Almost four to five months on, yet the flurry of devastation from Covid -19 isn't over. Already lots of people across the globe have lost their jobs or are on the verge of losing. The economy is reeling from the shock and people are at a loss as it has created an existential crisis. So, the policymakers and politicians have nothing but to think hard and engage in preparations for devising economic restoration policy and saving lives. The question is what comes first: human lives or economy. It is a sort of "between the devil and the deep blue sea" choice.
Before we delve into how we can map out economic recovery, let's dip into what adverse effect Covid -19 has left on the world and human society. A report published by The World Bank has warned that the pandemic could push between 40 and 60 million people into extreme poverty this year, with Sub-Saharan Africa being the hardest hit followed by South Asia. The International Labour Organisation [ILO] speculates 195 million jobs would be lost. Brad Smith, the Microsoft president, has said a quarter of a billion people are set to lose their jobs this year. And they will have to learn new skills to get new jobs or keep their current ones. His statement of "We live in a world of internet inequality" is a stark reality of the world and unless we diminish this inequality sooner than later, the unskilled people of the developing countries will be mostly paying the cost of the backlash of covid-19. This will definitely be devastating for the economies of those countries too. On the other hand, The World Food Programme projects that 135 million people are facing crisis levels of hunger or worse, while another 130 million are on the edge of starvation.
Again the shortfall of supply of food in the markets has plunged the supply-demand factor deeper into shambolic order. So, the economy is aggravating every single day amidst the spread of corona pandemic across the globe. The World Health Organization (WHO) has suggested that the virus may not be dying very shortly even if the vaccine is invented. On the other hand, the backlash of ill and unbalanced distribution of food and social benefits or any form of incentive is disturbing. To crown it all, there is no gauging tool to measure the psychological damage that has been caused and mental pressure that we have been engulfed with. In a nutshell, the adverse effect from Covid -19 is painfully huge.
Here comes the thought of how we can bail ourselves out. A V-shaped economic recovery is highly expected, but it might just be wishful thinking, though the UK PM Boris Johnson has announced a V-shaped economic recovery for the UK. However, a 'W-shaped' recovery with a second decline can't be passed over either! Therefore, the leaders will have to, in my wisdom, take the plunge to turn the corner. Then again the perplexity! Should we set our sights on recovering the economy when human lives are at stake? According to the June 2020 Global Economic Prospects by the World Bank, a recession has already sprung up and shown no signs of bottoming out. The baseline forecast envisions a 5.2 per cent contraction in global GDP in 2020-the deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support.
The Institute for Advanced Sustainability Studies (IASS) has opined that the pandemic has directly resulted in supply chain collapse. More and more companies are now facing bankruptcy. These factors have enforced the institutions and companies to downsize their workforce to an irreducible minimum. So, mass unemployment throughout the world is on the rise. The financial crisis triggered by Covid-19 across the globe has also called into question the US dollar's hegemony and could redefine the global monetary system. Dollar as a currency is undoubtedly the mainstay of global financial mechanism, but a team of researchers from IASS has identified that a significant share of Dollar is now being created by private financial institutions outside the USA, and so, it is remaining beyond the control of the United States' central bank, the Federal Reserve (Fed). This happens when banks outside the United States create deposits by issuing loans in US dollars to finance trade within global supply chains. The researchers refer to this as "offshore dollar creation." The team of IASS also holds firm to the idea that shadow banks have become systemically relevant entities and are creating novel forms of credit instruments, which are referred to as "shadow money." This is ultimately cutting back on Dollar hegemony.
A functioning global monetary and finance system is of absolute importance at this critical juncture. Recovery has to be arguably sustainable; otherwise the shockwave of another decline may cripple the pillars of the world economy. Taking cognizance of this volatility in the global financial system and markets, the IASS Research team has developed four scenarios that show how political decisions will shape the post-Corona world. According to them, the first two presuppose that the financial system continues to evolve -- resolving crises with the instruments of the existing system, much as occurred in 2008. The other two explore possible developments resulting from a collapse of the system that the Fed failed to prevent. The four scenarios are: a) A continuation of the current US dollar hegemony, b) the coexistence of competing monetary blocks, c) the emergence of an International Monetary federation, and d) International Monetary anarchy. The last two options may dramatically change the dynamics of the dollar-controlled financial trade mechanism of the world if they happen to form and exist. It will be a game changer then.
So, what are the other pressing issues other than socio-political instability, kaleidoscopic financial mechanism, increase of unemployment and food & market uncertainty during this corona-fueled crisis? Around the world, billions of people lack access to the most basic services that are required to protect their health, whether from COVID-19, or any other risk. Currently, over seven million people a year die from exposure to air pollution --1 in 8 of all deaths. Over 90 per cent of people breathe outdoor air with pollution levels exceeding WHO air quality guideline values. Agriculture, particularly clearing of land to rear livestock, contributes about one-fourth of global greenhouse gas emissions. Globally, about US$400 billion every year of taxpayer's money is spent directly subsidising the fossil fuels that are driving climate change and causing air pollution. Over half of the world's population now lives in cities, and they are responsible for over 60 per cent of both economic activity and greenhouse gas emissions. So, what are the prescriptions to fight these problems along with an overarching agendum of economic recovery? On May 18th 2020, WHO Director-General Tedros Adhanom Ghebreyesus addressed the 73rd World Health assembly where he emphasised on the following suggestions as a prescription to save the planet and the economy. The suggestions are: 1) Protect and preserve the source of human health: the Nature, 2) Invest in essential services, from water and sanitation to clean energy in healthcare facilities, 3) Ensure a quick healthy energy transition, 4) promote healthy, sustainable food system, 5) Build healthy, livable cities, and 6) stop using taxpayers money to fund pollution. The deliberation has obviously chalked economic recovery up to a strong and committed green recovery.
Not that the world economy hasn't experienced recessions, shocks or slow-down before, but what surpasses logic this time round is the speed of decline and the all-encompassing economic panic side by side an unpredictable health scare. The shock amongst the common mass has ushered in fizzling out production and lessening consumption. It is axiomatic that financial crisis contributes to the decline of any economy's supply side, but corona-fanned crisis has extended liquidity and capital problems. In such a scenario, a v-shaped economic recovery is almost unimaginable. So, optimism is that the Corona-created socio-economic and financial mess will be ebbing away as soon as a vaccine is invented. In the meantime, the United Nations has urged the Governments to chalk out a recovery plan around low-carbon technologies, just to avoid a return to fossil fuel-based "Business as Usual".
So, the dimensions of Covid-19-fulled crisis poignantly turn down mere economic recovery, let alone v-shaped one, for the world as part of survival of human societies and countries and safeguarding nature in a post-covid world. Every survival attempt or strategic policy framework-be it economic, political and social-- will become a 'false dawn' if we fail to fathom the pain of nature before everything else. Without inclusion of wellbeing and protection of nature in our mainstream policy mechanism, a recovery plan is implausible.
Sulav Barua Chowdhury is Chief Executive officer (CEO), BKMEA.
