Covid-19: Challenge Protecting both lives and livelihoods in India

The government must look after both health and economic concerns of mainly poorest people, investing in human life is must to mitigate inequality

It is a cause for concern when millions of people will have to undergo a dip in living standards, investors in big corporations, especially those which have capitalised on the lockdown due to the nature of their businesses, reap the benefits of all-time high share prices

At first blush, these questions appear to be valid and logical. However, a recent survey, conducted by the University of Chicago’s Booth School of Business where more than 40 economists from across the best universities in the United States (US) were asked similar questions, found that the overwhelming response was that any reductions in the current lockdown restrictions in the country will result in much deeper, long-term economic damage.

Similarly, a statement issued by the Economic Strategy Group of The Aspen Institute on March 25 stated: “Saving lives and saving the economy are not in conflict right now; we will hasten the return to robust economic activity by taking steps to stem the spread of the virus and save lives.”

In other words, economic experts seem to be stressing that premature lifting of lockdowns will result in a resurgence of the pandemic with greater virulence.

The fact is that the questions referred to at the beginning of this piece present a false binary of having to choose between the economy and public health. The two are not, and cannot be viewed as, mutually exclusive, but must be seen as interdependent. Curbing the virus is a sine qua non for the economy to rebound. It is fallacious to presume that the obliteration of growth and jobs is a corollary to social distancing, and not the pandemic itself.

Curiously, according to a 2014 study published in the Preventive Medicine journal, an increase in the unemployment rate during the Great Recession had a beneficial health effect across European countries, except for suicide mortality. Therefore, it is incorrect for anyone to argue that a recession will “kill” more people, in the ordinary course, than the virus.

In times such as this, public trust in the government’s strategy is more critical than the strategy itself. If by lifting the lockdown, the virus rebounds with equal or higher velocity, will the public still trust the authorities who misguided them? The importance of public trust cannot be overstated in the present construct since the success of any government strategy requires public acceptance. It is only the public that can ensure the efficacy of maintaining strict social distancing, good hygiene levels and testing compliance.

Most economists continue to urge that the only way to minimise long-term damage to the economy is to first control the virus, as being not only an end in itself, but a prerequisite for saving livelihoods and the economy.

A start-stop approach, which refers to imposing a lockdown, getting complacent and lifting it, only to see a surge in infections and reimposing restrictions — will yield a haphazard result, thereby compromising the mental, social and economic benefits to a methodical, sustained and phased economic recovery. The most glaring example of this is Singapore, which has been compelled to reintroduce a harsher 30-day lockdown after it prematurely eased the initial restrictions and permitted international travel, leading to a spike in cases.

On April 3, the World Health Organization and the International Monetary Fund laid out the task ahead for all governments that are dealing with the corona virus crisis. They point out that an economic stimulus can only be “in addition to” — and not a substitute — to health care spending.

Governments across the world have the unenviable task of striking a harmonious balance between spending on health care (enhancing support to existing hospitals and new makeshift treatment stations, ramping up testing infrastructure and procuring kits, paying salaries and providing medical equipment to frontline health care workers) and providing an economic stimulus to those most in need, enhancing unemployment benefits and minimising corporate insolvency. It is only by walking this tightrope that we can achieve the most optimal outcome of minimum health care burden and maximum economic recovery.

It could prove instructive for economists and policymakers to reassess the functioning of modern-day capitalism to a more broad-based form of capitalism that works for a majority of the population as pointed out by hedge fund investor Ray Dalio. He points out that capitalism “is producing a self-reinforcing feedback loop that widens the income/wealth/opportunity gap” and continues to concentrate wealth within the hands of a few and, thereby, increasing the gap between the wealthiest 1% of the population and other 99%.

It is a cause for concern when in the near future, millions of people will have to undergo a dip in living standards while investors in big corporations, especially those which have capitalised on the current lockdown due to the specific nature of their businesses, reap the benefits of all-time high share prices. According to the Bloomberg Billionaires Index, while the combined net worth of the world’s 500 richest people has dropped $553 billion this year, it has surged 20% from its low on March 23. This is largely due to the benefits that government bailouts will bring to behemoths, particularly in the United States.

It is time for society to use this pandemic as an opportunity towards increasing the value of human life in a more qualitative way to create a society that truly understands what Mahatma Gandhi, said: “It is health that is real wealth and not pieces of gold and silver.”