Coronavirus is a crisis for the developing world, but here’s why it needn’t be a catastrophe – The Guardian

While countries in east Asia and Europe are gradually taking steps towards reopening their economies, many in the global south are wondering whether the worst of the pandemic is yet to come. As economists who work on poverty alleviation in developing countries, we are often asked what the effects of coronavirus will be in south Asia and Africa. The truth is, we dont know. Without extensive testing to map the number of cases, its impossible to tell how far the virus has already spread. We dont yet have enough information about how Covid-19 behaves under different conditions such as sunlight, heat and humidity. Developing countries more youthful populations may spare them the worst of the pandemic, but health systems in the global south are poorly equipped to deal with an outbreak, and poverty is linked to co-morbidities that put people at a higher risk of serious illness.

Without the information widespread testing provides, many poorer countries have taken an extremely cautious approach. India imposed a total lockdown on 24 March, by which time the country had about 500 confirmed cases. Countries such as Rwanda, South Africa and Nigeria enforced lockdowns in late March, long before the virus was expected to peak. But these lockdown measures cant last forever. Poorer countries could have used the quarantine to buy time, gather information about how the disease behaves and develop a testing and tracing strategy. Unfortunately, not much of this has happened. And, far from coming to their aid, rich countries have outrun poorer nations in the race for PPE, oxygen and ventilators.

In many places, the human toll of the lockdown is already becoming obvious. Children go without vaccinations and crops are not harvested. As construction projects stall and markets are shuttered, jobs and incomes evaporate. The effects of prolonged quarantine on developing nations could be as harmful as the virus itself. Before Covid-19 rippled across the world, 15,000 children under five died every day in the global south, mostly of preventable diseases associated with poverty. Its likely that many more will die if their families are plunged further into poverty.

What can poor countries do in the face of this pandemic and how can rich countries help them? First, the systematic testing strategies that have been crucial to containing the epidemic and easing lockdown measures in Europe are equally critical in poor countries. In places where public health authorities dont have information about the spread of the virus and resources are limited, the response to coronavirus needs to be targeted at active hotspots. In this way, rather than imposing a universal lockdown, health authorities can identify the clusters where quarantine measures are required.

Second, developing countries must be able to improve the ability of their health systems to cope with a potential sudden influx of sick people.

And third, its crucial that poor countries are able to guarantee people a secure livelihood in the months to come. In the absence of such a guarantee, people will grow tired of quarantine measures and lockdowns will be increasingly difficult to enforce. To protect their economies from a collapse in demand, governments must reassure people that financial support will be available for as long as its needed.

In our recent book, written before coronavirus struck but with a title that is now eerily appropriate Good Economics for Hard Times we recommend that poor countries implement what we call a universal ultra basic income (UUBI), a regular cash transfer that amounts to enough for basic survival. The virtues of a UUBI are its simplicity, transparency, and its assurance that nobody will starve. It avoids the problems of many welfare systems that are designed to exclude the non-deserving, even at a cost to the needy. During a pandemic, when governments need to help as many people as quickly as possible, the simplicity of a UUBI could be lifesaving. Reassuring people that nobody will be excluded from subsistence aid also limits the feeling of existential foreboding that so many individuals in poor (and not so poor) countries are currently experiencing.

These ideas arent mere fantasy. The small west African country of Togo, with its eight million inhabitants and its GDP (purchasing power parity) per capita of $1,538, is working on all these fronts. In addition to testing 7,900 suspected cases, the country is deploying 5,000 test on a random basis to assess prevalence. Health authorities will use the results to determine when and where to restrict peoples mobility. The government has also launched a cash transfer scheme linking an electronic wallet to peoples cellphones; it already has 1.3 million people registered and has sent money to 500,000 in the region of Greater Lom (the capital) alone.

The good news is that many countries, particularly those in Africa, already have the infrastructure to rapidly transfer money across a population using cellphones. Many people already use these systems in private exchanges, so government schemes based on this infrastructure can be up and running in a matter of days. If phone data indicates that some regions are experiencing greater economic distress, the transfer could be more generous in those places.

In fact, the greatest constraint we face isnt the feasibility of these measures its the willpower to finance them. Developing countries will need a substantial amount of help from richer nations if they are to pay for a UUBI. Some fear that their currencies will depreciate if they act aggressively, potentially spurring a debt crisis. Richer nations will need to work with global financial institutions to offer debt relief and additional resources to developing nations. Many developing countries will need to buy food and medical supplies with hard currency, which will become increasingly difficult because of faltering export earnings and collapsing remittances.

Given the unprecedented collapse in earnings that many people face, conventional fiscal prudence is perhaps less important now than it was in the recent past. Now is the time for governments to help citizens and economies by spending more, rather than less. The governments of developing countries may need to accept large budget deficits in order to finance a UUBI, at least in the short term. When countries begin to loosen their lockdowns and resume production, they will face extremely weak demand. Pledging that cash transfers will continue for some time in the future will allow people to go out and spend money when it becomes safe to do so. In turn, this will drive the revival of the economy.

None of this means that governments should simply ignore concerns about macro-economic stability. But a clear spending plan that responds to the immediate shock of coronavirus, in conjunction with a longer term strategy for how the lockdown will end, offers the best hope for preventing the present crisis developing into a future catastrophe.

Esther Duflo and Abhijit Banerjee won the 2019 Nobel prize in economics for their work on poverty alleviation. They are the authors of Good Economics for Hard Times

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Coronavirus is a crisis for the developing world, but here's why it needn't be a catastrophe - The Guardian