Info Service on WTO and Trade Issues (Feb18/15)
14 February 2018
Third World Network
Guiding principles on HR impact of economic reforms
Published in SUNS #8619 dated 12 February 2018
Geneva, 9 Feb (Kanaga Raja) - The policy responses to the recent financial
crisis have revealed a deep-seated structural neglect of human rights
in economic policy formulation, insufficient protection of the most
vulnerable and a lack of attention to participation, consultation,
transparency and accountability, a United Nations human rights expert
"That neglect is the driving force behind the development of
guiding principles for assessing the human rights impact of economic
reform programmes and the development of analytical and methodological
tools to assess human rights impacts."
This is one of the main conclusions highlighted by Mr Juan Pablo Bohoslavsky,
the Independent Expert on the effects of foreign debt and other related
international financial obligations of States on the full enjoyment
of all human rights, particularly economic, social and cultural rights.
The conclusions are in his report to the upcoming thirty-seventh session
of the UN Human Rights Council (26 February-23 March 2018).
According to the rights expert, the guiding principles will help States
and international financial institutions to comply with their human
rights obligations in periods of financial distress when considering
fiscal consolidation measures, countercyclical initiatives and alternative
"Although such human rights-specific guidance has not yet been
adequately developed, relevant tools, experience and research exist
to inform the efforts to do so," he said.
He added that the guiding principles should start from the premise
that managing economic and fiscal affairs is a core government function
Fiscal consolidation and wider economic reforms are not inherently
incompatible with a State's human rights duties; indeed, such measures
can comply with international standards if they are designed and implemented
with those standards in mind, Mr Bohoslavsky underlined.
In March 2017, the Human Rights Council, in its resolution 34/3, requested
the Independent Expert to develop guiding principles for assessing
the human rights impact of economic reform policies, in consultation
with States, international financial institutions and other relevant
In his present report (A/HRC/37/54), the Independent Expert discusses
the development of guiding principles for assessing the human rights
impact of economic reform policies.
He identifies the main challenges of developing guiding principles
for assessing human rights impacts, including their basis, scope,
content, issues related to timing, and some reflections on how to
proceed, and concludes with some preliminary recommendations for discussion
on the content and format of the guiding principles.
The Independent Expert said he intends to circulate the draft guiding
principles for assessing the human rights impact of economic reform
policies to States, international financial institutions, national
human rights institutions, civil society organizations and other relevant
stakeholders by August 2018 with a view to obtaining written feedback
in the form of comments from all stakeholders.
He plans on submitting the final text of the guiding principles to
the Human Rights Council for its consideration at its fortieth session.
EVOLUTION IN RESPONSES TO FINANCIAL CRISES
In his report, Mr Bohoslavsky highlights the evolution in structural
adjustment responses to financial crises and the mitigation of adverse
social impacts up to the 2007-2008 financial crisis, as well as how
structural adjustment programmes affect human rights.
He underscored that, for both economic and legal reasons, economic
reform programmes must be inclusive and advance human rights.
According to the report, the latest global financial crisis (2007-2008)
is widely considered the worst of its kind since the Great Depression.
A decade later it continues to take a toll through fiscal austerity
that dampens recovery and reduces the scope for economic and social
transformation that is needed to generate more inclusive, rights-based
societies with access to decent work, social services and social protection
The contagion of the financial crisis that was ignited in the United
States of America was fuelled by what has been described as "hyper-globalization",
which brought both benefits and increased vulnerability to societies
around the world.
It also opened the way for financialization, a process that enabled
financial institutions and markets to increase in size and influence.
The United Nations Conference on Trade and Development (UNCTAD) concluded
that the continuation of that process, along with deepening inequalities,
increased the likelihood of a financial crisis recurring.
"Irrespective of whether financial crises are caused by external
or internal factors or a combination of both, there is need to develop
frameworks for solving them which put respect for human rights at
the centre," said the rights expert.
Mr Bohoslavsky noted that since the 1980s, there has been growing
consensus that economic crises and many structural adjustment policy
packages that have been implemented to prevent or overcome them can
cause severe adverse human rights impacts.
"It is then not surprising that economic reform policies have
been increasingly associated with initiatives to mitigate adverse
impacts on the livelihoods of poor communities. Yet, for a number
of reasons, these initiatives have often been far from being considered
While it has been acknowledged that structural adjustment and fiscal
consolidation policies can have massive adverse impacts on persons
in situation of vulnerability, most of those policies have not been
designed or implemented in a manner that would promote or safeguard
human rights. Often the focus has been limited to mitigating the worst
social impacts, rather than implementing reforms that would prevent
or dampen future crises.
Mr Bohoslavsky said countercyclical responses that invest in social
development are both feasible and associated with a more equitable
and sustainable economic recovery.
