The Austerity Pandemic
While some northern countries are beginning to question the austerity prescription, their southern counterparts are increasingly adopting cost-cutting measures. But the dangers posed by austerity are even more pronounced in developing countries, where citizens are especially vulnerable to its economic and social consequences.
NEW YORK – At this year’s International Monetary Fund/World Bank spring meetings in Washington, DC, the IMF urged European countries to ease their austerity policies and focus on investment, marking a shift from past rhetoric. But, in the corridors of those two multilateral institutions, there was talk of double standards.
In fact, most countries are cutting public expenditures – with the IMF’s support. So, even as some northern countries begin to question the austerity prescription, their southern counterparts (including southern European countries) are increasingly adopting fiscal-adjustment measures.
According to IMF projections, of the 119 governments that are shrinking their 2013 budgets (relative to GDP), three-quarters are in developing countries (including 21 low-income and 68 middle-income countries). Fiscal consolidation affects an estimated 80% of developing-country citizens, and its impact is expected to intensify steadily through 2015. During this time, the magnitude of contraction will be significant, with roughly one-quarter of all developing countries expected to cut expenditures below pre-crisis levels.