT or the online commerce sector, which have seen a conjunctural increase in demand for their goods and services. In doing so, governments have given up important resources to support those – including households and businesses – who have suffered the hardest repercussions of the crisis. “The Finance Ministers meeting in Washington are faced with an important choice: to contribute to the construction of more dynamic and equitable economies or to continue with the status quowhich risks exacerbating inequalities, causing immense and unjustified suffering for the most vulnerable social strata ”, concludes Bucher.

“But fairness seems off the radar for the next Italian government.” In the Italian context, the temporary, massive compensatory interventions of welfare, helped to alleviate income inequalities in the first two years of the pandemic. However, this should not lead to optimism, considering that the reduction in disparities has been accompanied by a decline in incomes for a large proportion of the poorest population. The challenges of the moment – the energy crisis, rising inflation and the risks of recession – risk further exacerbating inequalities from here on out.

The unknowns about the government to come. “While it is not yet known how the new government intends to act against high energy and high living costs, the underestimation of the economic and social gaps that tear our country and the indifference towards effective and equitable redistributive and pre-emptive political measures are alarming. -distributive able to remedy it. – adds Mikhail Maslennikov, political consultant on economic justice of Oxfam Italy – with reference to fiscal, labor and public spending policies, analyzed in the report by Oxfam And DFIit is not to be expected from the new government structure:

– an enhancement of the redistributive scope of our tax system,

– robust interventions aimed at promoting adequate minimum wages,

– a fight against working poverty,

– redesign a welfare universal public, in step with demographic dynamics and the transformations of the labor market. “The fate of citizenship income is also worrying – the report reads – which, instead of being made a more equitable and efficient tool to combat poverty, risks being canceled”.