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COVID-19 | Ecuador, COVID-19 and the IMF: how austerity exacerbated the crisis by Ana Lucía Badillo Salgado and Andrew M. Fischer

Ecuador is currently (as of 8 April) the South American country worst affected by COVID-19 in terms of the number of confirmed cases and fatalities per capita. While even the universal health systems of Northern European countries are becoming severely frayed by the nature of this pandemic, Ecuador serves as a powerful example of how much worse the situation is for many low- and middle-income countries, particularly those whose public health systems have already been undermined by financial assistance programmes with international financial institutions (IFIs). The IMF and other IFIs such as the World Bank must acknowledge the role they have played and continue to play in undermining public health systems in ways that exacerbate the effects of the pandemic in many developing countries.


The recent IMF Extended Fund Facility (EFF) Arrangement, signed in March 2019 with the Government of Ecuador, was already the subject of massive protests in October 2019 given the austerity and ‘structural reforms’ imposed on the country (aka structural adjustment). It has also directly contributed to the severity of the pandemic in this country given that health and social security systems were among the first casualties of the austerity and reforms. In particular, the government’s COVID-19 response has been severely hindered by dramatic reductions of public health investment and by large layoffs of public health workers preceding the outbreak of the virus.

From this perspective, even though the IMF has recently moved to offer finance and debt relief to developing countries hit by the COVID-19 pandemic, a much more serious change of course is needed. For this, it is vital to understand its own role ­– and that of other IFIs such as the World Bank – in undermining health systems before the emergence of the pandemic in various developing countries, lest similar policy recipes are again repeated.

The baseline

It is clear that the pre-existing national healthcare system in Ecuador has been replete with problems even in ‘normal’ times. As in most of Latin America, the weaknesses of the healthcare system in Ecuador stem from its segmented and stratified character, with a distinct segregation between three main subsectors – the public, social security, and private sectors. The Ecuadorian Ministry of Health has a weak coordinating and regulatory role over these three subsectors, each of which caters to different beneficiary populations and with clearly distinct quality of services. The public system is the lowest quality and the one accessed by most poor people. Despite claims of universal health, the national system is a far cry from anything approaching genuine universalism.

Moreover, there has been a progressive privatization and commodification of healthcare since 2008. For instance, the building of capacity within the social security system has been undermined by the channelling of health funding via contracts to the private sector, where pricing is also mostly unregulated [1]. More generally, Ecuador has consistently exhibited one the highest out-of-pocket (OOP) health expenditure shares in South America, despite a government discourse and constitutional mandate to deliver free, high quality, public healthcare for all citizens. OOP payments – or direct payments by users at the point of service – reached 41.4% per total health spending in 2016 [2]. They include, for instance, payments for medicine or medical supplies by poor people in public hospitals, as well as payments by middle- and upper-class people for consultations and surgeries. The COVID-19 crisis puts pressure on precisely these aspects of healthcare provisioning, rendering the system prone to systemic failure for the majority of the population, especially in times of economic crisis when the ability of users to pay is severely curtailed.

Crisis and IFIs

These problems in the healthcare system have been exacerbated by the austerity measures of the current government of Lenín Moreno. The measures were introduced in the context of the protracted economic crisis that started in 2014 and have been endorsed by the IMF and other IFIs. Public health expenditure plateaued at 2.7% of GDP in 2017 and 2018, and then fell slightly to 2.6% in 2019, when GDP also slightly contracted (see figure). This was despite the constitutional goal that established an increase of at least 0.5% of GDP per year until 4% was to be reached, which is still far below the 6% of GDP recommended by the Pan American Health Organization [3].

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Source: elaborated from the Fiscal Policy Observatory data (last accessed 7 April 2020 at https://www.observatoriofiscal.org/publicaciones/transparencia-fiscal/file/221-transparencia-fiscal-no-163-marzo-2020.html)
* The main component of this expenditure is on non-contributory social protection (social cash transfers).
** It excludes health expenditure of the social security system.

