Post-COVID pandemic: Prepare to fail if we fail to prepare

Post-COVID pandemic: Prepare to fail if we fail to prepare

Sunday, April 12, 2020

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This week we return to last Sunday's editorial theme urging the Government to establish a commission to work on the post-pandemic economy. We note that since then, the United States Administration has announced its intention to go that route.

One of the major casualties of COVID-19 so far has been employment. The International Labour Organization estimates that the COVID-19 crisis will wipe out 6.7 per cent of working hours globally in the second quarter of 2020, equivalent to 195 million full-time workers.

More than 81 per cent of the global workforce of 3.3 billion is currently affected by full or partial workplace closures. These figures exceed the employment displacement of the 2008-9 financial crisis. The eventual increase in global unemployment during 2020 could exceed 25 million.

Not surprisingly, the hardest hit have been the low-income households. Oxfam is concerned that even a 20 per cent decline in income as a result of a recession caused by COVID-19 would push an additional 548 million people below US$5.50 a day, the definition of poverty.

For the poor, who are the most vulnerable, there is much difficulty in social distancing because of overcrowding in accommodation, reliance on public transport, lining up for shopping and public services, lack of running water, no or shared toilet facilities, and no personal privacy.

Most poor people cannot store more than a day or two of food because they get paid daily or weekly or because they work in the informal part of the economy. In Latin America and Guyana, over 70 per cent of the households are without formal workers.

In several countries, the figure is over 90 per cent. For most of the poor, working from home is not a realistic option as they need proximity to suppliers, customers, equipment, raw materials and other workers. Most factory equipment cannot be taken home.

The loss of income by employees, earnings by businesses, and the extra government expenditure on public health and financial relief for households and businesses will lead to a massive global debt crisis, which will be particularly acute for the poorer developing countries.

International development financial institutions such as the International Monetary Fund, World Bank and Inter-American Development Bank will need additional capital to substantially increase their lending and allow them the unprecedented ability to cancel debts owed to them.

The World Trade Organization expects world trade to fall by between 13 per cent and 32 per cent in 2020, as a consequence of the COVID-19 pandemic. Imports may well be more expensive and countries will have to do more to be self-sufficient, including in food production. The positive is that more will be manufactured locally.

Whenever capitalism is in crisis, the role of the State has to be increased until the private sector is resuscitated. In an increased number of areas, economic activities will require support and regulation by Government. Indeed, some activities will have to be taken over by Government until the crisis is over.

It is by no means too early to start thinking on these issues which will come roaring at us like a freight train, once COVID-19 is over. As the saying goes, prepare to fail if we fail to prepare.

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