It is distressing to see the current pandemic and its economic repercussions being treated as political football, both nationally and internationally, by professionals and politicians alike. Twisting evidence to believe what you want to be true, not because they’re really true is not the exclusive prerogative exercised by presidents and prime ministers, but is also a habit indulged in by much lesser mortals. The current debate on whether to extend or lift the lockdown and enforce the SOPs more stringently centres on the veracity of the data on the incidence of morbidity and mortality data cited by contending parties. However, as the available evidence – necessarily partial and incomplete, due to woefully inadequate testing – from about 200 countries across the globe accumulates, it unravels the imponderable havoc the pandemic has already wreaked (not in terms of number of deaths only, but also in terms of social and economic deprivation and loss of human dignity) – on a large part of humanity, consisting predominantly of the very poor and the very old.
Also, the governments of more than 100 countries - from China to Sweden to Italy and Iran, down to India, Singapore and New Zealand - have adopted a range of strategies to limit the force and speed of expansion of the four-month old Wuhan-born pandemic and to mitigate the immediate suffering of households and economic difficulties of businesses brought about by the sometimes draconian measures of lockdown. Almost all affected countries have been engaged in putting together welfare, income and food support packages for households and bail-out schemes for affected businesses. Both developed and developing countries have come out with generous (though often woefully inadequate) welfare support programs with a conflation of motives ranging from compassion and prudence to statecraft and realpolitik. These strategies and programs have varied considerably in their detailed contours, reflecting their geopolitical, economic, social and demographic contexts and they are far from perfect in either their conception or implementation.
Almost all affected countries have been engaged in putting together welfare, income and food support packages for households and bail-out schemes for affected businesses. Both developed and developing countries have come out with generous (though often woefully inadequate) welfare support programs with a conflation of motives ranging from compassion and prudence to statecraft and realpolitik. These strategies and programs have varied considerably in their detailed contours, reflecting their geopolitical, economic, social and demographic contexts and they are far from perfect in either their conception or implementation.
The sudden and unexpected emergence of COVID-19 on the world stage last December was bewildering and is still viewed with an aura of suspicion by the Trump administration which is perennially looking for scapegoats to put the blame of its many political failures, as well as a prop for winning the November elections. Both economists (Econs) and epidemiologists (Epids) were at a loss to understand its full implications, although both disciplines were not unused to the sudden appearance of such Black Swan events during their disciplines’ evolution and some were even anticipating it to occur, sooner rather than later. As Krugman succinctly points out, econs and epis have one salient trait in common, in that they “often disagree, sometimes by a lot.” What is, perhaps, worse, is that “their forecasts are often wrong, sometimes very wrong indeed,” not unlike econs, though (for obvious reasons) Krugman doesn’t say so. In the current epidemic, both have unwittingly combined to make humanity’s predicament worse than otherwise, by giving plenty of grist to the mills of those who are eager to see their wheels churning regardless of their effect on the health of their workers and public at large.
Macro-Econs (the Brahmins or elites of the profession), who had been on the lookout for a more severe recession on their radar since that of 2008 – which, to their chagrin, they had missed sighting (like the Ramadan moon or the OBL take-out in Abbottabad). The econs thought they had caught the recession beast this time and began sharpening the tools that helped them slaughter the one that got away. But it was not the same beast, nor were their knives sharp enough to kill it. Econs initially saw the pandemic as a negative demand shock that would need to be countered by expansionary fiscal and monetary policies to support aggregate spending, as was done in the aftermath of the Great Depression and the Global Financial Crisis. Since the worst-affected economy by the pandemic was China’s, they thought that the Chinese economy, which had been hiccupping for the last few years and Trump had tried to do his best to strangle it further by imposing high tariffs on its exports to USA.
Soon enough, many economists realised that this shock was different. Unlike the 2008 global financial crisis, which led to a collapse in demand, the COVID-19 pandemic is first and foremost a supply shock. If firms are not producing because their workers are locked down, boosting demand will not magically make goods appear. Governments are preventing workers from working (deepening the supply-side recession) and consumers from consuming (deepening the demand-side recession). This recession, as pointed out by Nobel laureate Edmund Phelps, is intentional and unavoidable. What is not unavoidable is the longer-term damage that the containment policies are doing to the economy. To do this, the economy’s productive base and human capital will need to be preserved and strengthened by creating innovative and accommodative fiscal and monetary instruments that would play the role of a medically-induced coma to a patient while doctors are looking for the development of a vaccine or other treatments to ensure she can lead a healthier life after recovering from her present illness.
