Condemned to live poorly: how the covid has triggered poverty

There is no crisis without a good dose of euphemisms.

"Austerity" equals cuts in public services, "negative growth" equals recession, and if people don't have food they talk about "food insecurity."

We would actually have to say hungry.

Because that's what Beatrice Mbendo and her four children are going through in Kangemi, a shanty town in Nairobi, Kenya.

In May Mbendo was left without a job as a domestic worker.

Before the pandemic, he had four regulars.

Today it has none.

"Now things are really bad, we don't even have breakfast in the morning," says the 38-year-old.

Once his family spent two days with nothing to put in their mouths.

Mbendo was so distraught that one day she left her house crying.

“God heard my screams.

One person brought us two kilos of cornmeal, sugar and cooking oil, which helped me for a few days. "

The story of Mbendo (shared by the NGO Oxfam Intermón) is at the end of this nightmare.

But from Brazil to India, from Yemen to the United States, from Guatemala to the United Kingdom, from Spain to Afghanistan, millions of people are starving.

Some suffer more than others, but all are victims of the worst economic crisis since World War II.

More than 729 million human beings will be under the yoke of extreme poverty (living on less than $ 1.90 a day) in the worst-case scenario at the end of the year, according to the World Bank.

They will represent 9.4% of the global population, and will be 114 million more than predicted before the appearance of the virus.

Many of them will die hungry.

More than 265 million people, mainly in developing countries, are on the brink of starvation, according to estimates by the UN World Food Program.

The gale has wiped out two decades of fighting extreme poverty, according to World Bank economists.

And it will be a serious setback for other people living on a budget below $ 5.50 (3.2 billion, half the planet's population), who also suffer to meet their basic needs.

But some 500 million more could be added if the crisis worsens, says an analysis by the United Nations World Institute for Development Economics Research (UNU-WIDER).

"We are seeing only the beginning of the tsunami," warns Olivier de Schutter, United Nations Special Rapporteur on Extreme Poverty and Human Rights.

Returning to levels prior to the health crisis will not be easy.

A huge amount of resources is needed and, above all, that the global economy advances at a speed never seen before, according to the experts consulted.

The UN goals for 2030 (with 3% extreme poverty) are a fading dream.

They will only be fulfilled if global GDP grows at a rate of between 8% and 8.5% annually over the next decade, says Samuel Freije-Rodríguez, an economist specializing in poverty at the World Bank.

"That is five times higher than the historical rates experienced in sub-Saharan Africa," he adds.

The economic locomotive cannot assume such speed.

In 2021, global GDP will rebound 5.2%, after having fallen 4.4% this year, according to the International Monetary Fund (IMF).

Faced with such an emergency, the United Nations Conference on Trade and Development (UNCTAD) launched a first cry for help in April: at least $ 2.5 trillion is needed to support citizens to get out as quickly as possible to float and strengthen health systems.

“You have to act beyond avoiding hunger.

Making people survive is a very low bar.

We need to protect their health and livelihoods to have a good and sustainable recovery, and not leave the crisis with more inequalities in the long term ”, highlights David Laborde, senior economist at the International Food Policy Research Institute (IFPRI, for its acronym in English) ).

Mobilizing such an amount of money requires a monumental effort.

UNCTAD proposes for the poorest economies the cancellation of external debt and an increase in the provision of international aid, among other measures.

"Going into debt is not the option," says Eduardo Ortiz-Juárez, an academic at King's College London.

“It would seem the most logical thing to do, but what are the macroeconomic conditions in these countries?

Not everyone has privileged access to debt, "he argues.

While the world has fought back the virus with massive government spending ($ 11.7 trillion, according to the IMF), most of these resources are from the richest economies.

The fiscal response of low-income developing countries has remained at 1.2% of their GDP.

The public debt in low-income ones (in particular of the 47 least developed countries, most of them African) is considered unsustainable and therefore they cannot shoot it up.

Granting a temporary minimum income is seen as an answer to weather the storm, say the experts consulted.

But this mechanism has its pros and cons, says Ugo Gentilini, a senior economist for Labor and Social Protection Practice at the World Bank.

The advantages: a contained fiscal cost and its "progressive" nature, because it is aimed at those who have the least.

Furthermore, it is potentially acceptable to all political parties, the expert acknowledges.

In Spain, for example, no one voted against when it was approved.

Along the same lines, the United Nations Development Program (UNDP) launched a proposal in July: to give monetary aid of $ 62 per month, on average, to almost 2,780 poor people in 132 developing countries for six months.

The cost would imply a disbursement of close to 200,000 million dollars per month, which is equivalent to 0.27% of the GDP of this hundred nations, or a third of the external debt that is due this year.

But not everything is hunky with flakes.

