The coronavirus pandemic has shaken the very foundations of the global economy – and raised questions about basic moral principles as well as immediate practical issues. To help with both, the Vatican has created a commission to offer guidelines for a socio-economic response, one that provides “care for the whole human family facing the Covid-19 pandemic”. So what are the problems, and where might the solution lie?
The most evident economic concern has been many people’s inability to work during the “Great Lockdown”. The IMF has predicted that this dramatic decrease in productivity will result in a global recession even deeper than the Great Depression of the 1930s, with global GDP projected to fall by more than £7 trillion over the next two years. Already, governments around the world have had to dramatically increase public spending to cover the shortfall in personal and corporate earnings.
In the UK, the government introduced a furlough scheme covering up to 80 per cent of wages for a defined period and a further £350 billion in “bounce back” loans and grants to businesses struggling during the pandemic. Increased support has also been provided for the unemployed, whose standard rates of Universal Credit have risen to just over £400 per month, an increase of £1000 per year. There have been significant concerns about delayed access to both Universal Credit and the bounce back loans, but the actual size of the relief measures, at 15 per cent of GDP, eclipse the measures taken in response to the 2008 recession. Britain’s response is roughly in line with the relief being provided in other major economies.
As the developed world came to this broad consensus, however, Pope Francis contributed to the discussion with an Easter letter suggesting that “this may be the time to consider a universal basic wage”.
The policy of a state-guaranteed income for all has been proposed by many across the political spectrum, but governments continue to resist adopting it. The UK Chancellor, Rishi Sunak, explicitly ruled out such a proposal in the days following the Pope’s letter.
Meanwhile, the Spanish government announced that a permanent “minimum vital income” would be introduced in May, but this scheme is to be specifically targeted at 100,000 single parent households, making it more akin to Italy’s 2019 introduction of a minimum income for vulnerable families.
Catholic economists and theologians remain divided on the effectiveness of any truly universal basic income and its compatibility with Catholic Social Teaching. Professor Charles M Clark, a senior economic advisor to the Vatican, has been an outspoken advocate for such a policy, which, he says, provides “an effective social safety net and also promotes an efficient and flexible economy.”
But Professor Philip Booth of St Mary’s University, Twickenham, has argued that the proposal is a “radically individualistic concept which ignores the crucial economic role that households, families and other institutions play in the process of income distribution”. He adds that it would be “extremely expensive”.
Even if universal basic income remains off the agenda, however, the current relief packages are already deserving of the description “extremely expensive”, especially when decreased productivity is taken into account. Because of this, the IMF has predicted that public debt will rise from 69 per cent of global GDP in 2019 to 85 per cent in 2020. For many countries already struggling to deal with their national debt payments, this could tip their economies over the edge.
In Argentina, where the government was already struggling to meet its debt payments prior to the crisis, a possible default by the end of May was set in motion after the country missed a £400 million debt repayment in April.
In such cases, the need to restructure debts and cancel current debt payments has been a pressing concern.
On the eve of the pandemic, Pope Francis sought to mediate a Vatican meeting between officials from the IMF and the Argentinian government, encouraging “coordinated policies which should finance debt and reschedule debt.”
As the global crisis has unfolded, Church leaders have been increasingly bold in calling for such debt relief. In late March, Cardinal Luis Antonio Tagle suggested that the pandemic might “lead to a jubilee, a forgiveness of debt”; in early April the United States Bishops’ Conference (USCCB) wrote to President Trump requesting that the G20 and financial institutions “suspend debt payments for developing countries” and “restructure debt to eliminate vulnerabilities”.
The G20 has since placed a moratorium on third world debt payments, whilst the IMF has introduced modest debt payment cancellation packages for its poorest members alongside a new “Short-term Liquidity Line” of credit to assist countries in their coronavirus response. But development experts insist that more still needs to be done.
Jubilee USA’s Eric LeCompte, who co-wrote the USCCB letter, has said that world leaders still must look to provide “debt restructuring processes that include the private sector” and that this must be complemented by the developing world’s increased access to “emergency aid”, since “too many countries do not have the ability to feed their people, strengthen health services or help their people survive the economic impacts of the coronavirus”.
As the poor await such emergency aid packages and economies remain in lockdown, a new humanitarian crisis has emerged. But, as food and aid supply chains have broken down, the Church on the ground has stepped into the fray to meet the material needs of the destitute. Across the world, churches have been working with charities to distribute food during the pandemic, whilst Catholic relief agencies have increased their assistance to those most acutely vulnerable to infection: refugees and the homeless.
Jim O’Connor, the chief executive of the UK Catholic homelessness charity NOAH Enterprise, hopes that the changes to government housing provision during the pandemic may finally bring politicians around permanently to the charity’s “Housing First” approach, which seeks to address the problem of homelessness by treating “housing as a basic human right”.
This look to the future echoes the reflections on “life after the pandemic” included in Pope Francis’s letter. There, Francis pleaded that the coronavirus crisis could become a springboard in the “project of integral human development”, one that provides universal access to the “three Ts” of “Trabajo [work], Techo [housing], and Tierra [land and food].”
Here we may begin to discover a silver lining amidst the destruction and chaos of the pandemic, provided that the Church and society are able to invest in what the Vatican Commission describes as our “new socio-economic-cultural future”.
Thomas Caddick is a news writer for the Catholic Herald