However, the collapse in public investment in the health sector has been far more dramatic, falling by 64% from 2017 to 2019, or from USD 306 million in 2017 to USD 110 million in 2019 [4]. Such reductions would have been largely borne by the public health system and constitute expenditures that are vital for a COVID-19 response, such as the construction of hospitals and the purchase of medical equipment.

It was in this context that the IMF Extended Fund Facility (EFF) was agreed and signed in March 2019. Within the framework of this programme, the government implemented a large layoff of public healthcare workers (including doctors, nurses, auxiliary nurses, stretcher-bearers, social workers, and other healthcare workers). The layoffs continued throughout 2019, despite protests by the National Syndicate of Healthcare Workers of the Ministry of Health [5], [6], [7]. It is difficult to know the exact number of layoffs because of the fragmented functioning of the health system, although within the Ministry of Public Health alone, 3,680 public health workers were laid off in 2019, representing 4.5% of total employment in this Ministry and 29% of total central government layoffs in that year [calculated from 8]. Similar reductions in the social security sector were announced in 2019 for 2020, although we have not yet been able to find any data on these reductions.

Thus, it is not a surprise that Ecuador is currently doing so poorly in handling the COVID 19 crisis. The retrenchment of the public health system together with an already weak and retrenched social protection system coupled for the perfect storm. But even more worrying is that, in the face of the pandemic, the government paid 324 million USD on the capital and interest of its sovereign ‘2020 bonds’ on 24 March instead of prioritizing the management of the health crisis. This decision was taken despite a petition on 22 March by the Ecuadorean assembly to suspend such payments, along with a chorus of civil society organizations lobbying for the same [9] [10]. The government nonetheless justified the payment as a trigger for further loans from the IMF, World Bank, Inter-American Development Bank, and Andean Financial Corporation [11]. This is especially problematic given that Ecuador has been hard hit by the collapse of oil prices and, as a dollarized economy, its only control over money supply and hence hope for economic stimulus rests on preventing monetary outflows from the economy (and encouraging inflows).

The payment is also paradoxical given that the IMF and the World Bank are currently calling for the prioritization of health expenditure and social protection and for a standstill of debt service, and have announced initiatives for debt relief and emergency financing [12] [13]. Nonetheless, despite such noble rhetoric, it appears that the precondition for such measures continues to be the protection of private creditors over urgent health financing needs.

Atoning for past and present sins on the path to universalism

The COVID-19 pandemic undoubtedly exposes the inadequacies of existing social policy systems in developing countries and the urgent need of moving towards more genuinely universalistic systems. Ecuador is exemplary given that it has until recently been celebrated as a New Left social model even while its national health system has remained deeply segregated and increasingly commodified.

However, while the IMF and other IFIs have emphasised the importance of placing health expenditures in developing countries at the top of the priority list in the context of the COVID-19 pandemic [12], they have not acknowledged their own continuing roles in undermining these priorities. Indeed, their messaging is often contradictory, given that both the IMF and the World Bank have also repeatedly insisted that developing countries must persist with ‘structural reforms’ during and after the pandemic [13] [14]. In other words, there is no evidence that the course has been reset. As one way to induce a reset, it is important that they acknowledge the roles they have played and continue to play in undermining public health systems and universalistic social policy more generally, lest they continue to repeat them despite the switch to more noble rhetoric.


