The current era of austerity has its roots in the financial crises of late 2008, soon after which governments across the world spent an estimated $11.9 trillion of public money bailing out the banking industry – and they have since spent trillions more.15 Rather than placing the onus on the financial sector to repay the massive debts that accrued largely because of their high-risk lending, borrowing and speculative activities, policymakers are cutting spending on essential public services in a bid to save money and reduce government debt. These cuts have already been dramatic, but in many countries they have only just begun and are set to escalate further in the coming years. Unsurprisingly, the impact of austerity measures is likely to be particularly severe on poorer families as they target key social areas such as healthcare and public sector salaries, as well as financial assistance for students, the elderly and the unemployed. As it becomes increasingly more difficult for people to meet their basic needs, governments across the European Union and beyond are facing widespread popular protests that look set to continue as long as policymakers put deficit reduction before human rights. But the practice of financial austerity is nothing new. Developing countries burdened with illegitimate and unjust debts have been reeling under the harsh impacts of austerity measures for many decades, and still maintain an unsustainably high debt burden of over $4,076 billion [see section 9 in part 3]. A spate of reckless lending, an oil crisis and a series of unprecedented hikes in interest rates combined to push many developing countries into a debt crisis in the 1970s and 80s.16 When these countries found they were unable to repay the huge debts they had accrued, the International Monetary Fund (IMF) and World Bank stepped in to bail them out. In order to qualify for the loans, governments had to agree to enact Structural Adjustment Programs (SAPs) which forced them to dramatically cut public spending, privatise formerly state-run enterprises, and deregulate and liberalise their economies. The overriding intention was to prioritise debt repayments to the financial sector, heighten the role of free markets, and open up the economy to multinational corporate interests. In many ways, these extreme reforms parallel the IMF government bailout packages being imposed more recently across Europe.17 However, the impact of the austerity measures attached to SAPs in many low-income countries during the 1980s and 90s remains more severe than the experience of even the most debt-stricken European nations of today, which at least have broad-based systems of social welfare already in place. The introduction of SAPs in more than 150 developing countries decimated systems of social protection – that were often very weak to begin with – by further reducing spending on healthcare, education and other public services and social programmes. The result was a widespread and drastic reduction in living standards, a devastating impact on health outcomes, and a massive increase in extreme deprivation in some of the poorest regions of the world – which continues to thwart poverty reduction efforts and economic development in the Global South to this day.18 Wherever they have been administered, austerity measures have systematically undermined the sharing economy and disproportionately affected the poor and vulnerable. At the same time, policies of austerity have cut taxes for big businesses and the ultra-rich in the vain hope that the private sector might be able to generate economic growth and increase government revenues. Yet the experience of countries in both the Global North and South tells us that fiscal austerity does not work, even on its own terms. By prolonging economic recession and reducing government income, austerity has made it harder – not easier – to repay national debt. Instead of employing the tried and tested approach of increasing public spending in order to stimulate the economy, create jobs and increase government revenues, austerity measures are depressing economic activity, rolling back essential social protections and dismantling the sharing economy.19
Part 2: The global emergency
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