More than a third of COVID-19 recovery funds in 21 developing countries were scooped up by big corporations — not all of which were likely to pass along that relief directly to the workers for whom it was intended.
Those are the findings in a report released Wednesday by the Financial Transparency Coalition, a global network of groups focused on fighting illicit flows of money. The group argues that major companies collected the benefits, including loans and tax cuts, seemingly crowding out programs offering social protection, smaller businesses in need of relief, and “informal workers.”
Worldwide, there are approximately 2 billion informal workers — individuals with casual work arrangements or no fixed salary, typically forgoing the structural security such as health benefits or paid days off. Workers take these positions out of necessity, and industries can exploit their willingness.
The coalition’s report also found that one-third less money was spent in pandemic relief last year compared to 2020, down to 2.4% of a country’s GDP on average, due to the worsening global economic situation. And this pullback took place even as the lingering monetary and health costs brought on by the pandemic persisted, the report authors argued.
The group’s mission in large part is to force global decision makers to rethink the impact of so-called austerity measures, or the sharp budget reductions or pullbacks in borrowing intended to improve a country’s finances and usually appease its lenders and investors, but often at the expense of programs for people.
The pandemic-relief imbalances take place as more than 85% of the world’s population will live in the grip of stringent austerity measures by next year, the Financial Transparency Coalition said.
In total, between 75 million and 95 million people are expected to be pushed into extreme poverty this year alone. That’s due to the lingering disruptions of the COVID-19 pandemic and the cost-of-living crisis hitting developed and developing nations, spurred by Russia’s war on Ukraine. Russia’s invasion has disrupted energy markets
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driving up costs to heat and cool homes or travel to work, while food in particular is seeing an inflationary surge due to supply-chain issues and drought.
Women are the hardest hit
What’s more, by the coalition’s assessment, these latest developments hit amid rising and potentially long-lasting embedded inequality between the rich and the poor, with women in particular shouldering the burden of lost access to economic opportunities, in some cases erasing decades of slow progress for wage-driven freedoms.
Collectively, the money that women across the globe missed out on in 2020, when the pandemic impacted the most people at once, is more than the combined value of the economies in 98 countries, according to a separate report issued in 2021 by the global charity Oxfam. The impact was most commonly due to pandemic-related job losses and child-care obligations, which women disproportionately took on compared to men.
Oxfam said women worldwide missed out on at least $800 billion in income last year, as MarketWatch previously reported.
In Lebanon, for example, where the local currency has lost more than 90% of its value, food prices have risen more than elevenfold, over 80% of the population has fallen below the poverty line, and women are struggling to pay for costly sexual and reproductive healthcare. The price of birth-control pills in Lebanon, for instance, has surged by more than 600% since 2019, as Thomson Reuters reports.
To be sure, allegations of the misuse of public funds, especially around COVID relief — or, in some cases, funds redirected from their intended use — have plagued recovery efforts in the developed world too.
In the U.S. alone, a close examination of the distribution of public funds for private use is underway in Mississippi, which is perennially one of the poorest U.S. states and where residents of its largest city, Jackson, recently went almost two months without safe drinking water. The welfare scandal is the largest-ever public corruption case and has ensnared several people, including National Football League Hall of Famer Brett Favre and a pro wrestler whose drug rehab was allegedly funded with public money. (Favre has not been charged with a crime and has denied wrongdoing.)
People over austerity
For the Financial Transparency Coalition, it has been the series of issues — COVID, drought and storms, global inflation and rising interest rates among them — stacked one on top of the other that’s most worrisome, and serves as a dangerous backdrop to what will come next: sharp belt-tightening for segments of the economy already most at risk.
“Nearly 100 million people are expected to be pushed into extreme poverty this year, and things will get worse [in] many countries like Ghana and Brazil, which have allocated significant funds to social protection, but are now planning to sharply reduce their social stimulus packages,” said Matti Kohonen, the coalition’s director.
“[In the] meantime, many others are planning cuts in essential healthcare, education and social protection, as they run out of money due to lower economic growth and in the face of tough lending criteria from the International Monetary Fund and other institutions,” he said.
Healthier economies and opportunities for the often resource-rich developing nations not only put important value on all human lives, they have implications for the developed world, too. Strong economic growth in developing countries became an engine for the global economy after the 2008-2009 financial crisis, accounting for roughly 50% of all global growth. The importance of these growth engines has not changed. In addition, fully half of U.S. exports now go to emerging markets and developing economies.
What can be done?
The coalition called for all countries and international institutions, such as the IMF and World Bank, to implement alternative policies to bring what the group says is a “people-centered recovery” instead of austerity.
This includes taxing excess windfall corporate profits; introducing progressive levels of income and wealth taxes; eliminating illicit financial flows by implementing public-beneficial ownership registries for all sectors and public country-by-country reporting, especially those at high risk of money laundering and tax abuses; and increasing social security contributions and coverage.
It may be a tough ask: History shows austerity measures are among the favorite go-to policy moves, and right now, they’re in the conversation for economies of all sizes.
But the coalition sees deeper fallout if austerity is pursued.
“Next month’s IMF/World Bank Annual Meetings should promote a people-centered recovery with progressive tax policies on windfall profits of large corporates and wealth of top 1% of the population, instead of failed austerity measures; otherwise, more countries may collapse economically like Zambia and Sri Lanka, which benefited big companies and now face severe debt crises,” Kohonen said.
