“Transforming economies and the financing of public education post-COVID”, by David Archer.
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Public health and public education systems that have been underfunded for a generation are being overwhelmed by COVID-19. We are just now beginning to see the scale of the impact this will have on low income countries and on girls and women in particular. Much of the burden of caring for the sick and for children home from school has fallen on women – as has the increased burden of collecting water so households can wash their hands more regularly. This makes the evidence, analysis and recommendations in a new report from ActionAid disturbingly relevant. We show how most low-income countries could double their spending on education, health and other essential public services through taking action on tax, debt and austerity.
ActionAid’s new report: Who Cares for the Future: finance gender-responsive-public services was launched at the IMF / World Bank virtual Spring meetings. It is based on ground-breaking research over the past year, including on IMF conditions and policy advice affecting public services in all low- and many middle-income countries; on the new debt crisis and its impact on public spending (with Jubilee Debt); on the potential of progressive and gender responsive tax reforms; on trends in public spending on health, education, early childcare and water; and finally on the links between the underfunding of public services and the burden of unpaid care and domestic work borne mostly by women. Over the past six weeks the analysis and recommendations in the report have been updated in light (or in the darkness) of the pandemic.
Before the pandemic, on average worldwide, women spent four hours and 25 minutes daily doing unpaid care and domestic work, in comparison to men’s average of just one hour and 23 minutes. This has been changing by less than a minute per year. If properly valued, this work would constitute at least 9% of global GDP or US$11 trillion. At the height of the lockdown it is likely that the unpaid care and domestic workload of women has increased significantly. It has also become clearer than ever that the provision of quality early childhood care, public education, health, water, energy and social protectionhave a pivotal role to play to end this injustice.
Unfortunately, public services in low income countries have been chronically underfunded for decades, leaving countries way off target for achieving the Sustainable Development Goals (SDGs) and unable to respond effectively to COVID-19. Those fighting for more funding for different public services often fight against each other for a greater share of a small pie (as education activists we demand a 20% share), rather than working together to address wider and more strategic financing issuessuch asdebt, austerity and tax that could deliver system change for education alongside all other public services.
COVID-19 has hit as the scale of a new debt crisis has become clear. Our new research shows that those countries that spend more than 12% of their budgets in debt servicing have cut their spending on public services in the past three years. Indeed, several countries spend more in debt servicing than on education and health combined. In the context of COVID-19, developing country governments should suspend all debt paymentsso that they can draw immediately on revenue that is already in their treasuries to offer a comprehensive response. There has been some movement at the IMF / World Bank meetings this week, but the scale is grossly insufficient. There is an agreement to suspend the debt payments of 25 countries for 6 months, but more countries need this, and it is already clear that this is needed at least through to the end of 2021 – for 20 months not 6 months. More importantly, there must be a longer-term agreement that no country should be spending more than 12% of the national budget on debt servicing when they have desperate shortages in financing essential public services.
Whilst there has been much discussion of debt in recent weeks there is much less discussion of the austerity policies that have left low income countries so ill-prepared for COVID-19. In recent years the IMF has produced many progressive research and policy reports, but our new research shows that in practice the same old policies are enforced. The IMF has continued to hold down public spending by imposing unnecessarily low inflation targets (in 80% of countries) and deficit targets (in 96% of countries) and by freezing or cutting of public sector wage bills (in 78% of countries). The largest groups of people on the public sector wage bill anywhere are teachers, doctors and nurses. How can countries hope to achieve the Sustainable Development Goals if they cannot employ more teachers, doctors, nurses or care workers? As yet, there is no serious indication from the IMF that they will remove such conditions or shift their policy advice.
A third critical issue for financing public services is tax. Low income countries tend to have low tax-to-GDP ratios (just 17% on average, compared to 34% in OECD countries and over 40% in Scandinavia). Moreover, most taxes target the poor more than the rich, largely because the IMF has advised low income countries to prioritise value added tax (VAT) rather than more redistributive taxes. Our research showed that countries can expand their tax bases both rapidly and fairly. Indeed, it is realistic for most countries to expand their tax to GDP ratios by at least 1% a year, which would mean 10% by the SDG deadline of 2030. That would double the tax intake in countries like Nigeria and Pakistan, which have the largest number of children out of school. Post COVID-19, this can and must be done progressively, targeting the richest individuals and corporations. Within the next 5 years this would allow most countries to double their spending on public education, health, water and social protection.
A combination of actions on debt, austerity and tax would enable a doubling of investment in all public services. This would be key to delivering the financing needed for SDG 4 and other SDGs, and for enabling states to fulfil human rights obligations. We estimate this could also save the world’s women 9 billion hours every single day in unpaid care and domestic work.
Post-COVID, we need a new economics – one that does not just measure progress by GDP growth, ignoring planetary boundaries and making women’s unpaid work invisible. We need to build societies and economies that care for both people and the planet, and that intrinsically value and measure the fulfilment of basic rights.
The opinions expressed in this blog are those of the author and do not necessarily reflect any official policies or positions of Education International.