Global solidarity in crisis

In December 2019, Chinese media reported the spread of an unknown virus in Wuhan, at the end of January 2020, the World Health Organisation (WHO) declared a global health emergency. The virus has meanwhile spread rapidly around the world and brought the international economy and the social lives of many people to a standstill virtually overnight. Since then, many things have no longer been the same. More than five million people around the world have died from the virus (the estimated number of unreported deaths is much higher), while countless others continue to suffer the health-related, social and economic consequences of the pandemic. Although the development and approval of several Covid vaccines offered a glimmer of hope on the horizon, the pandemic is far from over in many places and several of its economic and social impacts are only now becoming really apparent.

In April 2020 Alliance Sud published an article entitled "A global crisis needs global solidarity", highlighting the fact that the crisis affects everyone, but not equally. Alliance Sud argued for more support for the poorest countries in overcoming the crisis, for global debt forgiveness and for reconstruction guided by the "build back better" principle. But what has happened in the meantime and where do we now stand after almost two years of Corona crisis?

Do we really have the pandemic under control?

Western health systems have also repeatedly come close to breaking point over the last two years. Crisis-weary health personnel, overcrowded intensive care units and many tragic personal stories have dominated the headlines. But the most serious catastrophes were being played out elsewhere – in India, Brazil or Peru, where the spring of 2021 witnessed countless families driving around cities for hours in search of oxygen while their loved ones slowly suffocated in hospital or on the way there; or in the refugee camps of Bangladesh, Colombia or Turkey, which saw not only the rapid spread of the virus but also appreciable spikes in food shortages and hunger.

Millions of people lost their jobs during the covid pandemic. This has led the International Labour Organisation (ILO) to estimate the 2022 unemployment figure at 205 million, compared to 187 million in 2019. Unemployment has skyrocketed over the past year, especially among young people and women. The number of working poor – workers who live on less than 3.20 dollars a day – has also risen by 108 million since 2019. The situation is most disastrous, however, for the more than two billion informal sector workers who have no social security at all. For them, lockdowns and other restrictions have meant losing their livelihoods in many instances.

The World Bank too finds that extreme poverty has again risen for the first time in 22 years on the back of the Corona crisis.  It estimates that to date, some 121 million people have been pushed into extreme poverty as a result of the crisis. But as Alliance Sud has reported in a background article, the World Bank's 1 dollar/day poverty line is set extremely low and has several methodological flaws. A more realistic definition of extreme poverty would perhaps convey an even more dire picture.

Food insecurity and hunger have also been considerably exacerbated by the Corona crisis. In 2020, for example, one in three people lacked access to adequate food. In the space of just one year, the prevalence of malnutrition rose from 8.4 to about 9.9 per cent, having remained virtually unchanged for the five preceding years. Compared to 2019, hunger affected an additional 46 million people in Africa, 57 million in Asia and roughly 14 million in Latin America and the Caribbean in 2020.

Through an extensive survey of 16,000 people in 25 countries, Helvetas and seven other European NGOs have verified the massive decline in income, food security and access to education confronting many people. The study shows that those who are already most vulnerable – the elderly, people with disabilities, single mothers, women and children – are the ones being hit the hardest by the pandemic.

Global economic upheavals

While the economies of many Western countries, including Switzerland, seem to be recovering at a remarkable pace, the recovery in the Global South is proving much slower. The International Monetary Fund (IMF) projects world economic growth of 6 per cent in 2021, but a mere 3.2 per cent for the African economy. Compared to those of the 2008 global financial crisis, the economic repercussions of the Corona crisis have been considerably more devastating for most of the poorer countries – especially those in Africa and South Asia.

The global spike in commodity prices has driven up the cost of many basic products: metal and oil prices have been rising since mid-2020, and annual food price inflation reached almost 40 per cent in May 2021, the highest in a decade. While rising metal and oil prices pose a problem mainly for industrialised countries, rising food prices have significant implications for poverty and hunger in poorer countries. In Nigeria for example, food prices have surged by almost a quarter since the onset of the pandemic, driving 7 million people into extreme poverty.

Tourism has been another sector hit especially hard by the pandemic. International tourist arrivals in the poorest countries plummeted by 67 per cent in 2020. The UN estimates that it will take at least four years for the number of tourist arrivals to return to 2019 levels. This is jeopardising the livelihoods of individuals, households and communities as well as the survival of businesses all across the tourism value chain.

Burgeoning debt

While most developed countries have rolled out massive stimulus packages to attenuate the economic impacts of the Corona crisis, poorer countries lack both the resources and the policy space needed to emulate the West. This is so because a) their creditworthiness renders them unable to borrow on international capital markets at reasonable interest rates; b) they cannot print money owing to spikes in inflation; and c) international tax evasion impedes them from raising sufficient funds in their own countries.

