‘For the first time in world history, people around the world are being forced to acknowledge that we all face a shared threat that no country can overcome by itself. If the world’s people join together under compulsion, to defeat Covid-19, they may learn a lesson. They may become motivated to join together, under compulsion, to combat climate change, resource depletion, and inequality. In that case, Covid-19 will have brought not only tragedy but also salvation, by finally setting the world’s peoples onto a sustainable course.’ - excerpt from a Project Syndicate published article ‘How might Covid-19 change the world?’ by Jared Diamond

The world did not prepare enough to reach a vaccine over approximately the last two decades when the first epidemic of coronavirus appeared in the shape of SARS (severe acute respiratory syndrome), along with lack of needed public spending and policy in reforming the health sector to meet the challenge of a possible pandemic, especially in developing countries. In other words, it increasingly clear that while a number of vaccines have been reached – albeit with mixed results both in terms of new variants of the virus, and reported serious side-effects of vaccines, and also in terms of low expected vaccine rollout rate, mainly in the global south, given strong presence of ‘vaccine nationalism’ and high prices due to patent walls – it will take a number of years before life assumes normality.

One study suggests that it may take more than five years to get rid of Covid-19 virus, as highlighted in an article ‘Learning to live with Covid-19’ by Asian Infrastructure Investment Bank’s chief economist, Erik Berglöf. According to Berglöf: ‘An international panel of scientists and social scientists, convened by the Wellcome Trust, recently constructed four scenarios… [where] each of these four scenarios would culminate into five settings: high-, middle-, and low-income countries, as well as conflict zones, and vulnerable environments like refugee camps and prisons. Not even in the most optimistic scenarios – characterized by a relatively stable virus, effective vaccines, and improved antiviral therapies – will SARS-CoV-2 be eradicated in all five settings within five years… As the study shows, eradicating the virus and ending the medical emergency will require not only a vaccine, but also effective treatments and rapid, accurate tests.’

Surviving a world hit by the pandemic for those working in the field of science, for instance, the main area of focus in terms of understanding the virus itself, would primarily mean learning to work together in an inter-disciplinary way, and being more open to better self-analysis. An article ‘The post-truth pandemic’ by Trish Greenhalgh pointed out in this regard that ‘How can sciences survive all of this? For starters, we scientists will need to be more self-reflective, developing a heightened awareness of our own identities, values, and ethical commitments as researchers working for the public good.’

At the same time, social scientists will also have to learn to collaborate more to deal with issues like the pandemic, with multi-sectoral causes, and cross-cutting consequences, ranging from psychology to sociology, to economy, to politics. In this regard, renowned economist, Dani Rodrik, in his recent article ‘How economists and non-economists can get along’ highlighted this collaborative need as ‘Understanding the advantages and limitations of economists’ methods clarifies the value they can add to analysis of non-economic questions. Equally important, it underscores how economists’ approach can complement but never replace alternative, often qualitative methods used in other scholarly disciplines.’

If the pandemic has taught us anything, it is that we are all in it together, and only by adopting a truly globalized, beyond-prejudices way, can we come out of it with least damage. Sadly, the triple nationalism in the wake of the pandemic – of food, oil, and vaccine – is totally opposite to effectively dealing with the vulnerabilities, insecurities, and economic challenges in the wake of the pandemic. Vulnerabilities and insecurities were already brewing due to years of neoliberal assault causing increasing income inequality and reducing political and economic inclusion, giving way in turn to dangerous populist politics, and xenophobia, and the pandemic has made them all the more pointed. Hence, life after the pandemic underscores the need for adopting a more understanding multilateral spirit, and inclusive globalization process.

At the same time, academic disciplines, feeding in turn into policy, will also once again need to revisit their narrow approach of analysis. Dani Rodrik in the same article, for instance, pointed out: ‘This is because the economists’ method does not yield an answer to the question “what causes civil conflict” (the reverse causal inference question). It merely provides evidence on one of the causes (income fluctuations), which may not even be one of the more important factors. Worse, because economists are trained only in the forward-induction approach, they often present their research as if the partial answer is in fact the more comprehensive one, further raising the ire of scholars from other disciplines.’

In the same vein, it needs to be understood that the role of fiscal policy has been heightened by the pandemic and the recession it has caused, given also that tools – both conventional and unconventional - at the disposal of central banks have already been used to virtual limit in developed countries, along with the fact that inflation in developing countries, in normal times, is at least equally a fiscal phenomenon anyways, with relatively lower role of monetary policy in the first place in developing countries, and therefore, has already been utilized to most extent in their particular context. Hence, when the advanced countries with much deeper financial sector are going towards using fiscal policy tools for dealing with brewing inflationary currents in the wake of stimulus spending during the pandemic, it is all the more important for developing countries – with far less financialization, and facing the triple-nationalism-causing inflation – to adopt fiscal policy vigorously in order to come out of the recession, continue with welfare policies, and deal with inflation.

In this regard, Robert Skidelsky, in a recent article ‘The silent revolution in economic policy’ pointed out: ‘With Western economies battered by Covid-19 and central banks running out of ammunition, fiscal policy is the only game in town. This should be openly acknowledged, and fiscal rules should be rewritten to allow for more active counter-cyclical policy and a much larger government role in allocating capital. … In a recent interview, for example, former Bank of England (BoE) Deputy Governor Paul Tucker said that “monetary policy should now take a back seat to fiscal policy.” Other central bankers, finance ministry mandarins, and OECD [Organisation for Economic Co-operation and Development] and International Monetary Fund officials are saying much the same.’

Also, countries will have to move away from unwarranted market fundamentalism - that has not allowed for instance better preparing against the onslaught of coronavirus, has hastened climate change crisis, exacerbated inequality, and led towards acute policy disenfranchisement – and move towards greater role of government, so that the trend of politico-economic extractive institutional design could be undone; whereby risks are socialized and profits are individualized, while the underlying support in most of private endeavour comes from either base-research from public institutions, or taxpayers’ money directly.

In this regard, Lars P. Feld et al in their recent article ‘Why the social market economy succeeds’ make the case for developed countries but given even less developed institutional and regulatory frameworks, and under-developed markets, the same is even more valid for developing countries, whereby adopting a social market economy is advocated in the article as follows: ‘The “social” element of the social market economy, then, is not about state ownership or state direction, as under socialism. Instead, it refers to a rules-based economy in which social interests are properly accounted for. … It is this principled impartiality that puts the “social” in the social market economy. Because everyone has a natural drive to improve their situation, the provision of an efficient, innovative, equal-opportunity system is a paramount social good. The social market economy is also social because it creates the wealth needed to provide welfare benefits, housing support, pensions, and other programs. Of course, as [Alfred] Müller-Armack stressed early on, such social policies should be designed to promote self-reliance and dignity rather than dependence.’

(The writer holds PhD in Economics from the University of Barcelona; he previously worked at International Monetary Fund)

He tweets@omerjaved7

Copyright Business Recorder, 2021

Dr Omer Javed

The writer holds a PhD in Economics degree from the University of Barcelona, and has previously worked at the International Monetary Fund. His contact on ‘X’ (formerly ‘Twitter’) is @omerjaved7

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