A/HRC/43/45 poverty due to those loans. Even the International Monetary Fund (IMF) has acknowledged that growing household debt may hold back economic recovery, which is already weak, prolonging the current phase of low growth.11 11. High household debt can also have a negative impact on the economy. At a certain point, indebtedness puts strain on productivity, consumption and growth, leading to unsustainable disequilibrium.12 If private debt is too high, consumers and businesses have to divert a greater portion of their income to cover interests and principal on that debt, spending and investing less as a result. In a number of financial crises, the rising level of consumer debt has triggered investment asset bubbles, leading to a financial meltdown. In many cases, private debt is nationalized through bailout programmes, which deepen public sector imbalances and may lead to sovereign debt crises.13 The unprecedented explosion of private debt indeed constitutes the single largest contingent liability on public debt in the event of a debt crisis.14 12. A correlation between private debt and inequality has been widely recognized. Studies show that household debt and top income share are positively correlated; income inequality therefore widens as private debt grows. 15 According to the credit-demand line of reasoning, private debt increases as households try to maintain certain absolute or relative levels of consumption while facing growing inequality; in other words, people borrow more extensively to maintain their standard of living. This can also be exacerbated by inequality; in a very unequal society, low-income households may do worse than households with an identical income in a more equal society.16 Moreover, household lending has become a key mechanism in social reproduction. Indeed, credit has become increasingly important to have access to basic public services, such as education and health care. Unequal access to credit can therefore exacerbate existing social and economic inequalities. 17 13. A common policy response in a financial crisis has been to protect financial institutions and large corporations, which, by default, shields the wealthier households owning their assets, rather than middle- and low-income households. 18 Moreover, the majority of countries resort to austerity to deal with a financial crisis, and drastic cuts in social protection and public sector jobs exacerbate the inequality gap. Austerity measures usually affect those in vulnerable situations, such as the poorest, not creditors. For women, access (or lack thereof) to social security and private debt are closely connected.19 On the one hand, women’s access to credit can be jeopardized by cuts to welfare benefits, which, on the other, are essential to prevent overindebtedness. 20 14. Rising levels of inequality may, in turn, directly or indirectly contribute to an increase in public debt and financial crises. To the extent that income inequality is directly related to income tax base, high levels of income inequality indicate that the tax base is not progressive enough. There is also some support for the view that rising inequality is harmful to economic growth, 21 while empirical evidence suggests that it is associated with more frequent and 11 12 13 14 15 16 17 18 19 20 21 IMF, Global Financial Stability Report 2019, p. 53. Ibid., p. 78. See also Servet and Saiag, “Household over-indebtedness in Northern and Southern countries”, p. 28. UNCTAD, Trade and Development Report 2017, Geneva, 2017, pp.100 and106. UNCTAD, Trade and Development Report 2019, p. 76. See also UNCTAD, Trade and Development Report 2017, pp. 103–104. See A/HRC/31/60. Lena Rethel, “Financialisation and the Malaysian Political Economy”, Globalizations, vol. 7, No. 4 (2010). UNCTAD, Trade and Development Report 2017, p. 108. Luci Cavallero and Verónica Gago, Una lectura feminista de la deuda, Fundación Rosa de Luxemburgo, Buenos Aires, 2019. Julia Callegari, Pernilla Liedgren and Christian Kullberg, “Gendered debt: a scoping study review of research on debt acquisition and management in single and couple households”, European Journal of Social Work, 2019, p. 9. Jonathan D. Ostry Andrew Berg and Charalambos G. Tsangarides, “Redistribution, Inequality, and Growth”, IMF, 2014, p. 15. The World Bank subsequently questioned the veracity of the findings in Poverty and Shared Prosperity 2016: Taking on Inequality (World Bank, Washington, 2016), p. 71. 5