This appeared in the FPJ on the 21st of December

It has been just over a year since the Coronavirus jumped from bats, via a wet market in Wuhan (China), to humans. And, the rest, as they say, is history. As the virus spread across the world, a contagion of unimaginable proportions. it caught governments unaware, wrought havoc through entire populations, and resulted in governments across the world locking down to various degrees, to prevent COVID 19 from wrecking even more havoc. But the cost has been huge. 

When we talk about the new normal, and the joys of working from home or the convenience of working from anywhere, we often leave out large swathes of the population who have to go somewhere to work. People who work on assembly lines, people who work in food processing plants, people who work in hospitality and in entertainment. There has been a blow to retail trade, small business and the service economies that come up to serve working populations – stationery shops, sandwich counters, tea shops, flowers, takeaway food, and many more.

The informal sector, the mainstay of most of the economically marginalised, has been particularly hit. Construction jobs, public works, daily wage jobs have all come grinding to a halt. The devastation across economies has been tremendous, as nations face an uphill battle combatting poverty. According to the World Bank, an additional 88 million people will slip back into extreme poverty because of COVID19 in the best case scenario, and about 115 million in the worst case scenario.

According to the World Bank, this is the worst reversal in poverty alleviation in almost thirty years. COVID 19 is likely to increase poverty by 8.1% in 2020 relative to 2019.the greatest impact of this is going to be in South Asia. And, in particular, India.

As the lockdown kicked in and large chunks of the manufacturing and service economy shut down, so did growth. Every economy in the world has seen a drop in their GDP. This is, according to many economic experts, the worst economic downturn since the second world war. Almost a year after most countries locked themselves down, there is no sign of when things will go back to normal. While the vaccine is being rolled out in many parts of the world, it is not easy to get the entire population inoculated at the click of the button. Many European countries are reimposing lockdowns as COVID numbers spike again. In the last few days London and Sydney have gone into lockdown, as has Germany and Italy. Most countries, especially those that face cold winters, are braced for the next round of the virus.  As governments lockdown populations to save lives, the impact is ruined livelihoods. And as more people lose jobs, they are less able to buy things, which in turn will impact the recovery of industries who want to return to ‘normal’.

 Also, the lockdown has resulted in hundreds of thousands of migrants, within and outside the country, returning ‘home’. Their earnings having dried up, and the region they worked in, went into lockdown. Be it states like UP and Bihar who supply the rest of the country with primarily unskilled labour, or the four southern states that offer skilled, unskilled, and white-collar labour – the hit on local economies is huge.

 What really is needed now is a stimulus. Governments ought to help get back economies on their feet in two ways. The first is giving a financial lease of life to enterprises – this could be in the form of tax breaks, transfers, interest free credit, financial giveaways – to get them back working, and employing people. And the second level it needs to put money back in the hands of those who are slipping back into poverty. The money, when exchanged for goods and services, will start off a virtuous cycle of growth that will renew itself, and thereby, renew the economy. The problem is that most nations are heavily in debt, and fiscal conservatives are warning against more debt. Conventional wisdom advices against more debt, warning against a doomsday scenario of higher interest rates, strangulation of business credit, and even more employment.

While there is a time for conventional wisdom, this may not be it. There is nothing about this virus and its economic impact that has any precedence. In an interconnected global economy, we need to be able to reignite the engines of growth to be able to lead millions out of poverty. We are already in an economic doomsday scenario – and governments need to be bold, put aside their dogma, and jumpstart their economies. There is no alternative.