The “lockdown” debate is getting bogged down too much into technical details of economics and epidemiology — both vying to claim the mantle of rigorous evidence-based natural sciences — but neither discipline seems ready to meet the current pandemic and economic challenges. The situation seems to be readily getting out of technocrats’ hands and the ball is falling into the political and geopolitical arena, with too many unknowns and too few equations. The virus is getting far ahead on the curve than humans’ current efforts have mobilised the capacity for defeating it, with the train wreck staring in our eyes.
The economists have awakened five years too late to Piketty’s seminal work and prescient warnings on growing income inequality and its consequences. The innovative fiscal measures being contemplated or toyed with, such as UBI (aka helicopter money), may be coming too little and too late in most developing countries in the present fast-deteriorating situation. Time is of the essence in the present situation and people need to be provided with urgent and sufficient relief in the form of cash, food and wage subsidies, without worrying overly about moral hazard considerations applicable in normal times.
In COVID-19 humans have met their match that has its own ‘ideas’ and can give the models of econs or epids a run for their money. Unless Pakistan’s elite-driven federal government can articulate a cohesive, long-term ‘strategy’ which protects the interests of all sections of the society especially those whose lives and livelihoods are on the line one, Pakistan is likely to be fighting a losing battle against an unyielding enemy, notwithstanding its enormous military prowess. Its present strategy of hiding and understating fatalities, denying they were attributable to coronavirus, and then absolving itself for not taking care of health and other human rights. This is a variant of what Trump is doing. Let the states do all the work, undermine their efforts by cashing in on the anti-lockdown sentiment, and deflect all responsibility for health.
While the governments of the day remain focused on short-term palliatives and panic-alleviating measures akin to arranging the deck chairs on the sinking Titanic, there is urgent need for long-term plans to increase the viability and resilience of the economy in the face of impending disasters. This virus will not go away any time soon and even when it does, its most important lesson would be the importance of being prepared for the next disaster — and that the radar for tracking looming disasters should never be left unattended. Health and social security systems will need to be built up not only to deal with this crisis, but to deal with other such events that seem to be occurring with greater frequency.
The complacent and self-congratulatory assessments of the efforts to counter the COVID-19 onslaught by our own Government, as well as by the world community, as a whole — because we are all in it together – does not give much hope or assurance to prevent the disaster that is waiting to happen and whose dimensions are too horrific to contemplate. If our performance in the 2005 earthquake, 2010 floods and the over a decade long war against terrorism, has anything to go by, we really need a miracle to bail us out of the myriad of troubles we are surrounded with. Somehow the nation will have to pull itself by its bootstraps to rescue itself from the impending catastrophe. PM Imran Khan has been pleading for people to find “out-of-the-box solutions to the country’s myriad problems. The nation is equally baffled how he got into the box, in the first instance. To be fair, not all that is rotten in the state of Denmark, did not take place under his watch, but a fair share did.
Pakistan’s new rulers, who had inspired and won the hearts of the masses with their “tabdeeli” slogan that resonated throughout the country more loudly than any since PPP’s “roti, kapra aur makan” in the 1970s, was in a unique position than any to play a transformational role in the country, a lot that often fell, by default, to the armed forces in the past 75 years – arguably, without bringing them much glory. However, during the first two years of its rule the PTI Government has done precious little to earn the confidence and approbation of the public at large for its performance and delivery in public services. Despite abrupt changes in personnel, though not policy, the economy – the main lever for making transformational changes – remains on an autopilot manned by an IMF-chosen crew. It is fortunate, however, that the IMF, stunned by the ferocity of the raging COVID-19 storm that is engulfing poor and rich countries alike, has put on hold Pakistan’s one-year old EFF program, providing its economic managers some fiscal space and much-needed room for maneuver in these troubled times.
Tinkering or at best galvanizing the system at the margins — which is the most charitable way of characterising the present national and global efforts — or “business as usual” (that too with reduced working hours) — is not what the doctors are ordering.