However, many States and international financial institutions do not
seem to have learned those lessons; austerity has been the predominant
response to the recent financial crisis, and fiscal consolidation
policies have largely remained human rights blind, with their principal
focus on ensuring balanced public budgets at all costs.
International and regional human rights mechanisms have pointed out
that budget cuts in various countries have affected the rights to
health, education, food, housing, work, social security, water, as
well as political and civil rights, such as access to justice, the
right to participation, the freedoms of expression, assembly and association.
"The right to life and personal integrity has not been spared;
economic crises further entrenched by austerity policies have triggered
an increase in suicides in some countries, resulted in the exclusion
of individuals from life-saving public health care and weakened public
health-care systems to such extent that they have been ill-equipped
to respond to epidemics."
The report pointed out that austerity policies are often justified
by an overly simplified or misleading diagnosis - in particular, blaming
excessive public expenditure for fiscal crises without even considering
other relevant factors, such as external shocks, insufficient revenue
streams, financial deregulation, widening inequalities, depressed
wages among low- and middle-income households or other failures owing
Policy decisions are frequently taken without sufficient consideration
of less harmful policy options and reliable analysis of foreseeable
outcomes. The information is often not publicly accessible in any
meaningful way nor subject to meaningful participation by groups in
society that may be adversely affected.
"To date, there is no general framework or methodology for adequately
assessing the human rights impact of economic reform policies. That
makes it extremely difficult to assess the real and often cumulative
effects of austerity policies on the entire population and, in particular,
the most marginalized segments," the Independent Expert said.
He noted that while the 2007-2008 international financial crisis was
the worst in decades, the origin of the debt crises in Latin America
in the 1980s, which had spread globally, was also tied to domestic
policy concerns in the United States of America and other developed
Following the Latin American crises, advanced economies sought to
tackle their high levels of inflation and attract investments by increasing
interest rates, which escalated interest payments for borrowers in
the developing world.
Debtor countries turned to the International Monetary Fund (IMF) for
bridge finance and for advice on how to deal with the financial impacts
of the crises. The structural adjustment policy package that came
to be characterized as the "Washington Consensus" became
the dominant remedy.
As a condition for accessing IMF financing, the reduction or reform
of public spending and the liberalization of markets by removing controls
and barriers, including on the movement of capital, were proposed.
By the mid-1980s, governments, researchers and an emerging international
civil society community had begun to voice their concerns about the
severe, adverse impact of such policy prescriptions on the ability
of countries to promote inclusive growth, develop human capabilities
and strengthen fair opportunities for all members of society.
Nonetheless, the traditional macroeconomic policy recommendations
of market liberalization and structural adjustment continued to dominate,
while a number of initiatives were developed in parallel to mitigate
their adverse social impacts.
In the late 1980s, the international financial institutions launched
"social funds" as temporary social assistance or social
protection facilities. That initiative gave rise to the development
of the early social impact assessment tools. However, those mechanisms
were often not sufficient and the turnaround and resumption of inclusive
growth often failed to materialize in the short and medium term.
With the new millennium, the international development community turned
more decisively to strengthening the agency of the actual beneficiaries
beyond social service delivery systems.
Attention shifted to social protection as a means of securing livelihoods
for the elderly and people living with disabilities, facilitating
access to nutrition, health and education for children, as well as
generating household incomes during adjustment and transition periods.
Social protection floors and conditional cash transfers became major
trends in social development cooperation in the early 2000s, favoured
by a wide range of governments.
"Yet, no consistent and comprehensive rights-based framework
for conducting human rights impact assessments of economic reform
programmes has emerged," said the rights expert.
IMPACT OF AUSTERITY MEASURES
According to the Independent Expert, today, more than two thirds of
countries across the world are contracting their public purses and
limiting, rather than expanding, their fiscal space.
Countries are struggling to protect hard-fought gains in improving
social protection and coverage. Those gains were the subject of extended
advocacy over almost thirty years, but have become increasingly at
risk of being reversed.
A 2015 study indicated that austerity was expected to impact more
than two thirds of all countries during 2016 to 2020, affecting more
than six billion people or nearly 80 per cent of the global population
by 2020 and that, contrary to public perception, austerity measures
were not limited to Europe; many of the principal adjustment measures
featured most prominently in developing countries.
Fiscal consolidation policies have varied from one country to another.
Nevertheless, seven of the most common fiscal consolidation measures
are: (a) public expenditure cuts affecting human rights-sensitive
fields such as public health care, social security and education;
(b) regressive tax changes; (c) wage bill cuts and caps and reduction
of positions in the public sector; (d) pension reforms; (e) rationalization
and further targeting of safety nets; (f) privatization of public
utilities and service providers and introduction of user fees; and
(g) reduction in food, energy and other subsidies affecting the prices
of essential goods and services such as food, heating and housing.
