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COVID-19 and developing countries: grim predictions of a significant increase in global poverty threaten the attainment of the SDGs

Migrant workers stuck in Mumbai because of a lockdown lining up for food this week.
Source: New York Times, April 30, 2020
The fight against COVID-19 has entailed a sharp, but one hopes transitional,  decrease in economic and social activities across the world through a combination of containment and mitigation measures. The result is a predicted steep recession in both developed and developing countries.
There are fears that the scale and scope of this global recession will be the worst since the Great Depression. Such a development was not, of course, anticipated by any of the major international institutions that track developments in the global economy. Thus, the IMF’s World Economic Outlook of January 2020 observes that:

‘Global growth is projected to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021…’ It noted a series of ‘downside risks’ that could drag down global growth, such as ‘…rising geopolitical tensions, notably between the United States and Iran, intensifying social unrest, further worsening of relations between the United States and its trading partners, and deepening economic frictions between other countries.’

Any reference to the possibility of the coronavirus pandemic stemming from a specific country was conspicuously absent in the January 2020 global assessment, although publicly available reports were already alerting readers to a potential public health crisis in China and beyond. The World Economic Outlook of April has completely overturned its January forecasts and now predicts a 3 percent contraction in global output in 2020, although it expects a strong recovery in 2021.
The World Bank’s January 2020 Global Economic Prospects (GEP) was a bit subdued (2.5% global growth in 2020 rising gradually over the forecast horizon), but the assessment of downside risks was oblivious about a public health crisis brewing in China. GEP noted ‘… the possibility of a re-escalation of global trade tensions, sharp downturns in major economies, and financial disruptions in emerging market and developing economies.’
Thus, the major international institutions have been caught by surprise by the emergence of COVID-19 and its dire economic consequences. There is now understandably a rush to assess the extent of the economic damage, primarily in terms of forecasts of a global recession. Given that sustained economic growth is a necessary, but not a sufficient, condition for a sustained reduction in poverty, a severe global recession will invariably have an adverse impact on global poverty. As a recent New York Times report puts it: ‘Millions Had Risen Out of Poverty. Coronavirus Is Pulling Them Back’.
What is the likely magnitude of this reversal in progress in reducing global poverty? A UNU-WIDER paper is one of the few early, but much-needed, attempt to provide some estimates – and they appear rather grim. This is shown in Table 1.
Contraction in per capita  consumption/income (%)
Additional increase (%) in global poverty above the status quo (bottom row) (%)
International poverty line (USD1.90 per day)
Additional increase (%) in global poverty above the status quo (bottom row) (%)
International poverty line (USD 3.20 per day)
Additional increase (%)in global poverty above the status quo (bottom row) (%)
International poverty line (USD 5.50 per day)
5%
1.1
1.8
1.6
10%
2.4
3.7
3.3
20%
5.6
7.7
7.0
Status quo (global poverty incidence, %, latest year)
10.1
25.2
43.5
Depending upon the magnitude of the contraction in per capita consumption/income that is assumed, and depending upon the specific international poverty line used, the estimated increase in global poverty above the status quo ranges from 1.1% to nearly 8%. In absolute terms, they range from approximately 85 million to 581 million. If these numbers are borne out in reality, they represent a major reversal in the global progress in poverty reduction and threaten the attainment of a core goal of the SDGs pertaining to the elimination of extreme poverty and hunger.
These numbers led the leading author of the paper to express
…’ (surprise) at the sheer scale of the potential poverty tsunami that could follow COVID-19 in developing countries. Our findings point towards the importance of a dramatic expansion of social safety nets in developing countries as soon as possible and – more broadly – much greater attention to the impact of COVID in developing countries and what the international community can do to help‘.
The Director of UN-WIDER concurs noting that:

This study shows that the achievement of the 2030 Agenda, and in particular, the SDGs on no poverty and zero hunger, is under considerable threat. The need of the hour is to bring together development agencies, national governments, civil society and the private sector in a global effort to protect the livelihoods and lives of the poorest of the poor in the Global South.’

