A menace by any other name: the ‘equaliser’ that just isn’t

By William Roman

COVID-19 and coronavirus are the most common names for it, but some sociologists and economists are tentatively hailing the virus as the great equaliser.

Four Horsemen of Apocalypse, by Viktor Vasnetsov
Four Horsemen of Apocalypse, by Viktor Vasnetsov

This is the event they had been waiting for, the one that forces the global community to re-examine its destructive ways. It takes just one of the apocalypse’s four horsemen to spur his steed and make a more just world to emerge, as history has shown. The Great Plague heralded the end of feudalism, and two world wars gave rise to the welfare state. In the aftermath of a cataclysm, inequality melts away — only to return once memories fade.

And these things came with a price tag: the global shocks needed to challenge inequality generally cost the lives of millions.

This holds true as much today as it did before. Just try to imagine the scale of human suffering that would result from the corona virus gaining a foothold in the slums of Mumbai, the favelas of Rio de Janeiro, or the townships of Johannesburg. Or picture the virus ravaging rogue states such as North Korea, Eritrea, and Venezuela where famine looms eternal and the masses have little recourse to medical facilities.

Where governments are starved of funds and social distancing is impossible, flattening the pandemic’s curve is not an option. Since 1990, an estimated 1.1bn people have strayed above the World Bank’s poverty line — but another 750m or so must survive on less than $2 a day. Sub-Saharan Africa is home to well over 400m of the world’s poorest people.

UN Secretary General António Guterres wants the world’s leading economies to provide “co-ordinated, decisive, inclusive, innovative” policy action, and financial and technical support for the poorest and most vulnerable. Guterres has reminded world leaders that the global health system is only as strong as its weakest link. The world needs solidarity to defeat the virus, he points out.

Two UN bodies, the World Health Organisation and the Food and Agriculture Organisation, joined the World Trade Organisation (WTO) in a warning over impending food shortages and the coming of a “great famine”. Travel restrictions affect the seasonal migration of farm labourers, while protectionist measures — such as the ban on wheat exports mulled by the Russian government — can disrupt fragile supply chains. Price gouging and reduced foreign exchange earnings may prevent less developed countries from sourcing the staples needed to keep their population fed.

FAO senior economist Abdolreza Abbassian is paying close attention to events in India. Prime Minister Narendra Modi put the country’s population under a strict lockdown just as Indian farmers and their labourers were preparing for the start of the harvest season. Abbassian is concerned for the Indian people, and wonders how the government plans to harvest and process crops. He also points out that India has been the world’s fastest-growing food exporter for 10 years running and is a major supplier of rice, wheat and sugar.

The UN Conference on Trade and Development, UNCTAD, has projected a downward slide of foreign direct investment of up to 40 percent this year. The International Labour Organisation calculates that as many as 25 million jobs may be lost worldwide, an estimated $3.4tn of lost labour income.

The scope of the pandemic’s impact on the world economy can hardly be overstated, yet the international solidarity Guterres calls for seems headed for an all-time low. In the US, the Trump administration avoids international co-operation, while the EU seems for now interested in clinging to its status of the world’s pre-eminent soft power. Since coronavirus hit the EU, its 27 component parts quickly claimed back their sovereign prerogatives, erecting borders and refusing to aid fellow member states.

The Dutch government, discretely supported by Berlin, promptly abandoned the moral high ground and lectured Italy and Spain extensively on the evils of fiscal imprudence — before shooting down any and all suggestions involving the pooling of risk and resources. Belatedly recognising that he may have gone too far in his display of fiscal rectitude, Dutch Finance Minister Wopke Hoekstra promised to donate €1bn to a future emergency fund for member states most affected. But he remained adamant that his government would not greenlight Eurobonds or agree to relax the conditions attached to bailouts from the €410bn European Stability Mechanism.

The reluctance of EU member states to help each other deal with crises is, of course, nothing new. Greece and Italy have been left to face the influx of refugees from Africa and the Middle East largely unaided. The banking crisis that started in 2008 also failed to spark European solidarity and was only haphazardly addressed after The Hague and Berlin realised that the fallout could possibly undermine the euro — the common currency that had, arguably, proved the single most important factor in ensuring the remarkable success of the northern economies.

UNCTAD’s call for a $2.5tn aid package for developing countries is likely to go unheeded. It has asked for $1tn to be made available through IMF special drawing rights, and an additional trillion in debt forgiveness. The conference also pleaded for a $500bn Marshall fund to be dispersed in grants to countries with underfunded public healthcare systems.

UNCTAD economists warn that even relatively robust developing economies will struggle as investors recall their money. They found that between February and March, portfolio outflows from the main emerging markets amounted to $59bn, more than double the $26.7bn that left those same countries in the aftermath of the financial crisis. Commodity prices are falling almost across the board, and have already retreated by an average of 37 percent.

UNCTAD Secretary General Mukhisa Kituyi said the economic shockwaves of the pandemic had hit developing countries with speed best described as “dramatic”. Kituyi also points out that the size of the proposed emergency package roughly equals the amount of money — 0.7 percent of GDP — that countries with a Seat on the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD) have pledged — but not paid — over the past 10 years.

It would seem that so far, in times of corona, some are still more equal than others.