Inequality is not a new issue that Covid-19 has revealed; it’s an immensely damaging pre-existing condition.

Date: 27 July, 2020  | Organisation: Christian Aid  | Theme: 
  • Debt
  • Private finance

If you take equality as a yardstick, then – despite many self-serving “myths, delusions and falsehoods” around the subject – it’s clear that the world has not really progressed over the last few decades. At least, that’s according to the UN secretary general António Guterres.

In a powerfully-worded speech, Guterres called for major reform to the UN security council, the International Monetary Fund and the World Bank to target systemic inequalities revealed by the coronavirus pandemic. Guterres’ call is necessary because, although the UN can call for member states to act, it does not have the financial means of raising bonds like the World Bank – or of issuing currency and loans like the IMF – to tackle crises.

With this as the backdrop, according to Guterres, the pandemic has “laid bare risks we have ignored for decades: inadequate health systems; gaps in social protection; structural inequalities; environmental degradation; the climate crisis” and so on.  Additionally, Guterres claimed, the pandemic has exposed “fallacies and falsehoods everywhere: the lie that free markets can deliver healthcare for all. The fiction that unpaid care work is not work, the delusion that we live in a post-racist world, the myth that we are all in the same boat”.

One might think that these fallacies and falsehoods would be exposed and corrected for in the greatest financial crisis in decades; sadly, that has not been the case: these fallacies have powerful institutional backers – the IMF continues to prescribe austerity policies.

For instance, Kenya’s Rapid Credit Facility (RCF) loan of $739 million and Nigeria’s Rapid Finance Initiative (RFI) loan of $3.4 billion both stipulate that, once the crisis abates, they should resume a path of “fiscal consolidation”.  In the case of Bangladesh and its similar loan, “fiscal discipline” has been mandated despite Bangladesh having one of the lowest rates of mobilising resources.

Rather than further punishing the poorest with these and similarly strict loan requirements, the international community’s focus should be on tackling tax dodging, widening tax collection and taxing the wealth and income derived from wealth. This would raise the required funds without entrenching existing inequalities and further penalising the least fortunate.

These are ultimately policy choices.  In their recent report, Building Back with Justice: Dismantling Inequalities after Covid-19, Christian Aid shows the cost of a broken international tax system on a variety of developing countries – the cost of which regularly exceeds the amount spent in mitigating the the coronavirus crisis.

The cost of coronavirus

We must not forget that many of these countries find themselves in the position they do due to historical and present-day exploitation from the West. As Guterres says: “Let’s not fool ourselves, the legacy of colonialism still reverberates. We see this in economic and social injustice, the rise of hate crimes and xenophobia, the persistence of institutionalised racism and white supremacy. We see this in the global trade system. Economies that were colonised are at greater risk of getting locked into the production of raw materials and low-tech goods – a new form of colonialism.”

Not too dissimilar are the signals made by the European Commission to Italy as part of the conditions built into the EU’s €750 billion bailout fund; this includes a requirement to engage in “structural reforms”, by which it is not clear if they mean privatisation, outsourcing, raising the retirement age, cutting social security, increasing tax incentives to corporates, flexible work and employment, or all of the above.

Of course, this wouldn’t be the first time we’ve seen such an approach implemented. Similar structural reform in The Netherlands, for example, led to the government selling off social housing to investors. The Ministry of Home Affairs even went so far as creating a special website to inform investors how to profit from buying up real estate that previously belonged to the social rental sector. Rather than a way to house the most vulnerable, the Dutch government apparently sees social housing as an opportunity to raise funds. In doing so, it is depriving people of adequate housing and perpetuating inequality.

In the UK, rather than commit to properly funding the NHS so that it is better prepared for any future health crises, MPs recently voted against a plan to protect the NHS from a US trade deal –  despite Boris Johnson’s impassioned claims that the “NHS is not for sale”. This move appears to be part of a broader plan to outsource core parts of the NHS to private companies – a move which will only entrench existing serious health inequalities in the UK.

Inequality, as Guterres says, is not a new issue that Covid-19 has revealed; rather, it’s a pre-existing condition that puts many people at greater risk of early death, worse life opportunities, poorer education and increased exposure to crime, among other negative effects. It is a condition that affects a huge proportion of the global population. And it is a condition that we should be working hard to tackle.

Currently, the overall trend is toward increasing global inequality. If we’re serious about tackling inequality, we need to take Guterres’s points seriously. We need to radically rethink our priorities and move from talk to action.

As the Building Back with Justice report makes clear, the coronavirus crisis has prompted new debates around tax behaviour. As we rebuild after the crisis, governments have a moment of maximum leverage to introduce tax reform and other financial change. Let’s not waste it.

 Photograph: Christian Aid/Jerry Clinton