Unless the world turns to an egalitarian economic model, which prioritises the needs of the poor, the coronavirus will continue to bite the poor
When Chief Minister Usman Buzdar reportedly asked at a meeting how corona bit somebody, it caused laughter, concern, outrage, and resentment.
While one might like to see a more reassuring person at the helm of affairs, there is no harm in taking a benign view of the innocent question. It is possible to put a metaphorical spin on what the chief minister (reportedly) said.
Let’s say it is worth asking how corona bites. The answer is that it may bite in a variety of ways. Here, we are concerned with how coronavirus bites the economies of the developing countries.
Louis Pasteur, the 19th-century French microbiologist, had forebodingly warned, “Messieurs, c’est les microbes qui auront le dernier mot” (Gentlemen, it is the microbes who will have the last word). Unlike the chilling prophecies of Nostradamus, Pasteur’s prediction was backed by a massive amount of historical data.
History of major pandemics shows that bubonic plague in the 14th century claimed by far the largest number of lives (200 million) followed by a smallpox pandemic in the 16th century (56 million), Spanish flue in 20th century (40-50 million), the plague of Justinian in the sixth century (30-50 million), and HIV/AIDS in the late 20th century (25-35 million).
Some of the most recent pandemics have been Swine flu in 2009-2010, which claimed over 200,000 lives, Ebola virus in 2014-2016 (11,300 deaths), MERS in 2015-present (850 deaths), and SARS 2002-2003 (770 deaths). The frequency of the pandemics has increased in the past century because of increased global travel and integration, urbanisation, changes in land use, and greater exploitation of the natural environment.
Novel coronavirus, which originated in Wuhan, China, in late December 2019, has already infected over 1.3 million people and killed over 70,000 people worldwide. Each new day breaks with even grimmer news and fears of a second wave of coronavirus.
Historically, each pandemic was accompanied by varying degrees of productivity loss, poverty and dislocation. Both the dynamics of infectious diseases and the actions taken to counteract it, such as travel bans, quarantines, and blockades on the import of food, mail and other items can cause immense damage to societies and economies.
Covid-19 is also expected to take a heavy toll on the global economy. According to an estimate by the International Food Policy Research Institute, global growth could be cut in half in 2020 to 1.5 percent from an earlier forecast of 3 percent. According to another estimate, the global economy will contract given the sudden stop to large swathes of economic activity and the resulting income loss in the manufacturing and services sectors across most advanced countries and China, combined with the adverse effects on financial markets, consumption (through both income and wealth effects), investor confidence, international trade and commodity prices.
Covid-19 is expected to hit developing economies harder because of mounting health budgets, reduced demand for exports, capital outflows (both debt and equity), rising spread on developing countries bonds, and fall in commodity prices in the developing countries. Though the stimulus packages announced by the developed economies and China may extenuate their mounting economic damage; developing countries have no such fiscal space and cannot offer even a small fraction of the packages announced by the developed economies.
The problem of poverty will become even more intractable because the recovery period is expected to be longer on account of some dynamics which are unique to Covid-19. For example, the fear of the repeat of Covid-19 in China will decrease the links in the global supply chains in the post-Covid-19 period may suppress demand for exports of emerging economies.
The ability of the developing countries to build up international reserves as buffer against macro-economic shocks is also limited. Falling currencies, commodity price downturns, and growing debt and financial vulnerabilities of the developing countries will also make the recovery more difficult.
Covid-19 is expected to take a heavy toll on the global economy. According to one estimate by the International Food Policy Research Institute, global growth could be cut in half in 2020 to 1.5 percent from an earlier forecast of 3 percent.
Even as it is important to see the consequences of the pandemics in terms of poverty and deprivation, it is also important to understand how economic inequalities exacerbate the vulnerabilities of the poor during pandemics. Accounts of previous pandemics could provide many useful insights.
For example, some accounts of the Spanish flu (1918-1919) claimed that the poor succumbed to the flue as readily as the rich. However, later evidence suggested that the first wave of infection had primarily affected the poor whereas the second wave afflicted people from the upper social classes more conspicuously. Something similar happened during the bubonic plague in the 16th century. Wealthy citizens fled the infected cities to their countryside villas.
This had two effects. First, the poor who were left behind were disproportionately more likely to be infected, at least initially, since they remained in the infected cities. Second, the wealthy, by fleeing from the cities, took the plague to the countryside.
There are several possible reasons why the poor were among the first victims. These included crowding, which increases the risk of contagion, poor housing conditions, lack of access to clean water (increasing the risk of secondary infection), and being in poor health before they were struck by infection.
People with greater economic resources have great opportunities for seeking medical care and for avoiding infection, at least in the short term, including fleeing infected areas until the pandemic catches up with them.
The Covid-19 pandemic has highlighted the vulnerabilities of the poor in Pakistan as well. Right from the beginning of the Covid-19 crisis in Pakistan, the prime minister has expressed concern about the difficult trade-off between the options of a lockdown and continued economic activity. The prime minister’s concern has been no figment of his imagination because 39 percent of Pakistani households live in poverty.
The government of Pakistan has sine announced a relief package of Rs 1.2 trillion to benefit 10 million individuals believed to be worst hit by the lockdown. An amount of Rs 12,000 will be disbursed to each of the nearly 2.5 million households over a period of four months.
Even assuming that there is no leakage of the sort alleged in the Benazir Income Support Programme, the logistical management of the initiative would be a considerable challenge.
The long queues in front of the ATMs, even in normal circumstances, conjure up disturbing images of a possible crisis.
Media reports have said the beneficiary families will be paid the cash after biometric verification through 18,065 points set up by Habib Bank Limited and Bank Al-Falah across the country. Enforcement of the safety rules of social distancing at these points would be a huge challenge.
A failure to ensure social distancing at these points would not only defeat the very purpose for which the cash transfer programme has been put in place but also actually spike the spread of the virus.
The specific mechanisms and pathways through which the current pandemic bites the poor in Pakistan and around the world require further research. However, one can say, without much fear of contradiction, that unless the world turns to an egalitarian economic model that prioritises the needs of the poor, the coronavirus will continue to bite the poor for the foreseeable future.