COVID-19: An extreme disorder

Flattening the epidemiological curve also means an economic cessation. Who will bear the burden most in an unequal world?

By Richard Mahapatra
Published: Monday 06 April 2020
A novel coronavirus warning board at India Expo Mart, Greater Noida, Uttar Pradesh during Auto Expo 2020 Photo: Vikas Choudhary
A novel coronavirus warning board at India Expo Mart, Greater Noida, Uttar Pradesh during Auto Expo 2020 Photo: Vikas Choudhary A novel coronavirus warning board at India Expo Mart, Greater Noida, Uttar Pradesh during Auto Expo 2020 Photo: Vikas Choudhary

The novel coronavirus disease (COVID-19) pandemic metamorphosed into everybody’s crisis by April. The emergence of Europe and the US as secondary — but deadlier — hotspots, after the epicentre China gave credence to the popular assumption of COVID-19 being an infliction of the rich and well-endowed ones.

It rampaged across the world by mid-March, disrupting the planet like never before. Over a million people contracted the novel virus and over 50,000 of them have succumbed to it.

The present pandemic is spreading through normal business-dwelling citizens of a globalised world, unlike the Spanish Flu pandemic of 1919-20 that was spread by soldiers on duty in World War I. This makes it an extremely hazardous development for health as well as the economy.

Never before in human history had we stopped mobility as we have now.

Approximately 3.1 billion people are under lockdown or every second human inhabitant of the planet is restricted from conducting his / her routine survival affairs, according to Johns Hopkins University.

A network of economists at the Centre for Economic Policy Research estimate that countries accounting for over two-thirds of the planet’s output and income are engaging in containment policies that would, in normal times, seem extreme.

The International Migration Organization termed the pandemic “a crisis of mobility of unprecedented nature”.

In the modern economy, everybody is somebody’s economic interest or investment. And without being mobile, the economy just can’t breathe.

We are enduring a 21-day national lockdown in India. It kept workers from work and consumers from consumption.

It effectively killed demand and supply as well. The economy ceased to be and presently, the International Monetary Fund (IMF) declared the world to be in recession for an uncertain period.

But it is according to the prescription. As flattening the epidemiological curve — or controlling the rate of spread of COVID-19 — became every country’s only way to curb transmission, imposition of lockdowns became frequent and long.

So, the faster we flatten the epidemiological curve with widespread restrictions, the faster economic paralysis also spreads.

We have to bear economic stagnation to stop the spread of the virus, in other words.

As Pierre-Olivier Gourinchas, a visiting professor at Princeton University said, “flattening the infection curve inevitably steepens the macroeconomic recession curve.” But the question is: Who will this side-effect of the treatment affect the most?

“This pandemic is not just a health crisis. For vast swathes of the globe, the pandemic will leave deep, deep scars,” said Achim Steiner, Administrator of the United Nations Development Programme (UNDP).

“We risk a massive reversal of gains made over the last two decades and an entire generation lost, if not in lives then in rights, opportunities and dignity,” added Steiner.

Disturbing images of mass exodus of migrant workers from urban centres appeared on the day a national lockdown was imposed in India.

Millions of workers headed to their homes from Kerala to Bihar, Delhi to Kashmir, Andhra Pradesh to Odisha.

It was not the fear of COVID-19, but the unbearable burden of surviving without survival tools. About 87 per cent of India’s workforce is in the informal sector.

A Down To Earth calculation showed that some 125 cities/towns reported migration. Upon their arrival in villages, after trudging hundreds of kilometres by foot and cramped inside any form of transport, they face an uncertain future. What would they do for survival?

International Labour Organization (ILO) estimates said as many as 25 million people could become unemployed, with a loss of workers’ income of as much as $3.4 trillion.

This is an underestimate, admits the ILO. The United Nations Development Programme estimated that income losses are expected to exceed $220 billion in developing countries only. With an estimated 55 per cent of the global population having no access to social protection, the crisis of economic loss will further precipitate.

The economic loss due to mobility restrictions is absolute, or it can’t be recovered. The global economy would slow down to below 2 per cent in 2020, according to the United Nations Conference on Trade and Development (UNCTAD).

This means a loss of $1 trillion to the world economy.

One per cent of global economic slowdown means poverty levels would go up by 2 per cent, according to the International Food Policy Research Institute (IFPRI).

This means we would add 14 million poor worldwide. Labour productivity would decline by 1.4 per cent in 2020 due to disruptions in labour markets, according to IFPRI. There would be a drop of 1.4 per cent in labour supply.

The World Bank estimated that 100 million people fall back into extreme poverty each year due to unexpected catastrophic health expenditures.

This number is likely to increase due to COVID-19. 40 per cent of the world’s population, in normal situations, has no health insurance or access to national health services.

These people spend close to 10 per cent of their family budget on health care every year. In India, close to 68 per cent of households incur out-of-pocket expenditure for health care due to dependence on private health care systems.

If states face community transmission situations, the health infrastructure will be overwhelmed. People would be further burdened with expenditure, even though they are without any employment now, in the absence of a public health system.

Maharashtra — the state with the highest number of COVID-19 cases in India — has one government hospital that serves an average 1,70,000 people.

There is a fear of food insecurity further precipitating across the world. Approximately 820 million currently endure chronic hunger or not getting enough caloric energy recommended for a normal life.

Around 113 million of them are so food insecure that their lives are at immediate threat if external assistance is not provided.

If the pandemic disrupts the livelihood chain and the global support system in this scenario, the imminent result is large-scale hunger mortality.

Such is the crisis in developing countries, that UNCTAD sought a $2.5 trillion rescue package to save them from severe financial distress.

This package includes writing off debt of developing countries worth $1 trillion. The pandemic shock in Africa will result in a drastic loss of revenues and slower economic growth.

The continent would need $100 billion immediate emergency financing to deal with the pandemic. Progress of the Sustainable Development Goals (SDGs) is also constrained now, particularly in developing countries.

A financing gap of $2-3 trillion will be faced by developing countries for the next two years, according to UNCTAD.

There are indications of many hotspot countries peaking in the COVID-19 spread. Many countries at the same time, however, have just entered the exponential spread phase.

Pandemics are known for their re-occurrences.

Like the Spanish Flu pandemic that came back three times killing an estimated 2 per cent of the global population; besides millions of deaths, the flu also killed many rich and famous like in the current situation.

The Spanish Flu killed US President Donald Trump’s grandfather.

The planet has entered into an extremely unpredictable disorder.

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