Sources:
[1] http://cdes.org.ec/web/wp-content/uploads/2016/01/privatizaci%C3%B3n-salud.pdf
[2] https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)30841-4/fulltext
[3] https://www.cepal.org/es/publicaciones/45337-america-latina-caribe-la-pandemia-covid-19-efectos-economicos-sociales
[4] https://coyunturaisip.wordpress.com/2020/03/28/los-recortes-cobran-factura-al-ecuador-la-inversion-en-salud-se-redujo-un-36-en-2019/
[5] https://www.eluniverso.com/noticias/2019/03/06/nota/7219694/trabajadores-publicos-salud-denuncian-despidos-masivos
[6] https://www.elcomercio.com/actualidad/recorte-personal-contratos-ocasionales-ecuador.html
[7] https://www.elcomercio.com/actualidad/despidos-trabajadores-ministerio-salud-evaluacion.html
[8] https://www.observatoriofiscal.org/publicaciones/estudios-y-an%C3%A1lisis/file/220-n%C3%BAmero-de-servidores-p%C3%BAblicos-del-presupuesto-2018-2019.html
[9] https://www.elcomercio.com/actualidad/asamblea-suspender-pago-deuda-coronavirus.html
[10] https://ww2.elmercurio.com.ec/2020/03/24/la-conaie-pide-al-gobierno-suspender-el-pago-de-la-deuda-externa/
[11] https://www.bourse.lu/issuer/Ecuador/34619 (first link under the notices section)
[12] https://www.imf.org/en/News/Articles/2020/04/03/vs-some-say-there-is-a-trade-off-save-lives-or-save-jobs-this-is-a-false-dilemma
[13] https://www.worldbank.org/en/news/speech/2020/03/04/joint-press-conference-on-covid-19-by-imf-managing-director-and-world-bank-group-president
[14] https://www.worldbank.org/en/news/speech/2020/03/23/remarks-by-world-bank-group-president-david-malpass-on-g20-finance-ministers-conference-call-on-covid-19

This article is part of a series about the coronavirus crisis. Read all articles of this series here.


About the authors:

Ana LucíaAna Lucía Badillo Salgado is a PhD researcher at the ISS focusing on the political economy of social protection reforms in Ecuador and Paraguay, in particular the role of external actors in influencing social policymaking. She is also a Lecturer at Leiden University College. mug shot 2

Andrew M. Fischer is Associate Professor of Social Policy and Development Studies at the ISS and the Scientific Director of CERES, The Dutch Research School for International Development. His latest book, Poverty as Ideology (Zed, 2018), was awarded the International Studies in Poverty Prize by the Comparative Research Programme on Poverty (CROP) and Zed Books and, as part of the award, is now fully open access (http://bora.uib.no/handle/1956/20614). Since 2015, he has been leading a European Research Council Starting Grant on the political economy of externally financing social policy in developing countries. He has been known to tweet @AndrewM_Fischer

COVID-19 | Lessons from the COVID-19 crisis for climate change politics by Murat Arsel

COVID-19 and climate change bear striking – and worrying – similarities and differences. Both are characterized by high uncertainty, but while COVID-19 has been identified as an immediate threat and action has been taken despite the absence of comprehensive knowledge, uncertainty has been touted as impeding concerted efforts to transform energy systems to combat climate change. The global economic system has strongly contributed to our failure to make radical changes. A different system – one that is not so fundamentally focused on maximizing profits over all other concerns – could have been better placed to make the undeniably painful economic adjustments we are forced to make, both before the emergence of COVID-19 and to prevent a catastrophe arising due to climate change. While both crises require dramatic societal transformations, we need to be aware of the potential negative political consequences of declaring them as emergencies.


One thing is certain about COVID-19: we simply do not know enough. Some aspects about it are simply unknown, on others we have conflicting information. Scientists are asked to take shortcuts from their rigorous methods and to offer their ‘best guess’ on hugely consequential questions. Policy makers then take decisions within a fog of uncertainty since experts have also argued that doing nothing is the absolute worst option. This is a terrifying situation for us all, but it is not entirely without precedent.

While the threat of COVID-19 might seem unique, there are some interesting parallels between this threat and that of climate change. At a general level, neither is simply a ‘natural’ phenomenon. This is not to suggest – as some have – that they are a ‘hoax’. Viruses exist, mutate, and infect ‘naturally’. Similarly, the climate of the earth shows variation due to various factors outside of human influence. But what imbues both COVID-19 and contemporary climate change with a catastrophic potential is the political economic context in which they are developing. More specifically, it is global capitalism that takes what is ‘natural’ and weaponizes it against humanity.

