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Stop austerity!

Guest content
07 July 2023

It is far more useful to fight wealth and inequality than to try and reduce poverty, writes Francine Mestrum.

For the ‘Stop Austerity’ Campaign, Isabel Ortiz and her team have listed 143 countries whose people are victims of the latest austerity policies. These policies are the result of recommendations given by the International Monetary Fund and the World Bank but are avidly accepted by most governments. It is obvious some of the current fiscal problems of countries can be seen as a consequence of the pandemic. However, it is a fact that the post-pandemic shock is much more severe than the post financial crisis shock of 2009.

It looks as ‘old news’, since most countries – an most of all their people – are suffering from the successive fiscal and austerity crises since the 1980s. It is almost unbelievable that 40 years later, these policies are still being pursued and their cumulative consequences are hardly mentioned anymore. We are now living a deep economic and social crisis, coupled to severe threats to democracy and to the planet’s health.

A very severe crisis

The consequences of neoliberal policies are identical, in all countries, on all continents. They manifest themselves more rapidly or more deeply depending on the level and quality of economic policies and pre-existing social protections. But everywhere the result is less protection, less public services, a failing education system, insufficient health care services, lacking public transport, insufficient pensions, lacking child care, insufficient social housing. And also: malfunctioning legal services, inhuman situations in prisons, mistreatment of migrants and asylum seekers… Real earnings of people collapsed, though everywhere it is said that the ‘public deficits have to be reduced’.

In short, it is the whole state apparatus that is disintegrating with tragic consequences for people. Public services have been privatized and labour markets are deregulated. Child labour is back on the agenda – or practised already in rich countries as the UK or Holland –, people are obliged to work longer for more years and if wages go up this is paid for by less social security contributions. In many poor countries, educated people emigrate – nurses, doctors - in order to try and find a better life in the North. There, they may earn more than in their own countries, but always less than domestic doctors and nurses.

In 2023 85 % of the global population lives in the grip of austerity. It is not the ‘privilege’ anymore of poor countries but manifests itself in both North and South.

The whole world has followed the social protests in a rich country like France where people do not accept the social regression anymore. After severe cuts in unemployment benefits, the retirement age is now being raised from 62 to 64, on the grounds that if we live longer we should also work longer. But workers are not living longer at all, quite the contrary. Life expectancy is declining and is 13 years shorter for the low-skilled than for the high-skilled. This is a global trend that an approach through averages never shows.

Moreover, pensions are one of the most redistributive social mechanisms, not only inter-generationally but also from rich to poor. Add to this the absolute disdain that part of the political class showed for the protesting population, and popular anger becomes perfectly explicable.

Another example from the North: my own small but rich country, Belgium, has a right-wing party in a government coalition that wants to abolish article 23 of the Constitution. The article says people have a right to a decent standard of living and it includes all the social achievements of the last century.

There are now strikes in countries that almost lost this tradition, such as the U.K., Holland and Germany. All these policies are fully in line with the World Bank philosophy saying we should only take care of extremely poor people and forget about welfare states that give people some certainty and contribute to the redistribution of wealth. In the past the formal objective of welfare states was ‘to maintain the standard of living’, now it is ‘to make work pay’ and combining the subordination of social policies to economic needs with a softer ‘capability’ approach thanks to ‘social investments’. The role of social partners in the management of social security systems also needs to be reduced.

In Southern countries, these same destructive forces for social cohesion and democracy already did their work in the past. On all continents, Asia, Latin America or Africa social conditions are worsening, too often people do not even have the opportunity of taking three meals a day, far too many people are living in slums and/or have hardly any health care.

UNDP's human development index - measuring GDP per capita, life expectancy and education - has been falling for two years in a row.

Even according to the World Bank, in 2020 alone, 70 million more poor people will have been added. The poorest 40% of the world's population has lost twice as much income as the richest 20%. COVID and its accompanying policies have mainly affected the poorest, despite the fact that about all countries say they prioritise them.

As for inequality, according to Oxfam, the wealth of the world’s 10 richest men has doubled since the pandemic began. The incomes of 99% of humanity are worse off because of COVID-19. Widening economic, gender, and racial inequalities—as well as the inequality that exists between countries—are tearing our world apart.

