Lives versus livelihoods?

Nobody would have ever thought to face a terrible trade-off, like we, to either baldly damage our livelihoods through prolonged lockdowns, or to sacrifice the lives of thousands, if not millions, to this pandemic COVID-19.This article is an attempt to evaluate policy options and their socioeconomic implications; which are, largely, overlooked so for.

Social distancing and lockdowns have positive externalities for health but can cause potentially even greater human sufferings by damaging our economy. It is reasonably certain that lockdowns can buy us the time to strengthen the healthcare system but can't control the spread of the virus for an extended period of time, until vaccines are available, or herd-immunity is achieved.

Unfortunately, development of proven vaccine seems a distant dream in near future; it is both difficult to develop and inadequate. Because it involves trials, approvals, mass production, distribution and dose administration to all humans. Likewise, it is not sane to bet on herd-immunity, which occurs when virus works its way through two-thirds of the population, kills many, but those who get recovered once can't get infected again and they won't transmit the disease further. Unfortunately, experts are not sure yet if recovering from COVID-19 confers any immunity at all, let alone lifelong immunity.

According to public-health experts, the pandemic could last 12 to 18 months and no one can certainly answer when can we go back to normal? Even if the current wave of COVID-19 happens to fade away there's a chance that one infected traveller can reignite fresh sparks in that locality as reported in China and Singapore. So, we all are prone to subsequent waves. This calls for synchronous control at locality to countrywide or even worldwide level, which seems impossible.

On the basis of aforesaid, suppressing COVID-19 transmission through social distancing and immediate lockdown is a dominant strategy. Nations who got it under control did so besides conducting random and targeted tests to identify the infected, isolate them, quarantine the suspected ones and finally trace the source. Moreover, governments' effective communication played a key role to garner societal acceptance for enforcing this strategy. Where does Pakistan stand regarding it?

Regrettably, we wasted a lot of time, first being in state of denial. Later, when few cases got reported and Sindh imposed lockdown, other provinces pointlessly delayed their decisions. The federal government, instead of playing a decisive role, convoluted the implementation by publically showing soft stance on lockdown as well as poorly managing the borders. But, good news is: time bought through partial lockdown was used to augment some capacity of our health care system. Bad news is: yet we are lacking a persuasive narrative for streamlining the citizen's behaviour to combat this pandemic.

Irrefutably, the socioeconomic consequences of a prolonged lockdown appear unmanageable. But abandoning it, hastily and without right protocols in place, could be unwise, particularly when tests and protective equipment are still inadequate. The governments across the globe had announced stimulus plans worth $10.6 trillion to support citizens' basic needs and jobs. Why our government is on the horns of dilemma to choose between lives and livelihoods? Only option is: save the lives first - later safeguard the livelihoods, while softening the economic crisis to sustainable levels. That is the most immediate imperative; rest of all should be worked around it. As the saying goes in Urdu "jaan hai toh jahan hai"

Now the question arises, how to do it?

Let us first analyse the nature of shock and its propagation mechanisms. Lockdowns are causing disruption in supply chains globally. Uncertainty about COVID-19 and future policies are causing the households to withhold consumption (initially capital goods) and save under precautionary motive. Likewise, firms are suspending their planned and inventory investments. Temporary workers are losing jobs. This income effect will further reduce the aggregate demand, which in turn cause more layoffs. This vicious feedback loop within supply and demand will drive the recession from domestic to global economy and vice versa. In our case, this loop could cause a negative output gap of 7 percent, which in turn could increase the existing unemployment from 6.77 million to 13.49 million.

One should be cognizant of the fact that our 71.4% (46.8 million) workforce draws its livelihoods from informal sector, which is poised to face a major brunt. Most of the very well-intended policy support by the government and State Bank, would have negligible impact on this sector. Given the average family-size of 6.45 persons, cash transfer under Ehsaas Programme to 12 million families actually accounts Rs 465 per person per month that is inconsequential. As per rule of thumb: government's stimulus package should be speedy and substantial, of the same order of magnitude of the output loss.

No one can bail us out except deficit financing. The whole world is suffering; a call for donations to diaspora seems ludicrous. Nonetheless, both Eids with zealous philanthropy are about to inject over trillion rupees into the economy and may add resilience over the course of next three months. But before that our government needs to play smart. Stakeholders in the private, public, social sectors, and even opposition benches all have roles to play if cajoled properly.

(The writer is a professor at KSBL and former chief economist of Pakistan)