The IMF estimates that low-income countries would have to spend some USD 200 billion over the next five years in the ongoing battle against the pandemic and another USD 250 billion to speed up economic recovery. Yet most of these countries have no room for manoeuvre to increase their spending. According to the IMF, 41 low-income countries even cut back their overall expenditure in 2020. This notwithstanding, 33 of them still saw a rise in their public debt-to-GDP ratio. The external debt of developing countries thus hit a record USD 11.3 trillion in 2020, 4.6 per cent more than in 2019 and 2.5 times the 2009 figure in the wake of the global financial crisis.

Where is the global solidarity?

Despite numerous calls for generous support and debt relief, little has been done to date. The Debt Service Suspension Initiative (DSSI) agreed on by the G20 countries, the World Bank and the IMF in the spring of 2020 led only to the temporary suspension of bilateral debt servicing for some countries. Not only did China, as a major lender, not participate in the initiative, but neither did the numerous private lenders support the DSSI.[1] Moreover, barely more than half of the "eligible" countries participated, for fear of displeasing their private creditors. Ultimately, the DSSI increased the financial leeway for 46 debtor countries in 2020 and 2021 (by USD 5.7 billion and USD 7.3 billion). However, as the suspended debt payments will have to be reintroduced into the repayment schedules as of 2022, the looming debt crisis was at best postponed rather than eliminated. Furthermore, the emergency loans granted by the IMF and the World Bank for dealing with the crisis are hardly the solution to the problem, as they only generate further indebtedness.

Although Official Development Assistance (ODA) increased by 3.5 per cent in 2020, it still represents a mere 0.32 per cent of the combined gross national income (GNI) of OECD-DAC member countries. This is less than half the internationally reaffirmed target of 0.7 per cent of GNI, which is supposed to be allocated to ODA and represents just about 1 per cent of the funds mobilised for domestic stimulus packages. Although Switzerland did quickly release additional funds for humanitarian projects and for the Covax Alliance, even in 2020, as one of the world’s richest countries, it only allocated 0.48 per cent of its GNI to ODA – a far cry from the internationally agreed target of 0.7 per cent.

Global vaccination apartheid

Former OECD Secretary-General Angel Gurría too has emphasised that far more will have to be done in the future to help developing countries with vaccine distribution, health care and assistance for the poorest and most vulnerable.

Unfortunately, the selfishness of Western countries is apparent not only in their economic stimulus packages, but also in the distribution of Covid vaccines. While many Western countries are already vaccinating children or administering third, so-called booster shots, in the poorest countries, just 3.1 per cent of the population have received at least one vaccine dose.

A study by the Airfinity research institute shows that at current vaccination rates, 80 per cent of adults in G7 countries will be vaccinated by the end of 2021. At the same time the G7 will have amassed nearly 1 billion surplus vaccine doses. These would be enough to vaccinate a large part of the population in the 30 countries with the lowest vaccination rates (most of them are in Africa). Set up to ensure more equitable worldwide vaccine distribution, the Covax initiative has so far delivered less than 10 per cent of the 2 billion doses promised to low and middle-income countries. Part of the reason for this is that richer countries have signed priority contracts with vaccine manufacturers, thereby squeezing Covax out of the vaccine market. Absurdly, several rich countries (including England, Qatar and Saudi Arabia) have themselves also obtained vaccines under the Covax programme.

With a population of 8.6 million, Switzerland too has so far signed contracts with five vaccine manufacturers for a total of almost 57 million doses (although only three vaccines have been approved by Swissmedic to date). Although Astra Zeneca is not licensed in Switzerland, 4 million doses of that manufacturer's vaccine were promised to Covax, of which only about 400,000 have been distributed up to now.

Alongside the Covax initiative, it is also crucial to build vaccine production capacity in low- and middle-income countries. To that end, however, pharmaceutical companies would need to share their vaccine technology and know-how with manufacturers in these countries. A proposal submitted by India and South Africa at the World Trade Organisation (WTO) seeking a temporary waiver from certain provisions on intellectual property rights for tests, treatments and Covid vaccines has been supported by China, Russia and in part by France, the USA and Spain, as well as by the WHO and Pope Francis. The pharmaceutical industry and Switzerland oppose it and are still arguing for voluntary measures.

Back to normality?

While it may well appear that the Corona crisis will soon be behind us in Switzerland, the world as a whole is still far from that point. It will take more than ad hoc support for humanitarian projects, the donation of "old" or "unwanted" vaccine doses and the granting of more loans to poorer countries to combat the current crisis and its underlying structural causes.

Only when we admit that we are all interconnected and bear a common responsibility to make the world a liveable place and to keep it that way, will we be able to move forward and overcome not just this crisis but also its underlying systemic crises, including the global climate crisis. For the Corona pandemic has made one thing abundantly clear: where there is a (political) will, there is a way.

[1] An Alliance Sud study, based on data from the Swiss National Bank (SNB) and the Bank for International Settlements (BIS), finds that the public debt owed by the 86 poorest countries to 40 Swiss banks amounts to 5.7 billion Swiss francs.