In the final analysis, the ultimate sufferers of, as well as the deliverers from the crumbling system, will be the world’s ordinary working people or the precariat. To paraphrase and contextualize the stirring call for unity from a famous Manifesto, “you have nothing to lose but the supply chains and the outsourced jobs”, should revolution come. It is time for humanity to seriously set about preparing for one whose time has nearly come and give up the “band-aid” solution which would not withstand the onslaught of the gathering storm.
Also, the governments of more than 100 countries - from China to Sweden to Italy and Iran, down to India, Singapore and New Zealand - have adopted a range of strategies to limit the force and speed of expansion of the four-month old Wuhan-born pandemic and to mitigate the immediate suffering of households and economic difficulties of businesses brought about by the sometimes draconian measures of lockdown. Almost all affected countries have been engaged in putting together welfare, income and food support packages for households and bail-out schemes for affected businesses. Both developed and developing countries have come out with generous (though often woefully inadequate) welfare support programs with a conflation of motives ranging from compassion and prudence to statecraft and realpolitik. These strategies and programs have varied considerably in their detailed contours, reflecting their geopolitical, economic, social and demographic contexts and they are far from perfect in either their conception or implementation.
Almost all affected countries have been engaged in putting together welfare, income and food support packages for households and bail-out schemes for affected businesses. Both developed and developing countries have come out with generous (though often woefully inadequate) welfare support programs with a conflation of motives ranging from compassion and prudence to statecraft and realpolitik. These strategies and programs have varied considerably in their detailed contours, reflecting their geopolitical, economic, social and demographic contexts and they are far from perfect in either their conception or implementation.
The sudden and unexpected emergence of COVID-19 on the world stage last December was bewildering and is still viewed with an aura of suspicion by the Trump administration which is perennially looking for scapegoats to put the blame of its many political failures, as well as a prop for winning the November elections. Both economists (Econs) and epidemiologists (Epids) were at a loss to understand its full implications, although both disciplines were not unused to the sudden appearance of such Black Swan events during their disciplines’ evolution and some were even anticipating it to occur, sooner rather than later. As Krugman succinctly points out, econs and epis have one salient trait in common, in that they “often disagree, sometimes by a lot.” What is, perhaps, worse, is that “their forecasts are often wrong, sometimes very wrong indeed,” not unlike econs, though (for obvious reasons) Krugman doesn’t say so. In the current epidemic, both have unwittingly combined to make humanity’s predicament worse than otherwise, by giving plenty of grist to the mills of those who are eager to see their wheels churning regardless of their effect on the health of their workers and public at large.
Macro-Econs (the Brahmins or elites of the profession), who had been on the lookout for a more severe recession on their radar since that of 2008 – which, to their chagrin, they had missed sighting (like the Ramadan moon or the OBL take-out in Abbottabad). The econs thought they had caught the recession beast this time and began sharpening the tools that helped them slaughter the one that got away. But it was not the same beast, nor were their knives sharp enough to kill it. Econs initially saw the pandemic as a negative demand shock that would need to be countered by expansionary fiscal and monetary policies to support aggregate spending, as was done in the aftermath of the Great Depression and the Global Financial Crisis. Since the worst-affected economy by the pandemic was China’s, they thought that the Chinese economy, which had been hiccupping for the last few years and Trump had tried to do his best to strangle it further by imposing high tariffs on its exports to USA.
Soon enough, many economists realised that this shock was different. Unlike the 2008 global financial crisis, which led to a collapse in demand, the COVID-19 pandemic is first and foremost a supply shock. If firms are not producing because their workers are locked down, boosting demand will not magically make goods appear. Governments are preventing workers from working (deepening the supply-side recession) and consumers from consuming (deepening the demand-side recession). This recession, as pointed out by Nobel laureate Edmund Phelps, is intentional and unavoidable. What is not unavoidable is the longer-term damage that the containment policies are doing to the economy. To do this, the economy’s productive base and human capital will need to be preserved and strengthened by creating innovative and accommodative fiscal and monetary instruments that would play the role of a medically-induced coma to a patient while doctors are looking for the development of a vaccine or other treatments to ensure she can lead a healthier life after recovering from her present illness.
