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COVID-19: Lessons from its Freakonomics

The outbreak of novel coronavirus has led to consequences which policymakers should look at. These are inadequacies in India’s health infrastructure, deficiencies in distance education and distress among SMEs. By S Narendra

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The government of India has done well to declare the existential threat of corona virus-19 (CV-19) a national disaster. There could be two opinions about the adequacy of measures taken so far to protect people against this pandemic. It is well to remember that it has overtaken the seven continents with the least warning and overwhelmed most countries’ governments. Countries with enormous financial and health-related resources are finding it difficult to cope with the CV-19 challenge.

It is a time for citizens to proactively support the official measures by following the guidelines regarding personal hygiene and social distancing. The latter is a tough call in a densely populated country like India where people live cheek by jowl. The burden of keeping the virus away largely falls on the individual and the family, calling for a total transformation of social and personal behaviour. As of now, the government’s attention is concentrated on putting in place policies and programmes to control its spread and on mitigating the pandemic’s adverse effects on the economy and people’s livelihoods.

India, like many other countries such as China, the US, Britain and members of the European Union, is contemplating fiscal and monetary measures to stimulate the economy. As many economists have said, economic theory has no answers as it has never faced, nay, never contemplated the dislocation of life caused by the CV-19 pandemic. It is outside the demand-supply framework (the invisible hand of market forces) of the discipline.

Noted American economist Tyler Cowan in a recent online post wrote that basic economic concepts like “inflation” are no longer useful when toilet paper, face tissues, sanitisers, soaps and masks become more valuable than the commodities in the normal basket of goods whose prices are studied for measuring inflation and adjusting lending interest rates.

Governments are now required to deal with a hydra-headed problem on an emergency basis. CV-19 has arrived on the back of an economic slowdown that had drastically reduced the government’s revenues. The shutdown of vital economic activities in most sectors due to the pandemic will further dim government’s revenue outlook. It is a double whammy because now they are required to deal with a many-headed problem using massive resources. Considering the enormity of the challenge, they will do well not to rush to bail out businesses which are making the most noise. Perhaps, the outlines of the economic and social challenges are yet to emerge fully in order for a measured response to be thought of. The world, including India, seems to be headed for the long haul.

There are likely to be some unintended consequences from the ongoing “national disaster” which may need to be reckoned by policymakers. Such consequences are studied under the title of Freakonomics by some noted economists. CV-19 is exposing in both rich and poor countries massive inadequacies in health infrastructure, a key contributor to any nation’s human resources. It will do a lot of good if the media and experts are allowed to put the Indian public health infrastructure and the economic model that tilts it in favour of privatising health to a lot of public scrutiny. Perhaps, for the first time, the nation will be X-raying this sector, hopefully gaining it the priority it deserves in central and state budgets.

Many health sector experts have lamented that the centre and state governments’ combined expenditure on health is far lower than India’s neighbours’. Economist Joseph Stiglitz has said that the trend of moving away from public to private healthcare in India was pushing more people into poverty fast. The present situation is a great opportunity for bringing back healthcare into the national political agenda. Unfortunately, the gains in the health sector are post-dated, invisible and offer less scope for political kickbacks that accrue from building physical infrastructure. Hence, it tends to receive lip-service.

The COVID-induced closure of educational institutions also offers an opening for examining the deficiencies of distance education and utilising the tremendous possibilities offered by technology for delivering quality education and skills to the masses at less cost. Its quality has to be improved vastly and used for improving the standard of education imparted in government schools and colleges.

The government, academia and technology innovators need to be brought together to collaborate in this sector. If governments care to use a significant part of the stimulus money for the above two objectives, it would improve India’s competitive advantage, encashing the available demographic dividend.

A third priority should be to bring relief to the informal sector due to the shutdown. This sector provides the bulk of employment to about 472 million people. The formal sector accounts for just 10 percent of jobs but has more voice in policymaking. The economic distress caused to workers who have no job guarantees and no social security cover is unimaginable because of the shutdown. Going by the experts’ opinion, the COVID emergency could last fairly long. Announcements such as facilitating more credit to SMEs are conventional solutions which may not be adequate in this dire situation. The livelihood of a huge number of wage earners whose only tradable asset is physical labour is under threat. How to fulfil their basic food needs requires immediate attention. One does not know whether governments should consider opening something like free soup kitchens. In New York, according to a New York Times report, some 7,50,000 schoolchildren were dependent on their school which provided one daily meal. The shutting down of schools has deprived them of this. If that is the situation in the US, imagine the plight of children and their families in India who have no daily, regular wage-earning work. This is mentioned here mainly to point out the enormity of the problems facing the polity.

There was a report that the air quality over China had improved due to the COVID 19-induced lockdown. Ironically, global warming effects will be less due to the economic shutdown. Every past year this millennium has seen an increase in global temperature; 2020 may be an exception. This is one of the Freakonomics effects. Policymakers, if so inclined, can draw some lessons and build them into post-COVID policies.

CV-19 is compelling us to change our social and personal behaviour. We have the option to resume our life with business as usual in the post-COVID era, leaving our fate and that of the universe to market forces and climate change. We also have the option, having come out of an existential threat, to modify our lifestyles which were defined by instant gratification of wants and adopt a more environment-sustainable one. One hopes that traditional economic theory, hinged to consumption-based capitalism that shapes government policies, learns lessons from the COVID crisis and its consequences for people whose life is on the fringes of the market forces but who are vital to the overall economy.

The challenge posed by COVID-19 has to be fought at the state, district and village level without a clash of political egos. In this humbling moment in the nation’s history, the sagacity of leaders in Delhi and state capitals will be tested. It is time to show a shared vision and resolve for infusing confidence in the people that the political system is united in navigating them out of the pandemic.

—The writer is a former information adviser to the PM and a government spokesperson




Lead: UNI

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