In the case of climate change, the problem is not that humans are extracting natural resources in order to secure their livelihoods. The manner in which this extraction is carried out, its continuous intensification and, most importantly, the extraction of resources not necessarily to meet the human need to exist and to thrive, but rather to fulfil the need of capitalism to continuously expand, is what transforms extraction into a planet-altering force captured in the concept of the Anthropocene.

Similarly, the astonishing spread of COVID-19 could not have been possible without the incredible powers of global capitalism. The virus has spread so quickly and so effectively on the back of a global structure that transports goods, humans and – let us not forget – ideas at almost magical speeds. But it is important to not fall into the trap of blaming connectivity and mobility for the spread of the virus but the underlying economic structures that made combatting it so difficult and painful. While such a pandemic could also occur under a different global economic order, the precarity of not just individuals or classes but even some of the richest and technologically sophisticated economies is what makes COVID-19 so dangerous. A different system – one that is not so fundamentally focused on maximizing profits over all other concerns – could have been better placed to make the undeniably painful economic adjustments we are forced to make.

The parallels between climate change and coronavirus do not end there. Climate scientists – those in the natural as well as the social sciences – have long been arguing that if drastic changes are not made to the way we produce and consume, in other words to the way we live, we can expect apocalyptic changes to global ecosystems. When these materialize, their impacts are likely to be just as and probably even more colossal than the toll that COVID-19 will have exacted. Yet scientists’ pleas for radical action have been rebuffed on two grounds – we do not know enough, and dramatic curbs to economic activities are fundamentally against public interest. The effectiveness of these arguments has been far greater in the case of climate change than in COVID-19! As the COVID-19 crisis shows, these two grounds have not prevented governments across the world from acting in response to the COVID-19 threat.

Can we expect a change in attitude to climate change politics once the COVID-19 crisis is over? That is certain though it is possible to expect two dramatically different responses which will depend on how, in the aftermath of COVID-19, societies around the world come to understand the now evolving response. If the response to COVID-19 comes to be seen as an overreaction or a form of mass delusion, this would have massively negative effects on ongoing efforts to respond to climate change. That would mean not only that scientific authorities – not just the epidemiologists or immunologists but the entire enterprise itself – will be discredited, opening the door to an ever-intensifying challenge that will dwarf the anti-vaccination movement. Worse still, such an impression will embolden the Trumps and Bolsanaros of the world (unfortunately not a rare breed!) to challenge and pull back all too necessary measures to reduce greenhouse gas emissions.

However, if the experts as well as politicians and policy makers who follow them are vindicated in making draconian changes (and if those who do not do so are vilified), we can expect a new era in which scientific authority is once again celebrated and valorised (rather than challenged by baseless arguments as has been the case with the anti-vaccination movement). It can also be expected that the spectre of an ecological apocalypse will be taken more seriously, bringing it with it meaningful socio-economic and cultural transformations to adapt to and mitigate climate change.

Authoritarianism creeping in through the back door

Implementation of dramatic societal transformation in response to anticipated catastrophes might at first be seen as an entirely positive outcome. But it is important to remember that all appeals to emergency, such as the declaration of a state of emergency, regardless of how justified they are, contain within them the seed of authoritarianism. A call to urgent action is almost by definition a call to silence dissent, to short-circuit deliberative democracy and to privilege the opinion of a select few over all others.

While rare, the climate movement has long had an authoritarian streak as demonstrated by this statement by no less than the developer of the Gaia hypothesis, James Lovelock: “We need a more authoritative world. We’ve become a sort of cheeky, egalitarian world where everyone can have their say. It’s all very well, but there are certain circumstances – a war is a typical example – where you can’t do that. You’ve got to have a few people with authority who you trust who are running it”[1]. A few years ago, such statements could have been considered fringe opinions intended more for provocation than for actual implementation. With countless leaders and scientists comparing COVID-19 to a war, there is genuine reason to be actively worried about ending up in a situation where climate change too becomes securitized in this manner.