The “lockdown” debate is getting bogged down too much into technical details of economics and epidemiology — both vying to claim the mantle of rigorous evidence-based natural sciences — but neither discipline seems ready to meet the current pandemic and economic challenges. The situation seems to be readily getting out of technocrats’ hands and the ball is falling into the political and geopolitical arena, with too many unknowns and too few equations. The virus is getting far ahead on the curve than humans’ current efforts have mobilised the capacity for defeating it, with the train wreck staring in our eyes.
The economists have awakened five years too late to Piketty’s seminal work and prescient warnings on growing income inequality and its consequences. The innovative fiscal measures being contemplated or toyed with, such as UBI (aka helicopter money), may be coming too little and too late in most developing countries in the present fast-deteriorating situation. Time is of the essence in the present situation and people need to be provided with urgent and sufficient relief in the form of cash, food and wage subsidies, without worrying overly about moral hazard considerations applicable in normal times.
In COVID-19 humans have met their match that has its own ‘ideas’ and can give the models of econs or epids a run for their money. Unless Pakistan’s elite-driven federal government can articulate a cohesive, long-term ‘strategy’ which protects the interests of all sections of the society especially those whose lives and livelihoods are on the line one, Pakistan is likely to be fighting a losing battle against an unyielding enemy, notwithstanding its enormous military prowess. Its present strategy of hiding and understating fatalities, denying they were attributable to coronavirus, and then absolving itself for not taking care of health and other human rights. This is a variant of what Trump is doing. Let the states do all the work, undermine their efforts by cashing in on the anti-lockdown sentiment, and deflect all responsibility for health.
While the governments of the day remain focused on short-term palliatives and panic-alleviating measures akin to arranging the deck chairs on the sinking Titanic, there is urgent need for long-term plans to increase the viability and resilience of the economy in the face of impending disasters. This virus will not go away any time soon and even when it does, its most important lesson would be the importance of being prepared for the next disaster — and that the radar for tracking looming disasters should never be left unattended. Health and social security systems will need to be built up not only to deal with this crisis, but to deal with other such events that seem to be occurring with greater frequency.
The complacent and self-congratulatory assessments of the efforts to counter the COVID-19 onslaught by our own Government, as well as by the world community, as a whole — because we are all in it together – does not give much hope or assurance to prevent the disaster that is waiting to happen and whose dimensions are too horrific to contemplate. If our performance in the 2005 earthquake, 2010 floods and the over a decade long war against terrorism, has anything to go by, we really need a miracle to bail us out of the myriad of troubles we are surrounded with. Somehow the nation will have to pull itself by its bootstraps to rescue itself from the impending catastrophe. PM Imran Khan has been pleading for people to find “out-of-the-box solutions to the country’s myriad problems. The nation is equally baffled how he got into the box, in the first instance. To be fair, not all that is rotten in the state of Denmark, did not take place under his watch, but a fair share did.
Pakistan’s new rulers, who had inspired and won the hearts of the masses with their “tabdeeli” slogan that resonated throughout the country more loudly than any since PPP’s “roti, kapra aur makan” in the 1970s, was in a unique position than any to play a transformational role in the country, a lot that often fell, by default, to the armed forces in the past 75 years – arguably, without bringing them much glory. However, during the first two years of its rule the PTI Government has done precious little to earn the confidence and approbation of the public at large for its performance and delivery in public services. Despite abrupt changes in personnel, though not policy, the economy – the main lever for making transformational changes – remains on an autopilot manned by an IMF-chosen crew. It is fortunate, however, that the IMF, stunned by the ferocity of the raging COVID-19 storm that is engulfing poor and rich countries alike, has put on hold Pakistan’s one-year old EFF program, providing its economic managers some fiscal space and much-needed room for maneuver in these troubled times.
Tinkering or at best galvanizing the system at the margins — which is the most charitable way of characterising the present national and global efforts — or “business as usual” (that too with reduced working hours) — is not what the doctors are ordering.
In the final analysis, the ultimate sufferers of, as well as the deliverers from the crumbling system, will be the world’s ordinary working people or the precariat. To paraphrase and contextualize the stirring call for unity from a famous Manifesto, “you have nothing to lose but the supply chains and the outsourced jobs”, should revolution come. It is time for humanity to seriously set about preparing for one whose time has nearly come and give up the “band-aid” solution which would not withstand the onslaught of the gathering storm.