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Blogs, Macroeconomic policies

Austerity: Bad news for economic recovery and human rights

Over the last year, reports from Oxfam, the Council of Europe, and the ILO have criticized the implementation of austerity policies both in Europe and worldwide. According to these reports, austerity policies have not only prevented countries from recovering from the financial crisis of 2008, but have also caused states to regress on their human rights obligations.

According to Oxfam, while austerity primarily necessitates budget cuts that deeply reduce spending on social services, policies may also include the privatization of public services such as healthcare, energy, and water, decreased regulation of labor markets, weakening of collective bargaining, increased administration of the regressive Value Added Tax, and a reduction in resources for battling inequality. These policies weakened regulation and decreased public spending with the intention of lowering the deficit-to-GDP and debt-to-GDP ratios and supposedly creating a more growth and investment-friendly environment.

In this misguided attempt to restore the economies in Europe to pre-crisis levels, austerity policies have had serious negative consequences on the realization of human rights. Because of cuts to social spending, the capacities for states to fulfill their human rights obligations have significantly declined, compounding the negative effects of the crisis on poor and vulnerable populations. Austerity has led to retrogressions in education and health, and escalations of discrimination, xenophobia, racism, and scapegoating of minorities. It has furthered poverty and unemployment, especially in relation to children and youth. According to the Council of Europe, homelessness has increased in 15 of its 21 member countries. The employed are suffering too: 10 percent of working households are now living in poverty as a result of declining real wage values, and the disruption of collective bargaining practices has diminished prospects for wage growth. The Council of Europe also predicts spikes in child labor, human trafficking, and food insecurity as a result of these policies.

“We have been here before – Oxfam’s experience of austerity and economic crisis is that it can take 25 years for living standards to recover,” remarks Oxfam International representative Nicolas Mombrial. Should these policies continue, Oxfam’s report also warns of a “lost decade” in Europe and 15 -25 million more Europeans living in poverty by 2025.

Austerity does not only harm European countries: according to the Council of Europe’s report, austerity practices affect between 80 and 90 percent of the world’s population. In the years since the crisis, many developing countries have adopted or opted to continue austerity policies. Additionally, official development assistance to developing nations has been widely cut as part of austerity policies in Europe; this is especially significant since the European Union is the largest provider of ODA worldwide. As a result, social services/protections in developing nations are losing funding at both the national and international levels, severely reducing states’ abilities to respect human rights obligations and undermining efforts to achieve long-term development goals (e.g. the Millennium Development Goals).

The United Nations Human Rights Council, in its Report on the 10th Special Session in 2009, stated: “global economic and financial crises do not diminish the responsibility of national authorities and the international community in the realization of human rights.” In other words, financial crises do not excuse states from their human rights obligations to both their citizens and to people worldwide. Therefore, by adopting and sustaining austerity measures, states have unjustifiably neglected their interior and extraterritorial human rights obligations.

Unfortunately, these measures have also failed to meet their own goals: Oxfam reported that a majority of affected European countries saw increases to their debt-to-GDP ratios, and some even suffered from higher deficits than before austerity policies were implemented. Furthermore, these countries are experiencing weak growth, which Oxfam believes is unlikely to strengthen under the current policies.

This is not surprising, as austerity policies mirror the failed structural adjustment programs of the 80s and 90s. Those programs pushed income per person levels back 15-25 years in some countries and plunged millions into poverty with little to no progress towards economic recovery. Countries were only able to recover after abandoning the IMF-recommended adjustment policies.

In fact, studies show that social protection programs, which austerity measures have worked to undermine, are essential for recovery, as they lead to economic growth, higher levels of productivity, political stability, and declining levels of poverty.

So why are governments worldwide continuing policies that both impair restoration of their economies and cripple efforts to protect human rights?

One possibility is the involvement of international economic institutions, such as the IMF and World Bank. Despite admitting to underestimating to what extent growth would diminish due to austerity measures, these institutions have continuously pushed for implementation and preservation of these harmful policies.

Another possibility comes from austerity’s effect on equality. While the poor have, in some cases, become poorer, the rich have become richer. Oxfam asserts that the richest 10 percent in Europe have seen their share total income grow since the crisis, often in tandem with a decrease in share of total income held by the poorest 10 percent. The luxury goods market is growing, another mark of continuing prosperity for the richest. Rising inequality is dangerous: it is linked to higher crime rates, lower educational outcomes, and decreased trust between people. Likewise, it leaves an opening for another crash: high levels of inequality can lead to more high-risk-high-interest borrowing, one of the causes of the 2008 crisis. It may also be responsible for the continuation of these policies: Oxfam argues that greater inequality gives richer individuals more political power, which they may use to continue these unequal policies.

No matter what the cause, austerity measures are counterintuitive for both the realization of human rights and the restoration of European economies. As such, these policies need to be reversed in order to return Europe to pre-crisis levels socially, economically, and financially, and to hinder dangerous trends worldwide. To do so, Oxfam recommends protecting ODA and social services, restructuring or canceling unsustainable debt, building fair tax systems, and fixing the problems that started the financial crisis. The Council of Europe adds on to these recommendations, arguing for positive measures to protect vulnerable and marginalized populations, ensuring universal social protection floors, re-strengthening labor regulation and collective bargaining, and supporting other countries economically with human rights-related programs.

In order for the world to move forward, human rights must be prioritized, and austerity be left behind.

Read the Oxfam report here.

Read the Council of Europe report here.

Read the ILO report here.

Samantha LeMaster is a program assistant at the Center of Concern.

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