Fiscal consolidation measures are often accompanied by structural
reforms, such as deregulation, labour market flexibilization, reduction
in labour rights and various administrative and legal reforms.
While these measures are ostensibly aimed at facilitating future economic
growth, reducing unemployment and increasing tax revenues, they have
often directly affected the enjoyment of human rights, including access
to justice, said the Independent Expert.
"Numerous United Nations bodies and human rights mechanisms have
concluded that the financial crises have threatened government expenditure
on a wide range of social welfare services when and where they were
most needed. Austerity measures have contributed to prolonging the
economic crisis and compounded the threat to human rights beyond that
posed by the crisis alone."
Austerity policies have contributed to increased social exclusion,
as evidenced by long-term unemployment, an increase in homelessness
and other manifestations for which there are no easy cures. Addressing
such consequences costs governments much more than investing in their
"It seems obvious that understanding and monitoring the human
rights impact of economic reform policies are critical for preventing
and mitigating short- and long-term impacts and for building resilience
to future crises," said Mr Bohoslavsky.
The report by the Independent Expert also highlighted the legal imperatives
as to why human rights should guide economic reform programmes.
It said that while States have the primary responsibility to comply
with international human rights treaties and standards, international
financial institutions and other international organizations are also
bound to respect human rights.
Like any other subject of international law, international financial
institutions are bound by the obligations incumbent upon them under
the general rules of international law, under their constitutions
or under the international agreements to which they are parties.
They are therefore obligated to comply with the human rights set out
in the Universal Declaration of Human Rights and in international
human rights treaties, which have become part of customary international
law and which reflect the general principles of law.
"While many human rights norms are subject to qualifications
and limitations, fiscal consolidation and economic reform measures
should never violate the minimum core content of economic, social
and cultural rights, nor be directly or indirectly discriminatory
or result in the adoption of impermissible retrogressive measures
in terms of the enjoyment or implementation of economic, social and
The prohibition of impermissible retrogression in human rights law
is the key economic, social and cultural rights standard for assessing
rights-harming fiscal consolidation and economic reform measures,
said the rights expert.
He also noted that wealth and income inequalities had been widening
within countries over the two to three decades prior to the latest
financial crisis, both in the developing world and among the more
In 2015, an analysis by the Organization for Economic Cooperation
and Development (OECD) showed that income inequality had a negative
and statistically significant impact on medium-term growth. The analysis
also indicated that a main factor behind inequality hurting growth
is failure to make adequate education opportunities available to poorer
The rights expert said equally critical to economic recovery and human
development is the expansion of income and work opportunities for
all. Poverty and exclusion from the labour market have been described
as a waste of human resources with adverse impact on economic growth
both through lack of their contribution to the economy and by their
need for additional protection.
HUMAN RIGHTS IMPACT ASSESSMENT
The Independent Expert noted that there is a wide range of impact
assessment tools that have been developed since the approach was first
introduced in the 1970s to address environmental impacts. Human rights
impact assessments are among the newer tools, but the literature has
already articulated the value added of a human rights approach.
"Applying a human rights impact assessment approach to situations
of and in response to financial stress would be new in the context
of economic reform."
A human rights impact assessment would provide a framework and normative
guidance that would prompt analysis of the deeper causes of a crisis
as well as serious consideration and analysis of alternative responses
to crises that can provide a more sustainable path to longer-term
Important lessons can be learned from the reactions to the 2007-2008
financial crisis over the past ten years. The impact - both direct
and indirect - of economic policy change on human rights is complex
and multidimensional and policymakers could draw on lessons learned
from developing a multidimensional approach to poverty.
According to Mr Bohoslavsky, what was lacking until the 2007-2008
financial crisis was an analysis of the multiple ways in which fiscal
consolidation measures could impact human rights.
He said: "Policymakers need more detailed guidance that could
help to combine that knowledge with analytical approaches that would
allow human rights impact assessments to be carried out in a timely
and solid manner and improve policy responses to financial crises
by ensuring that they prevent, minimize and mitigate adverse human
Ensuring participation is essential for human rights impact assessments.
A key challenge is how to identify, reach and understand the depth
and breadth of impacts on different groups at risk of marginalization
or vulnerability, such as women, children, the elderly, persons with
disability, national, ethnic, linguistic and religious minorities
or other groups that may be at risk in a given national context, such
as indigenous peoples, refugees or internally displaced persons.
"Reliable and disaggregated data are needed to strengthen modelling
or at least inform a more detailed analysis."
The rights expert said that once the analysis of potential impacts
is done, a core part of a human rights impact assessment is designing
prevention, mitigation and compensation measures to counteract adverse
This is done by selecting alternative measures, modifying proposed
measures through compensating for impacts (e.g., providing cash payments
to the poorest to compensate for the removal of fuel subsidies).
