Mariely López-Santana is an Associate Professor and the Director of the Political Science Program at the Schar School of Policy and Government. For the last 15 years, she has worked extensively on labor market and employment policies, and welfare states in advanced industrial countries, including in her book, “The New Governance of Welfare States in the United States and Europe.” In the last few weeks she has been blogging about governmental responses to the COVID-19 economic crisis: https://marielylopezsantana.weebly.com/coronarecession.
Q: In your blog you have been discussing the stimulus packages of various countries, including the United States, India, Denmark, and Spain. What can you tell us about these global developments?
As countries around the world are being hit by the pandemic, governments have been launching a variety of responses to tackle the current economic downturn, including fiscal stimulus packages and social protection and job measures. For instance, according to Gentilini, Almenfi, and Orton's “living paper” (from the World Bank and the International Labor Organization) "living paper,"in three weeks, the number of countries that have introduced social protection and job measures increased from 45 to 105 countries.
Q: What are some noteworthy cross-national differences?
First, let me refer to the process of creating and passing the packages. A noteworthy difference is “who is at the table?” In many European countries, including Denmark and Germany, governments must negotiate with the social partners, namely labor unions and employers. In Spain, the process was more technocratic in nature, as the ministers and the prime minister launched the stimulus package. Still, in the near future, [this will] bring social partners and political parties to the table. And, in a very polarized environment, the White House and both legislative chambers passed the Coronavirus Aid, Relief, and Economic Security Act.
Q: When it comes to the nature of the packages, are there notable differences between richer and poorer countries?
As we would expect, there are noteworthy variations across countries in the nature of the programs being launched. While poorer countries are mainly expanding existing programs, the richer countries are introducing new programs and expanding existing ones. It is very likely that in the next few months we will see much innovation taking place. For instance, Spain intends to implement a Universal Basic Income Program (Andrew Yang, are you listening?) to tackle the pandemic’s economic impact. The question is whether these innovations will remain in place after the crisis.
Moreover, cash transfers, such as the U.S. stimulus checks, tend to dominate in richer countries. By contrast, given that social safety nets in poorer countries are less comprehensive in nature, their responses “mostly include administrative adaptations, in-kind transfers, school feeding, and utility waivers” (Gentilini, Almenfi, and Orton's living paper: 4). For instance, according to Keert Nakray, the Indian state of Karnataka made provisions for 10 kilograms of rice and 2 kilograms of wheat for each member of Below Poverty Line [status].
Another interesting trend across richer countries is the coverage of atypical workers, such as those who are part of the “gig” economy, who tend to lack fixed contracts and benefits. Spain, for instance, will provide unemployment benefits of 130 euros to domestic workers. In the same way, Berlin launched benefits for artists.
Q: When it comes to the case of the United States, are any trends being overlooked?
While much has been said about how Federalism has affected the nature of response in the U.S., the debate has mainly focused on federal-state relations. Nonetheless, we also must pay attention to the consequences of the COVID-19 crisis on local governments. Compared to states, local governments do not have much capacity to raise their own revenue, yet they are responsible for delivering many goods and services. As states start to face fiscal pressures, what will happen to local governments?
If we pay attention to recent trends, then we should expect an increase in the number of local fiscal and/or financial emergencies and, possibly, bankruptcy. Consequently, municipalities might be placed in receivership and face emergency managers or financial oversight boards. As we have learned from the cases of Flint [Michigan] and Puerto Rico, these organizations have been unpopular, as some have argued that they erode democracy. The COVID-19 crisis represents an economic and a political threat to governments.