By John Garrett, Kathryn Tobin and Chilufya Chileshe
LONDON, May 12 2020 – The coronavirus pandemic underscores the profound fragility and unsustainability of today’s world. It exposes the chronic underinvestment in human health and well-being and the consequences of a relentless exploitation of biodiversity and the natural environment.
Despite the pledge by 193 governments in adopting the historic Agenda 2030 for Sustainable Development, COVID-19 and the accelerating climate crisis threaten to undermine the progress made and to increase global poverty levels for the first time in decades. Global leadership—governmental and corporate—has been found seriously wanting.
At least half of the world’s population do not have access to essential health services. Three billion people lack basic handwashing facilities, over a billion people live in dense, slum conditions and are therefore unable to practise physical distancing, and 40% of health care facilities globally lack hand hygiene at points of care (WHO/UNICEF JMP 2019).
The virus and resulting lockdowns threaten the livelihoods of 1.6 billion workers, and a few months ago 11,000 scientists declared clearly and unequivocally that planet Earth faces a climate emergency. These combined social, economic and environmental crises show the need to make real progress on the Sustainable Development Goals (SDGs) and inspire new, collective action towards a more just, equitable and sustainable global order.
Central to this agenda is finance. Yet even before widely-instituted lockdowns and the resulting economic recession, financing to achieve the SDGs was woefully insufficient.
WaterAid’s research on financing universal access to safe water, sanitation and hygiene in Nigeria, Ethiopia and Pakistan (SDG 6 targets 1 and 2) indicates shortfalls multiple times that of current levels of financing.
Other studies show that this is common across other SDGs, with the UN Sustainable Development Solutions Network identifying a US$400 billion annual funding gap to deliver the SDGs in Low Income Developing Countries (LIDCs).
No single country or individual can resolve these issues in isolation. National efforts by LIDCs to mobilise increased domestic resources to tackle the pandemic and invest in the SDGs must be backed by a global, coordinated and comprehensive response far exceeding the support provided to date.
Last week, the UN Secretary-General launched a framework focused on mitigating the socioeconomic consequences of the pandemic through a “human-centred, innovative and coordinated stimulus package reaching double-digit percentage points of the world’s gross domestic product”.
This is very welcome, but crucially it must be built on equitable, affordable and sustainable foundations—rather than a mountain of new debt and subsequent austerity which followed the 2008 financial crisis.
Financing this unprecedented global stimulus requires a comprehensive package of fundamental reform—long advocated by civil society and movements for economic justice—comprising debt relief, taxation, international aid, reserves, and subsidies.
This structural transformation should be urgently instituted both as part of immediate response to COVID-19 and as permanent redirections and safeguards on international economic and financial systems.
Debt relief from the IMF and World Bank and G20 is a positive start, providing temporary fiscal space, including for public spending deprioritised in the face of crushing debt service commitments.
But as the Jubilee Debt Campaign, Oxfam, Christian Aid and others have advocated, widespread unconditional cancellation of public and private debt is what is really needed, overseen by an independent sovereign debt workout mechanism under the aegis of the United Nations.
Zambia’s US$1.5 billion external debt servicing requirement in 2020—now only partially alleviated—compares with budgets for health of US$215 million and for water, sanitation and hygiene of US$91 million (2019).
Debt cancellation is just one example of the transformation required in financial relationships between high-income countries and LIDCs to enable governments to address COVID-19, effectively target public goods and services, realise human rights (including the right to development) for all, especially the poorest and most vulnerable, and achieve the SDGs.
Global structures of taxation also require a wide-ranging overhaul. Church leaders in the UK recently highlighted how US$8 trillion sits in off-shore tax havens, with developing countries deprived of up to US$400 billion every year in tax avoidance and evasion.
In similar vein, the IMF has previously revealed that almost 40% of Foreign Direct Investment is completely artificial: it consists of financial investment passing through empty corporate shells with no real activity. Ending these practices, and ensuring democratic oversight of corporate profit, is crucial to ensure that governments – and their people – benefit from revenues earned in their countries.
Further, phasing out fossil fuel subsidies and implementing carbon taxes can both end incentives that deepen the climate emergency and release new funds for sustainable development. As the IMF has recently recognised, this is especially crucial in stemming the immediate tide of COVID-19 and greening the economic recovery. The organisation would do well to make reporting on these issues a core and mandatory part of its Article IV surveillance.
While the IMF has taken some steps to free up liquidity for health and stimulus spending to address COVID-19, the UN Secretary-General, UNCTAD and others have called for a new allocation of Special Drawing Rights to bolster developing countries’ foreign exchange reserves, stimulate economies and release funds for spending on health and public services.
Mobilising the full financial power of the IMF in support of its member countries—in an initiative which is affordable for LIDCs—would be a welcome repeat of action taken in 2009. This would also represent a return to the initial post-war vision of the Bretton Woods institutions as instruments of multilateral response to crisis and underdevelopment.
In tandem, a widescale fulfilment of Official Development Assistance (ODA) commitments – meeting and exceeding the longstanding target of 0.7% of GNI – is required. A handful of countries have fulfilled this commitment: now is the time for other high-income countries to join them—going above 0.7% in a “Race for the Top”.
COVID-19 has exposed the fragility of even the most powerful countries and companies: as former UK PM Gordon Brown points out, in today’s interconnected world they are only as strong as the weakest link in the chain.
But the hit to donor countries’ economies should not be used as an excuse to shirk global responsibility or turn away from multilateralism: like the climate crisis, COVID-19 illustrates that even when immediate effects are localised, the implications are global. The EU and others have launched an important initiative in pledging support for the WHO’s COVID response.
It can only be a first step, however: €7.4 billion, like the US$2 billion sought by the World Food Programme to address acute hunger impacts, is in stark contrast to the trillions being found for national rescue plans by OECD economies.
Only a major influx of funding–overseen through principles of transparency and accountability and the participation of civil society–can enable the concerted political action and system strengthening required to end the pandemic, deliver the Paris Climate Agreement and achieve the universal promise of the SDGs.
Private finance has a key role to play, but currently investment and lending decisions are not sufficiently aligned with environmental, social and governance (ESG) standards, and affordability for LIDCs remains a major concern. Over a year ago, we called for a new public finance target for high-income countries, to ensure their climate finance commitments were genuinely additional to the fifty-year-old promises on aid.
This global plan for renewal and sustainability is now more pressing than ever, to enable governments to finance their development priorities and achieve their sustainable development agreements, including universal access to water, sanitation and hygiene and the transition to a zero-carbon global economy.
Scientists estimate we have ten years to restore the world to a sustainable pathway and avoid the compounded and catastrophic effects of climate change. Addressing the health and economic impacts of COVID-19 while turning towards climate justice will require no less than a complete transformation of the current financial system and global economy.
Almost eighty years ago during World War II the British economist William Beveridge provided the intellectual foundation for the UK’s National Health Service, which now forms the backbone to the country’s response to the pandemic. In launching his seminal report, he said that “a revolutionary time in the world’s history is a time for revolutions, not for patching”. We would do well to heed his words today.