These are not natural phenomena, this is indeed the result of political and social choices.

Return of the ‘social problem’

People adapt, step by step, till all of a sudden there are no margins anymore. That is what we see when drug trafficking, crime and suicide numbers are rising. That is what we see when anti-system parties are on the rise, mainly from the extreme right. This is what is happening now. Societies are disintegrating. Inequalities are rising. CEOs and shareholders rob and snatch what they can, shamelessly. Every day somewhere a scandal emerges about yet some more corruption, some more impunity. Not infrequently, politicians play that same game.

It is no longer just about class differences. Gender relations also take on a different colour when the data are disaggregated. As we know, women live longer than men. But women do not live longer in good health than men, they face all kinds of health problems much earlier.

The difference between the highly educated and less educated is also well known. But who knows that the life expectancy of highly educated blacks is still lower - four years on average - than that of their white counterparts with just the same education? In other words, there is also discrimination and/or racism.

These data show that inequality causes huge problems. Poor people's lives are shorter and less healthy and face a host of other problems such as discrimination, access to healthcare and healthy food, access to education and knowledge. All societies today show cumulative inequalities.

Solving these problems will need another economic system and a huge re-distributional effort. But both poverty reduction policies and so-called ‘development aid’ are on a wrong track.

According to a recent study the ‘aid’ from 1960 to 2017 has been largely favouring the North. In total 152 trillion US$ worth of resources have been drained from the global South. From South East Asia, mainly Vietnam, Indonesia, Malaysia and Thailand, it was 11 trillion US$. This money equals the missed opportunities to improve people’s lives.

For every US$ of aid 14 US$ flow out in wealth drain. If the repatriation of profits and the illicit financial flows are added, we arrive at 30. For every US$ of aid 14 US$ flow out in wealth drain paid by the South.

Clearly, there are winners and losers, there is redistribution but it goes from South to North and from poor to rich. Speaking of ‘fiscal consolidation’ in such a context is ridiculous.

As for 'poverty reduction policies', they are also farcical. They never can close the existing social and economic gap. Only a universal policy for all people can do something about it, but that requires an effort from the rich.

Today, poverty reduction policies focus on targeting, finding out who needs help most and most urgently, charity that accepts to only give crumbs to put misery out of the world.

It does not work and will never work. It has been repeated ad nauseam for centuries. Poverty policies are not aimed at poor people but at the needs of non-poor people, the need for illusion and a good conscience, at ensuring and preserving a social order based on all existing inequalities. If it were really aimed at poor people, surely there would be no limit to redistribution from rich to poor, according to Georg Simmel, the father of the sociology of poverty.

Nothing has been more tragic, and an untold cruel farce, than the World Bank's decision to prioritise poverty! It meant phasing out universal social protection and forgetting and neglecting inequality. It was said, quite openly, but all political and social leaders welcomed this alternative and this very cheap social policy. Moreover, poverty is a political problem, a lack of material resources, of income, but that too was forgotten for a moment. In its place came moral and psychological considerations. From poverty in general the switch was made to women's poverty - by definition non-income related - and then to children's poverty.

The system has now reached its limits. It is on the brink of total collapse.


The consequences of this tragic situation have been highlighted already by authors such as Thomas Piketty and Branko Milanovic. Wealthy people have power and use this power to influence politics. To cover and hide their corruption, they try to undo the separation of powers, accusing judges of being ‘activists’. This is what is happening in countries like Poland, Israel and Belgium.

As for the people, they are desperate and more and more trust anti-system parties which lead us to illiberal democracies or even fascism.

As was perfectly predictable from the new poverty philosophy thirty years ago, societies are being squeezed with a small super-wealthy top and a very large poor and almost poor bottom. The main victims are lower middle classes and the world once again is one of poor vs rich, polarized and dangerously unstable.

‘Another world is possible’ shouted the first World Social Forum, but no one ever really worked for it. With on top a climate crisis looming, it has become very urgent.

Francine S. R. Mestrum has a PhD in Social Sciences from the Université Libre de Bruxelles, Belgium. She worked at the European institutions and several Belgian universities.

Oiginal source: Meer

Image credit: Peter Damian, CC BY-SA 3.0.