This brings us back to the question of uncertainty and authority. While our knowledge of climate change – how it works, what its impacts are and how we can reverse it – are incomparably better than what we know about COVID-19, the socio-economic and ecological decisions that need to be taken are far from obvious if we are to avoid an economic crisis similar to the one brewing at the moment. How can we transition towards a carbon neutral economy? Which fossil fuel reserves need to be designated as ‘unburnable’? Where do we restore ecosystems and to what state? How, if at all, do we prevent flooding of cities and towns? What are the ecological tipping points and how can we prevent them if they remain largely unseen? These and countless other questions require not only authoritative scientific input but genuine deliberative discussion as well.

No society – regardless of how extensive its education and research attainment – is ready for this challenge. This is because the model of economic development that has dominated since World War II has created a relationship with science that Ulrich Beck has brilliantly described as “organized irresponsibility”[2], in which global capitalism has powerfully capitalized on the explosion of productivity enabled by modern science and technology while brushing under the metaphorical carpet its risks and uncertainties. Debates about the safety of genetically modified foods and nuclear power were harbingers of a brewing crisis of how science and technology can be socialized. COVID-19 is a stark reminder that the challenge remains great. If it is not addressed, we can expect many more war-like situations, not least in relation to climate change.

[1] https://www.theguardian.com/environment/blog/2010/mar/29/james-lovelock
[2] https://www.theguardian.com/education/2015/jan/06/ulrich-beck

This article is part of a series about the coronavirus crisis. Find more articles of this series here.


74804489_10163151698620144_409485347391537152_oAbout the author:

Murat Arsel is Professor of Political Economy of Sustainable Development. His research and teaching focus on the tensions between nature, capitalism, and emancipatory socio-economic development. Additional details of his work can be found at www.marsel.me

Image Credit: Markus Spiske on Unsplash

COVID-19 | Radio silence during the crisis: how our imperial gaze threatens to sharpen global divides by Lize Swartz and Josephine Valeske

The spread of coronavirus COVID-19 across the world has been accompanied by an explosion of activity on social media as people have tried to make sense of the implications of the virus and the speed of change. But the story that is emerging amid the chaos has failed to draw attention to the effect of the virus on low-income groups, making visible a radio silence on the plight of those in the Global South in particular. We need to break the silence to ensure the implementation of inclusive responses and a widening of the narrative beyond that of the privileged, write Lize Swartz and Josephine Valeske.


Following the progression of the coronavirus on news and social media from within the Netherlands, we have witnessed a worrying parallel development: a focus on the immediate economic effects of the crisis, including financial losses; reports of panic buying that have fueled further panic and anxiety; and the effects of quarantining on personal life. In the higher income households of Europe, social distancing and isolation are no more than an inconvenience for many, and one of the biggest concerns among young adults seems to be the boredom that will hit when being forced to stay at home for two weeks. For others it will be the lack of freedom of movement, the inability to travel for leisure and business or do things for pleasure.

Thus, two sides of the virus have become highlighted: either inconvenience through social distancing leading to eventual recovery, or death of the vulnerable as an impact of the virus itself. The ‘middle’—the physical suffering the virus will bring, rooted in pervasive structural socio-economic inequalities, has not sufficiently been discussed. The pandemic uncovers the effects of decades of neoliberalism undermining the welfare and healthcare systems all across the world. But in the Global South as well as in intentionally forgotten places in the Global North like the refugee camp Moria on Lesbos, the suffering will assume another dimension altogether.

There is still hope that low-income countries can avoid the pandemic, with Africa having put travel bans on Europe, China, and the US in a powerful twist of the discriminatory global visa regime. But if the coronavirus hits impoverished countries with high levels of social inequality and inadequate public health systems that still suffer the effects of (neo-)colonialism, that inequality will increase. For the vulnerable, the coronavirus will not be just an inconvenience, leading to loneliness or a temporary loss of income—it will likely cause untold suffering. The virus may result in the death of the physically vulnerable, including undernourished children and adults, or those with tuberculosis or Aids.