The report highlights some key points that it said need to be addressed
and considered in designing a human rights impact assessment.
These include the legal basis of the guiding principles; scope of
the guiding principles; timing (focus on ex ante human rights impact
assessments); addressing different situations; what should be covered;
who should conduct the human rights impact assessment; how data and
information should be collected; how the human rights impact assessment
should be carried out.
As to what should be covered, the Independent Expert proposed that
the human rights impact assessment should include: (a) review of all
the policy options for tackling a crisis, including countercyclical
measures; (b) analysis of how policy changes and proposed budget cuts
and other adjustment measures are likely to affect the population,
in particular the most vulnerable groups - using a variety of quantitative
and qualitative tools; (c) analysis of the extent to which budget,
policy, legislative and other changes may contribute to fulfilling
the State's human rights obligations or potentially undermine them;
and (d) a (non-exhaustive) list of preventive or mitigating measures
to take to respond to the analysis that are in line with the government's
human rights obligations.
SOME RECOMMENDATIONS ON THE GUIDING PRINCIPLES
In order to advance the discussion on the development of the guiding
principles for assessing the human rights impact of economic reform
policies, the Independent Expert has recommended that the guiding
(a) Recognize that managing economic and fiscal affairs is a core
government function, while underlining the obligations of States and
international financial institutions to ensure that their economic
reform policies and conditionalities on financial support respect
(b) Draw on existing human rights standards relating to economic,
social, cultural, civil and political rights at the international
and regional levels, including core international human rights treaties,
their authoritative interpretation in general comments, statements,
decisions, guiding principles, concluding observations and recommendations
issued by international human rights mechanisms;
(c) Set out the normative framework that has emerged from the extensive
work carried out to date in relation to human rights and the financial
crisis, and provide specific guidance on how to apply the framework.
That should include specific guidance on assessing economic reform
policies with a view to: (i) identifying positive human rights impacts;
(ii) preventing or mitigating adverse impacts on the enjoyment of
economic, social, cultural, civil and political rights; (iii) identifying
and preventing potential violations of the core minimum obligations
relating to economic, social and cultural rights; (iv) screening economic
reform measures against discriminatory impacts in law and in practice
that are incompatible with international human rights law; (v) identifying
impermissible retrogression of economic, social and cultural rights;
and (vi) clarifying the circumstances in which certain retrogressive
measures may be justifiable, based on the principles of necessity,
proportionality, legitimacy and reasonableness;
(d) Be applicable to different circumstances in the context of acute
financial crises, in less challenging economic times, in developing
countries and in highly advanced economies;
(e) Ensure prompt consideration of various policy alternatives, beyond
austerity measures, in response to fiscal constraints;
(f) Complement debt sustainability analyses with a view to integrating
human rights impacts and social sustainability in the assessment;
(g) Provide guidance on and references to analytical approaches that
could make visible the potential impacts of reform measures and show
how the burden of adjustment is shared across different income quintiles,
gender, age and different social groups, including the most marginalized;
(h) Ensure that the assessment of human rights impacts is based on
qualitative and quantitative data, disaggregated by gender, disability,
age group, region, ethnicity and any other relevant grounds, based
on a contextual, country-level appreciation of groups at risk of marginalization;
(i) Provide specific guidance for carrying out cumulative, rights-based
impact assessments of various reform measures that are often implemented
in parallel as part of fiscal consolidation packages, such as taxation
and public expenditure reform, so that the fuller impact on rights
holders and particular groups at risk can be assessed;
(j) Set out an international standard and framework for conducting
human rights impact assessments of economic reform policies that can
be adjusted to the particular needs of government departments, advisory
bodies, parliamentary committees, national human rights institutions,
international financial institutions, international human rights mechanisms,
academic institutions or civil society organizations;
(k) Include suggestions on how to integrate human rights impact assessments
into existing assessment methodologies that governments, international
financial institutions and other bodies may already be using;
(l) Consider the best way to carry out a human rights impact assessment
in order to ensure that the results can effectively inform policy
decisions, while at the same time address the independence and credibility
of the assessment undertaken;
(m) Establish the criteria to be met by the assessment team;
(n) Provide guidance on how to ensure the meaningful participation
of all relevant stakeholders and affected individuals and groups,
including women, children, the elderly, persons with disability, migrants,
minorities and other groups at risk of vulnerability, such as indigenous
peoples, refugees and internally displaced persons;
(o) Set out the standards for transparency and accountability when
carrying out the impact assessment and for the publication and reporting
of information and the assessment;
(p) Recommend that human rights impact assessments be instituted and
carried out regularly, before, during and after the implementation
of economic reforms that may have the potential to cause significant
adverse human rights impacts, and facilitate States' reporting obligations
to the Committee on Economic, Social and Cultural Rights.