Gentilini explains that there are other obstacles linked to the processing and design of this mechanism: the way in which the beneficiaries are chosen, the administrative requirements (cross-checks, updated documentation, etc.) and the disincentives it can create in the search for employment .

In Spain, for example, applications for the minimum vital income have stalled and only slightly more than 130,000 requests have been approved against the target: 850,000 households at risk of exclusion, consisting of 2.3 million people.

Its financing, moreover, is not simple.

The UNDP proposes to reuse the money destined to pay the external debt (through temporary suspensions);

use the resources with which fossil fuels are subsidized or boost consumption through spending measures, recovering the investment later through increased collection.

“A minimum income is a help, not the solution to the problem of poverty,” says Deepak Xavier, an inequality expert at Oxfam Intermón.

“It's fighting for the parrot's chocolate.

The only thing it achieves is that people do not have a miserable life, "adds Borja Monreal, author of Ser Pobre (La Huerta Grande, 2019).

But it is not the only answer.

"It is a tool that could help people to mitigate scarcity, but not precariousness," adds Monreal.

So far, more than minimum income with a permanent vocation, there are several mechanisms of punctual transfers aimed at the poorest citizens, of different nature and duration.

Since the pandemic broke out, for example, some 200 jurisdictions on the planet have launched 1,500 measures to support society, a third of them non-contributory cash transfers, according to the World Labor Organization (ILO).

"In Latin America [money] transfer measures have been announced for 84,000 million dollars, which are fundamentally going to shore up the income of the poorest families," says Alicia Bárcena, executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC).

This could reduce the number of poor people expected this year: 231 million people in Latin America, 96 of them in extreme scarcity, indicates the head of the institution.

"We expect estimates to drop two or three percentage points by the end of the year," he adds.

But ECLAC experts go further and advocate for a true unified emergency basic income for the region, of about $ 120 a month on average, for the entire population in difficulty.

This can cost 2% of the GDP of the entire area, if applied for just six months.

If it extends to nine, it would imply an expense of 3.6% of the regional GDP, highlights Bárcena.

"It is not cheap, but it is very important," he stresses.

"We must go beyond short-term solutions," says De Schutter of the UN.

"The real key to reducing poverty is attacking inequality," he says.

Because while it is true that in the last 30 years emerging and developing nations have taken advantage of the economic boom to reduce extreme poverty (from 36% in the 1990s to 9.2% in 2017), the greater benefits of that growth have remained in few hands.

The Gini index (zero equals perfect equality and 100 equals maximum inequality) only registered a reduction of three percentage points between 2002 and 2018, going from 44% to 41%, according to the IMF.

And the current economic crisis will only widen the gap, as the index is expected to return to 2008 levels. "One of the ways to attack inequality is through economic democracy," says economic historian Richard Wilkinson, co-author of Equality (Captain Swing, 2019): "We need more progressive taxes."

Taxes

“Fighting inequity also means taking away privileges,” says Oxfam's Xavier.

"I mean, big corporations pay their fair share of taxes," he adds.

According to the NGO, an increase of just 0.5% in the rate of tax on the wealth of the richest 1% would go a long way: if applied over the next 10 years, it would raise funds to invest in the creation of 117 million jobs in sectors such as education, health and care for the elderly, among others.

"The world, in the last 30 years, has been the victim of regulatory competition," adds De Schutter.

"The ability of countries to maintain progressive taxation schemes has been challenged by the rich, who can easily transfer their companies to other jurisdictions such as tax havens or territories with very low corporate rates," he highlights.

To show a button: the average legal rate of corporate tax has gone from 28% in 2000 to 20.6% in 2020, according to the Organization for Economic Cooperation and Development (OECD).

In Spain it has dropped from 35% to 25% in the same period, although the effective rate that companies finally pay is lower (21.5% on the tax base and 9.5% on profits).

The OECD's proposal to introduce a global digital tax, which forces big tech companies to pay taxes where they make their profits, is on the right path to tax justice, experts note.

Negotiations to approve this new rate, however, have stalled after the Donald Trump Administration dropped them.

Building a better life is getting harder and harder.

Inequalities make it difficult to find a job to build a future for yourself.

"This is a worrying conclusion that has serious repercussions for social cohesion," says the ILO.

In developing countries the situation is fragile.

“There are a high number of women and men working informally without any social protection.

That makes them vulnerable.

They are not poor, but neither do they have a secure position in economic terms, ”argues Ortiz-Juárez, from King's College London.

More than 1.6 billion employees in the underground economy were affected between April and May by the pandemic, according to the ILO.

Income of informal workers in middle-income nations (such as Mexico, Ecuador, Romania, Thailand) fell 27.7%.

The most affected were those of the poorest countries (such as Haiti, Malawi or Ethiopia, India, Indonesia), with a drop of 82%.

Even when these people are employed, they still face significant barriers: more than 630 million workers in the world do not earn enough from their activity to lift themselves out of poverty, neither they nor their families, according to the ILO.