While it is true that the elderly across all income groups are experiencing the highest mortality rates, it is likely that young people in low-income groups will experience higher mortality than those that are wealthy, as is the case with influenza. A study by the University of Edinburgh found that the level of access to healthcare is associated with <65 year-olds’ influenza mortality rates. Deaths are not just numbers, but real experiences resulting in trauma and emotional distress.

Furthermore, often it is the suffering before possible death that strikes us hardest. Wealthier residents in the Global South, as many people in the Global North, will be able to self-isolate by withdrawing into their own lives, surrounded by high walls—properties where they can live in relative comfort for a few weeks, waiting for the storm to pass. Their place of safety is others’ place of danger. In informal settlements, isolation is not possible, where toilets and taps, where and if they are available, are shared. It is here where several people are crowded into a single room, sharing beds, utensils, space. It is here where diseases including tuberculosis spread more quickly. The suffering of those who cannot distance themselves socially, whose houses are not necessarily homes, or who do not have a house with a door and four walls, needs to be emphasized. The suffering of those who usually wander the streets during the day and now have to be confined into what might become a death trap.

When the time for isolation comes, not only will it be impossible in densely populated areas, it will become devastating. Many workers survive from their daily wage, living hand to mouth. Those without a choice will have to go to work, and the virus will spread. The dependence on public transport, particularly buses and trains, in developing countries should not be negated. Wearing a mask won’t help if you’re crowded into a small space. And as horrible as working with a fever and breathing troubles sounds, it might still be better than what will happen if the governments declare shutdown and sentence the extremely poor to go hungry for days or even weeks.

In addition, school feeding programmes for many children provide the only nutritious meal that they get each day—or the only meal they may get. Staying away from school can be devastating for families who cannot afford to feed their children, both in the Global South as also in places like New York City, which hosts 114,000 homeless children. And impoverished people who cannot afford private healthcare will have to wait in queues in clinics and at hospitals for free medicine—to the extent that they are accessible or proximate—increasing their risk of exposure to sickness.

Perhaps the worst of it all, however, is that for many low-income groups in the Global South, the physical effects of the pandemic and the sudden confrontation with death by illness are not at all as novel as they are for us in the rich countries. Death and suffering from communicable diseases is much more common in the Global South than in the North (see figure below). The daily death count of “poor people’s diseases” such as tuberculosis and malaria are at present much higher than those of the coronavirus, but these illnesses, often easier to fight than the novel virus, are usually forgotten―as are their victims.

corona graph

Source: https://informationisbeautiful.net/visualizations/covid-19-coronavirus-infographic-datapack/

The coronavirus is threatening to sharpen divides both intra- and internationally, not only revealing differences in adaptive capacity based primarily on socio-economic circumstances that affect individual responses to the virus, but also highlighting ignorance regarding the constant high level of exposure of vulnerable groups to communicable diseases. The very silence about these inequalities perpetuates them. Strong responses are sorely needed, including ongoing pressure to ensure that interventions are inclusive and target vulnerable groups first instead of focusing on the business sector.

Moreover, individuals need to break the silence by directing their gaze outward, away from their own societies, to reshape the narrative of the crisis by driving the focus away from the privileged who continue to dominate sense-making processes and who are dampening or silencing the voices of others in the process. And finally, it should not be forgotten that what wealthy societies are facing now has been the daily reality for many around the world, and that our imperial gaze often prevents us from recognizing this.


This article is part of a series about the coronavirus crisis. Find more articles of this series here.


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About the authors:

Lize Swartz is a PhD researcher at the ISS focusing on water user interactions with sustainability-climate crises in the water sector, in particular the role of water scarcity politics on crisis responses and adaptation processes. She is also the editor of the ISS Blog Bliss.

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Josephine Valeske holds a MA degree in development studies from the ISS. She is currently an intern at the Transnational Institute in Amsterdam and the blog manager of the ISS Blog Bliss. Her reseach interests lie in the areas of aid, corporate accountability, and social and economic justice.