Thu, Apr 02, 2020 page9

• The COVID-19 pandemic demands a coordinated global response

  • By Martin Guzman
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  The COVID-19 pandemic has thrust the world into a health and economic crisis of a magnitude that few could have anticipated, but that everyone must now confront — together. Unless all countries enhance global coordination and cooperation as much as possible, the social stability of the entire planet could be at stake.

  On the economic front, many economists and policymakers seem to have convinced themselves that policies to boost effective demand are sufficient to mitigate the downturn. The problem is much more complicated, and will not be solved with the standard stimulus measures.

  As reducing social interaction is crucial for mitigating the spread of the coronavirus, most people cannot go to work, unless they are in essential industries, and because people are not working, they will have less — or no — income to spend.

  Under these circumstances, the fear that economic activity could continue to plummet is justified, but that outcome is unavoidable in the short term.

  However, just because the situation is unprecedented does not mean that we lack principles that can and should guide our actions as we move forward.

  To stop the pandemic and rescue the world’s economies, everyone must abide by five in particular.

  First, protecting health and human life is and must remain the No. 1 priority. Health is a global public good. To safeguard it, the circulation of people and goods within our societies must be reduced.

  As is already being seen, this society-wide imperative inevitably will reduce economic activity, but the sooner it is implemented in full, the sooner the economy will be restored. Nothing can happen until COVID-19 has been defeated.

  In the meantime, everyone also must be bold in thinking about how to guarantee the supply of essential goods and services.

  In addition, the healthcare providers who are trying to make do with extreme shortages of life-saving equipment for patients and personal protective equipment for medical staff need assistance.

  Respirators, ventilation machines, oxygen and even simple masks are in critically short supply in too many places.

  Decisive action is needed to alleviate these shortages, lest they lead to a broader loss of life and social instability.

  The second principle is to protect those who are, or who might become, vulnerable to the disease, the economic freeze, or both. In the absence of policy interventions, changes in the composition of demand are forcing many households and individuals into desperate circumstances.

  Indeed, recently released monthly data for the US show that the number of Americans filing for unemployment insurance has skyrocketed in the past two weeks.

  In countries where a large share of the working population is employed in the informal sector and as such is not covered by unemployment insurance — as is the case in Argentina — the need for protection is even larger.

  Meeting the needs of the most vulnerable requires a three-pronged strategy.

  First, governments must provide cash transfers large enough to preserve a living income for all struggling households.

  Second, they must extend traditional unemployment insurance so that laid-off workers do not fall into penury before the pandemic ends.

  Third, they must protect existing employment by subsidizing jobs in sectors that are critically affected by the crisis, but that will remain valuable for the economy when the crisis is over. Argentina is adopting these measures.

  The third principle is to preserve the organizational capital, or knowledge, embedded in ongoing enterprises. This is not the same as protecting profits or shareholders.

  The crisis demands policies geared specifically toward preserving the positive productive capacities and know-how within firms, small and large.

  Observing this principle will be critical in avoiding exacerbated inequality, ensuring the preservation of systems of accountability that are central to a market economy and staging a broader recovery from the downturn.

  The fourth principle is that the research undertaken to address the COVID-19 crisis should be treated as for the global public good. Scientific work toward a vaccine and other treatments will be critical for reining in the pandemic and restoring economic activity, but these therapies must be made globally available at affordable prices.

  Hoarding valuable knowledge when countless lives are at stake is as an unforgivable moral crime. It is also counter-productive, given that everyone is connected through the global economy.

  The final principle is to think boldly. To provide liquidity at the global level, the entire economic-policy toolkit must be used and new tools that might be added to it must be experimented with.

  For example, bilateral currency swaps between central banks in developing and advanced economies must be extended, and the IMF’s special drawing rights should be expanded to meet the challenge at hand — as proposed by IMF managing director Kristalina Georgieva at the G20 leaders’ summit last week.

  A global emergency requires decisive global policies. Argentina is prepared to do its part to help the world navigate these difficult times. All countries and international institutions must stand together and act resolutely.

  Martin Guzman is the Argentinan minister of economy. This commentary was adapted from remarks made at the G20 special meeting of finance ministers on March 23.

  Copyright: Project Syndicate
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