The recent announcements about the effectiveness of the vaccine are not an incentive for this group either.

"For 2020, history is largely written and only adequate second wave mitigation could limit the damage," says IFPRI's Laborde.

The vaccine could help speed up the recovery period, even revitalizing confidence in tourists, an important source of income for some developing countries, explains the expert.

"But it remains to be seen how far it will reach the poor in the global south," he adds.

This will not be until 2022, as according to Oxfam, the richest countries, with 13% of the world's population, have purchased 51% of the doses from the main laboratories in advance.

“It seems that the life of a person in Bangladesh is much less important than the one in the UK”, ditch Deepak Xavier.

"Many dreams were left unfulfilled ... many plans, many things to do."

Carol Claros breaks down in tears.

This year, the world fell on him.

In early 2020, when she returned from maternity leave, her employer dispensed with her.

“The lady wanted a person with a 24-hour disposition.

I no longer compensated him, ”says this 27-year-old Honduran who worked as an intern.

Then the pandemic broke out.

His partner's salary (950 euros per month) was not enough for all expenses.

Only for rent they pay 700 euros.

Then he started pulling savings.

"Now I have nothing left, nothing, nothing."

Today, Claros cleans portals.

He works 13 hours a week and earns 350 euros a month.

Even so at home they can't make ends meet.

They receive help from Caritas: diapers, baby food and food stamps.

This family from the Madrid district of Carabanchel has joined that 49.3% of the population of Spain that already in 2019 had some kind of difficulty making ends meet, according to the National Institute of Statistics (INE).

"Precarious jobs, the shadow economy ... the most vulnerable have been exposed by the COVID crisis," says Graciela Malgesini, head of European affairs at the European Anti-Poverty Network (EAPN).

The scenario is not rosy.

The collapse of 12.8% of Spanish GDP forecast for this year, the highest among developed countries, according to the IMF, will push many people into starvation.

More than 1.1 million people will join the ranks of relative poverty in Spain at the end of this year, according to Oxfam Intermón.

With this, more than 12 million residents (26% of the population) will be in this condition.

The figure is not trivial.

“It is a consequence of the structural failures in Spain,” says Liliana Marcos Barba, head of public policies and inequality at Oxfam Intermón.

“The country has a sick labor market in which there is a very high group of low-income people with a greater presence of women, youth, migrants and people with low qualifications.

They are the cushion where losses settle when there is a crisis ”, he assures.

Proof of this is the demand for social action by large NGOs in the country has increased between 40% and 60% during the pandemic, according to an analysis by Funcas.

And between a quarter and a third of that demand comes from people who have turned to the services offered by these organizations for the first time.

In 2008, under the Europe 2020 strategy, Spain committed to reducing the number of people at risk of poverty by between 1.4 and 1.5 million (between 2009 and 2019).

For this, the Arope indicator was taken as a reference, which measures poverty, severe material deprivation and low intensity of employment.

Taking this methodology into consideration, at that time there were about 10.8 million citizens at risk of poverty in the country and the indicator was 23.8%.

But the financial recession showed the worst of its faces: Spanish GDP fell 3.8% in 2009, leaving more than 4.3 million people without jobs.

The target exploded into the air.

In 2014, the Arope indicator climbed to 29.2%, and although it has fallen in recent years, it has not been able to get close to the goal.

Last year it stood at 25.3% when the European average was 21.1%, according to Eurostat.

"In absolute terms today there are 11.8 million poor people, which means that, instead of reducing the number, it increased by one million people," says Malgesini.

The causes of this rise?

A high unemployment rate (currently higher than 16%, almost double the European average) and a situation of chronic youth unemployment (today it reaches 43.9%, the highest in the region), which is also seasoned with programs insufficient social protection; and tax and spending policies that favor the wealthy classes much more than the poor, says Philip Alston, the UN special rapporteur on poverty.

"The last decade can be considered as lost in the fight against poverty", highlights Malgesini.

Public aid

There is still hope that the battery of measures launched by the Government to deal with the consequences of the pandemic, which amount to more than 210,000 million euros, according to the Ministry of Finance, will save some people from falling into poverty.

"The aid of the ERTE, the minimum vital income, the limitation of evictions and cuts of basic services and others, can limit a little the effect of the covid-19, especially in the poorest people", argues an analysis of the EAPN.

Before the pandemic broke out, the European Commission already warned of some dangers to social cohesion that had their origin in unemployment, temporary contracts and the high proportion of citizens who remain at risk of poverty or social exclusion despite the time of bonanza of recent years.

This same week, the IMF warned about growing inequality in the country, which was already high before the pandemic and which will widen.

"Spain ranks last in too many social rankings in the European Union," says Alston.

"If poverty could be solved with strategic plans and voluminous reports, the country would be in the lead," he concludes.