Few of us could have imagined that a virus invisible to the human eye could bring the world economy to its knees. Wealthy countries like Australia and New Zealand have cushioned the blow with modest support for businesses, workers, and the unemployed. But many poor countries are struggling even to keep people alive or working.
On 19 July, the UN secretary general Antonio Guterres robustly urged major reform to the UN Security Council, the International Monetary Fund, and the World Bank, in order to address global inequalities so evident with the pandemic, especially in health care, “gaps in social protection, structural inequalities, environmental degradation and the climate crisis”. He particularly attacked “fallacies and falsehoods everywhere: the lie that free markets can deliver healthcare for all … the delusion we live in a post-racist world, the myth that we are all in the same boat”.
Speaking at the annual Mandela lecture at the UN headquarters in New York, Guterres called for a new social contract in such “dangerous times” to deliver universal health cover and the possibility of a universal basic income.
Not only had the pandemic undermined efforts through the UN Sustainable Development Goals (SDGs) to eradicate the most severe poverty and to narrow inequality, but Guterres warned that the virus could bring famines of “historic proportions”, and drive 100 million people into extreme poverty, hitting the most vulnerable hardest, particularly workers in the informal economy, women, and children.
He highlighted the astonishing gaps between the richest and the poor, saying that the 26 richest people in the world held as much wealth as half the global population.
Pope Francis’s signature document
This message is astonishingly similar to that of Pope Francis in his social encyclical Laudato Si’, which highlights the issues of climate change and inequality, among other serious challenges. Francis wrote Laudato Si’ in close collaboration with architects of the SDGs, and released the encyclical in May 2015 to mobilise public opinion in support of the forthcoming Paris Climate Summit and the SDGs. After Francis spoke to the UN General Assembly on 25 September 2015, the national delegates voted to endorse the SDGs. Francis is reported to have worked the phones himself to help consolidate support for the Goals.
Francis is in favour of free markets which benefit everyone equitably, including carbon pricing, but he is appalled by the rent seeking, corruption, and market manipulation, chronicled by economists like the Nobel laureate Joseph E Stiglitz in his recent book People, Power, & Profits: Progressive Capitalism in an Age of Discontent.
Yet, in Australia, our government has gone lame on climate change, despite the recent savage fire season. And inequality in Australia is following down the neoliberal path of enriching the wealthy, particularly through capital gains, while many others barely maintain their wages. As the Governor of the Reserve Bank Philip Lowe commented, flat real wages diminish “our sense of shared prosperity”, undermining our sense of fairness, especially among those aged under 35 who suffered a fall in their incomes over the past decade even before coronavirus struck.
Many commentators were astonished at the Federal Treasurer Josh Frydenberg extolling the neoliberal economic policies of former UK prime minister Margaret Thatcher and US president Ronald Reagan, with their agendas of privatisation and deregulation.
Roger Beale, a former public servant involved in microeconomic reform, interpreted Frydenberg as advocating “bringing forward tax cuts, increasing workplace flexibility, and reducing green tape”. He added that Frydenberg “is sadly mistaken if he genuinely believes cutting taxes for the already better well off will unleash growth and repair the budget”. There was no ‘trickle down’ of prosperity for most people.
In Australia, too, real wages have been stagnant, depressing demand. The government proposes to cut taxes for those in the top half of income earners, but this will do little for those on taxable incomes below $45,000. Beale argues that the biggest stimulus would come instead from increasing the disposable incomes of those on the lowest incomes, especially a sustained increase in JobSeeker and JobKeeper payments, and rental assistance for benefit recipients. As is evident in the COVID-19 outbreak in Victoria, the gig economy has become a major liability since part-time workers in meatworks and nursing homes helped spread the virus. Being without sick leave or benefits, they could not afford to miss work.
Ross Gittins, economics editor of the Sydney Morning Herald, wrote a stinging response to Frydenberg on 29 July, accusing the government of being “punishers and straighteners”, particularly of the unemployed. Gittins approved of the JobKeeper allowance, though those without links to an employer were left to travel second class on JobSeeker, on a benefit of $558 a week, a quarter less than JobKeeper. After September, JobKeeper will continue for a further six months, but JobSeeker only for another three months at a reduced $408 a week. The government said nothing to indicate that it would increase the previous Newstart allowance from its miserable $40 a day. “Why so tough?”, he asked, on those enduring the worst hardship.
Former Treasury Secretary and current chairman of the Australian Security Exchange Ken Henry was also puzzled that the government had not permanently increased Newstart to a liveable level.
Gittins argued that the privatisation agenda has been excessive. In Australia the “obvious reforms have been made”, with little left to privatise. The privatisation of Medicare has been problematic, and the states’ privatisation of electricity resulted in “three big money-hungry oligopolists” raising prices “far higher than a carbon tax ever could”. Opening childcare, aged care, and vocational training to for-profit businesses has resulted in such poor results that the public is now opposed to privatisation.
Queensland University economist John Quiggin wrote that, when the pandemic hit, major economies had still not recovered from the global financial crisis and the austerity policies that followed. The pandemic “has exacerbated rising inequality, and accelerated the breakdown of the globalised trade system”. It has also “distracted attention from the even greater threat of climate change”.
For Frank Stilwell, professor emeritus of Political Economy at the University of Sydney, job creation needs to be linked to climate change and rising inequality as our central challenges. He blames the economic views of Thatcher and Reagan for entrenching inequalities in the 1980s, weakening unions and deregulating business and finance. One terrible result in Australia has been to allow the “problem of housing affordability” to grow relentlessly during this period of neoliberalism.
The Director of Research at the Asian Bureau of Economic Research at ANU, Adam Triggs, laments how institutional scandals have undermined trust. “The scourge of tax avoidance among multinationals, the rich, and big companies have undermined trust in our tax system, while rising wage theft, and depressed wages fed the narrative of a system rigged against workers”.
To help restore trust in governments, Triggs calls for a national anti-corruption authority and reforming political donations, criminalising wage theft, and closing generous tax loopholes, with increased penalties for financial wrongdoing. He thinks it will be harder than ever to reverse rising inequality and solve the toxic misinformation in much of the social media.
The Covid-19 crisis poses a choice for Australia: to follow down the US path of economic and social polarisation, or to abandon the failed neoliberal agenda and rebuild a sustainable economy with greatly increased equity in incomes, wealth, and opportunity.
Photo World “at the breaking point” due to inequalities: Antonio Guterres, UN chief. YouTube.
6 August 2020