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April 10, 2020

Covid-19: a threat and a wakeup call -Part I

Opinion

April 10, 2020

The pandemic has something to say to all of us. Its most clear message is that humans must change the way they live. UN Secretary General Guterres has called it a crisis unlike no other. It is “spreading human suffering, infecting the global economy and upending people’s lives”. He has called on world leaders to coordinate their response with innovative policies. .

This column will first discuss how we got here; that is: why do new viruses keep emerging? It reviews the many factors that have combined to bring us the pandemic and other consequences that it may spawn. It will then analyze what the post crisis world may look like.

The virus did not happen because someone ate soup made from bats. It is caused by behaviour that humans have pursued for a century or more. In the name of progress, we have reduced biodiversity. Scientists say that as we clear up habitats for farms, homes, and offices, we have weakened the innate defence against disease that nature offers through biodiversity. And in an ever-connected world, a virus in one city spreads faster than fire to all others. As indeed, this one did.

While countries try to battle the health challenge, we see other challenges loom large. The virus already has affected the world economy, though its full effect is yet to unfold. It also has brought in sharp focus the harm caused by years of cuts in the size of the public sector. Such ‘right-sizing’ usually displays its full damage in times of crisis, as governments find themselves short of the means to lessen human suffering. The world must also deal with the fickle and flighty approach to foreign policy that some major powers have pursued of late. This has come at a time when cooperation among nations is most needed.

In his op-ed a few days ago, Fareed Zakaria fears a “series of cascading crises” to engulf the globe. Normal life would elude us for a long time unless world leaders work together to manage them. In a period of high tension between the US and China, this is a distant wish. Yet cooperation among them is critical. All this is happening while the climate crisis still looms, and public and private debt are historically high.

This context governs the pandemic’s effect on Pakistan. Our country must deal with not just its large human and economic cost at home, but with what happens around us and in the world.

Jim Robbins who writes on science and nature says that “epidemics … don’t just happen. They are a result of things people do with nature”. In a 2012 op-ed in the New York Times, he said that sixty percent of new viruses have their origin in animals, mostly wildlife. Until now, biodiversity ensured that humans were protected from virus-bearing white rats and bats by wolves, hawks and owls who fed on them. Yet, progress drove these intermediaries away, leaving humans in direct contact with the bearers of virus. Bats especially have caused the most harm. They chew fruit and then spit out seeds at random. This was the source for SARs and Ebola, and most likely for Cpvid-19. White rats carried the Lyme bacteria to humans and the pretty migratory Robins brought the West Nile virus to manicured gardens.

While we take these risks in the name of development and economic returns, their costs are high. In a 2015 UN report, losses from environmental damage were estimated to be between $2 trillion and $4.5 trillion. Degradation costs us in many ways. Cutting down forests causes frequent floods. Intensive farming and fishing degrade the soil and deplete marine species. Climate change causes extreme weather at high human and economic cost. Closer to home, losing mangroves have increased the rate at which the sea has made inroads into the mainland. And flawed water use would make us water scarce before long.

So far, businesses have profited from their incursions into nature. Yet, nature has its way of hitting back. Hurricanes have brought home the folly of building fancy homes on reclaimed land. Firms of all kinds – from auto makers, to tea and coffee growers – now spend millions to secure water supply. Tourism firms that run ski resorts and safaris too have faced losses. Climate change has made snowfall less predictable. Cutting forests has made wildlife disappear. This is on top of the frequent health crises, the latest of which has brought the world to a halt.

There is now also a full-fledged economic emergency caused by the pandemic. The virus does not distinguish between rich and poor. But the poor are the hardest hit. They face difficulty whether in finding treatment or from loss in income. Production of goods and services have fallen, and economic activity is at a virtual standstill. Job losses are in the millions. All over, states must live with the effects of falling taxes and sudden rise in expenditure on health services. It may take years for jobs to pick up again.

Fareed Zakariya fears that in a world with highly leveraged public and private sectors, defaults may set forth a second wave of economic troubles. Even states in Europe, Italy among them, could default. We have to see if the dominoes start from the developing economies or from Europe.

The world economy is in recession already. Our best hope now is that it may not be too deep. Default on sovereign debt would worsen it. So would a break in supply lasting over many months. The rebound of economic activity in China suggests that this does not have to be so.

A Harvard Business Review analysis says that the V-shaped curve is the most likely outcome. A deep recession “is difficult to imagine”, it said. Yet, there are other competing voices. Corporate guru Mohammed El-Arian warns states to be ready for a U-shaped recovery. He says that this may be the best-case scenario.

The economic situation is changing rapidly. Each new day brings worse tiding. By early April, one estimate of unemployment in the US was 13 percent and growing. A recession in the US affects the rest of the world. The UN says that a record global recession “is a near certainty”. Globally, workers may lose $3.4 trillion of income by year end. Much would depend on the quality of government response. Economies need targeted interventions that spur production and productivity. The signs so far are less than encouraging.

Governments across the world have lost the ability to deal adequately with a crisis. Since the 1980s, there has been an assault on the public sector. Guided by the belief that markets are the cure for all of society’s problems, we have greatly shrunk the space for public service. Countries have reduced their investment in public institutions and the civil servants who run them. And it is public service that citizens turn to in times of crisis. In developing countries, years of neglect has left a large social deficit. Their people will suffer the most.

The writer is chair and CEO

Institute for Policy Reforms, and a former commerce minister.

To be continued