Covid-19 has made its mark on all the global economy’s socioeconomic indicators and, despite its worldwide impact, the weakest and most vulnerable economies have been hit the hardest. Coronavirus has also shown us that neoliberalism is incapable of resolving problems like those caused by the pandemic.
The global economic crisis led to the fall in 2020 of the key indicators of gross domestic product (GDP) growth, and although some international institutions are predicting a recovery in 2021, in reality this is overshadowed by a large question mark.
This is how Director of the Centre for World Economy Studies Ramón Pichs explained it to the press, saying that in some regions, such as Latin America, economic contraction had reached lower levels, with previous weak growth reinforced by the new, pandemic-induced situation.
Pichs emphasised that despite the pandemic’s global impact, the weakest and most vulnerable economies have been hit the hardest. Within these economies, the poorest and those working in the informal and service sectors have been deeply affected by reduced mobility, closures and lockdowns.
Poverty and extreme poverty have also increased, Pichs stated, and this year a further 90 million people are expected to join the ranks of the poor and destitute. Another important issue is the drop in remittances; this practice is fundamental to the economic activity of many developing countries, which are extremely dependent on this income, as is the case for some Central American and Caribbean nations.
Furthermore, direct foreign investment has contracted while external debt has increased.
Debt and pandemic
As 2020 draws to a close, global debt now stands at around 227 trillion dollars, approximately 365 per cent of GDP, which is almost four times global GDP.
At this stage, Pichs emphasised, the debt is considerably more significant for all developing countries and emerging economies, for which it stands at 11 trillion dollars.
However, in terms of debt servicing – interest payments and repayment – these countries paid some 30 trillion dollars between 2012 and 2020 alone. Yet, their debt remains at 11 trillion dollars.
Pichs went on to explain that for creditors, big business is not debt payment but debt management – and management in such a way that the service bears interest and, as a result, increasingly larger quantities of revenue can be extracted from developing economies. These services and the interest on external debt represent one of the issues affecting Latin America.
It is expected that developing regions are among the hardest hit, with an 8 per cent drop in GDP.
Since 2008, the global economy has suffered a marked slowdown; this has reached its lowest levels in some regions, such as Latin America, whose weak growth has been reinforced by the new, pandemic-induced situation.
Despite the high social, economic and human cost, the pandemic has benefitted some sectors, such as information and communication technologies, pharmaceuticals and, in short, all sectors concerned with an increasingly technologically connected world.
“If we really want to build a better world, we have to re-evaluate the role of science and scientists, and the need to listen to them in the process of decision-making,” Pichs remarked.
It is also important to build local capacities for development and the ways in which these can make countries much more independent, using their own means.
Likewise, Pichs said, this is important to meet the existing environmental challenges and future pandemics, especially if the destruction of habitats and impact on biodiversity continue. In addition, the possibility of illnesses transmitted from animals to people could be repeated or increase.
“A better world cannot be based on neoliberal precepts, with the reduction of the weight of the state on the economy, the decrease in government budgets for education, health and other services,” he stated. (PL)