Social Protections in a Post-Covid World: Will Neoliberalism Prevail Again?

Fifty five percent of the world’s population is not protected by social insurance and assistance programs. Most of these people exist at the intersection of multiple socially or structurally vulnerable identities; including women, people of colour, and informal and migrant workers. COVID-19 has brought attention to the critical importance of social protection systems — now recognized as key to surviving crises like a global pandemic.

Well-designed social protection systems can protect vulnerable populations from the consequences of a global crisis that would otherwise exacerbate existing inequities. Throughout the COVID-19 pandemic, we have witnessed the unprecedented global use of social protection measures, including social transfers, social insurance, social services, and labour market interventions.

For some, this has led to hope for the future of social protection systems. With the pandemic revealing potential policy solutions and new creative ways to extend the delivery of protection measures, scholars and international agencies have hoped that the temporary and ad-hoc measures could become a runway for building up inclusive, comprehensive and efficient systems.

But looking at recent history, others are left less optimistic.

If states follow the blueprint created in the 1980s debt crisis, we could see the re-emergence of devastating austerity measures. That crisis led to many low and middle-income countries accepting conditional debt relief from multilateral organizations, including the World Bank and International Monetary Fund (IMF). The conditions, based on neoliberal economic principles, forced structural adjustments that reduced public spending on critical social rights. For example, a study of 91 countries showed that these loan agreements produced adverse effects on labour rights that worsened the longer the countries continued with the programs. By some estimates, the prescribed austerity measures cost Africa a quarter-century and Latin America a decade worth of growth. Instead of supporting low- and middle-income countries through the debt crisis, austerity served the wealthy at the expense of the poor. These patterns of leaving behind the most vulnerable continued into the 2008/09 global financial crisis.

There are some indications that we may see a similar pattern emerge as governments grapple with the economic fallout triggered by COVID-19, which the United Nations has called the worst crisis since the Great Depression. The IMF has once again offered COVID-19 loans that are dependent on the enactment of a package of reforms, which in some cases involve a decrease in social spending. In fact, the IMF has insisted on fiscal austerity as a condition for 85% of the loans offered. According to OXFAM’s report, wage cuts, caps and freezes, and an increase or introduction of regressive consumption taxes are the most common fiscal measures that countries have discussed with the IMF. However, the IMF has also advised governments to reverse the increases in social spending seen during the pandemic once the crisis abates. For many of these countries, social spending was at a record low before the pandemic — meaning that COVID-19 was the first time many vulnerable populations saw any state-provided support. A reversal of these social protection measures will undoubtedly drive-up inequities worldwide, unless national governments adopt alternative policy options that prioritize sustaining and building up their social protection systems.

Nonetheless, despite the valid reasons for concern about the future of social protection, there are also reasons to support hope for a better, more fair future.

We now have the research to support that austerity fails to accelerate economic growth and that investing in social protection sectors is, in fact, good for the economy. The narrative around social protection and the economy has historically been about striking a balance between the two, based on the assumption that countries face a trade-off between these two objectives. With research to debunk this assumption, an evidence-based approach should lead national governments to reject austerity, not only for the betterment of their vulnerable populations but also as a way through the present economic crisis. Even the IMF has begun to recognize the value of investing in social protection to curb the effects of the economic crisis; their recommendations in the face of COVID-19 are focused on targeted programs and safety nets as opposed to building up universal social protection systems. Further, economists have pointed to a wide array of options for financing improved and sustainable social protection systems. Many of these involve progressive tax reforms and, for low- and middle-income countries, moving away from relying on external assistance. If implemented, such redistributive policies would go a long way toward reducing global inequities.

An equitable future, in line with the 2030 Agenda for Sustainable Development, hinges on working toward universal social protection systems. For many of us, COVID-19 is not the last economic fallout we’ll see in our lifetime, especially amid the ongoing climate crisis. Let us hope that multilateral organizations have learned from their past mistakes. As history presents governments with yet another critical juncture to determine the fate of vulnerable communities, we must demand that they stand on the right side of history and work with individuals and organizations challenging any who seek to once again follow the neoliberal playbook.