The economic consequences of COVID-19: For the first time in 60 years, growth is expected to be zero in the Asian region

 

Figure 1

Figure 2

Grim forecasts of the economic consequences of COVID-19 have now become the norm. In its April World Economic Outlook, the IMF predicts a contraction of world GDP growth that is much larger than the global financial crisis of 2008-2009. Not surprisingly, this has been described as the worst global downturn since the Great Depression. This is the consequence of what the IMF calls the ‘Great Lockdown’, as economic and social activities are sharply curtailed across the world to contain and mitigate the coronavirus pandemic.

The Asian region, which includes some of the most dynamic economies in the world and accounts for more than 60% of the global population, is facing zero growth for the first time in 60 years. The region has endured the oil crisis and stock market crash in the early 1970s, the Asian financial crisis of 1997-98 as well as the global financial crisis of 2008-2009 without suffering a region-wide recession, although a number of countries experienced negative growth. But this time is very likely to be different. Regional growth is predicted to plummet to zero, although other forecasts, such as by the ADB, are less dire. Both the IMF and alternative forecasts concur that there will be a recovery in 2021. Nevertheless, in the short run, the poor and vulnerable in the Asian region are likely to bear the brunt of the sharp growth slow-down, while also bearing the brunt of a public health crisis.

Some of the affluent nations of the world have demonstrated that they are prepared to amass huge fiscal and financial resources, equivalent to more than 60% of US GDP, to ameliorate the rather adverse economic consequences of fighting the coronavirus pandemic. The poorer countries of the Asian region are unlikely to match such firepower. What Japan or even China can do, Cambodia cannot. Such countries will have to rely significantly on external assistance both through bilateral donors and multilateral agencies. Whether such assistance will be forthcoming on a timely and adequate basis remains to be seen.

Beyond COVID-19: ‘The America we need’

Where is the America we need?

 

It was not so long ago that the United States was enjoying its ‘unipolar moment’ as the world’s sole superpower. Communism collapsed and thus obliterated the Soviet Union. China was well on its way to embrace key elements of capitalism as part of its strategy to integrate with the global economy after decades of immiseration as an autarchy. The American political elite felt charitable and confident enough to accommodate the peaceful rise of China. Some declared an ideological victory by proclaiming the ‘end of history’. A US-led liberal democratic future was regarded as the only way forward after decades of fruitless ideological battles between communism and capitalism.

How the status quo has changed! It needed a pandemic like COVID-19 to bring the world’s sole hegemon ‘to its knees’. The world’s most influential nation now finds itself among the most ‘infected’, with over 20,000 fatalities. More such tragedies await an anxious nation led by a feckless leader whose administration bungled its response in dealing with a pandemic. While one is deeply saddened by current developments, what matters is what lies ahead. How the future of America evolves from here matters not just for Americans but will deeply affect the global community given the unique position of the United States in world affairs.

There are those who are doggedly optimistic that America is the ‘comeback nation’. In sharp contrast to this rosy narrative, some note with deep sorrow the death of the ‘myth’ that the US is the best country in the world.

As a leading scholar of international relations reminds us, COVID-19 and its lethal consequences on the American community have simply accelerated the fraying of the American model:

Long before COVID-19 ravaged the earth, there had already been a precipitous decline in the appeal of the American model. Thanks to persistent political gridlock, gun violence, the mismanagement that led to the 2008 global financial crisis, the opioid epidemic, and more, what America represented grew increasingly unattractive to many. The federal government’s slow, incoherent, and all too often ineffective response to the pandemic will reinforce the already widespread view that the United States has lost its way.

Others have speculated that…

As Washington falters, Beijing is moving quickly and adeptly to take advantage of the opening created by U.S. mistakes, filling the vacuum to position itself as the global leader in pandemic response.

The irony is that the pandemic originated in China whose initial missteps converted a local affliction into a pernicious global phenomenon. Yet, China’s assertive measures contained the crisis enabling it to declare victory against an epidemic and allowing it to act as a global citizen helping other nations in distress. The US administration has tried to pin the blame on China by depicting the pandemic as the ‘Chinese virus’, but this smear campaign has been unable to elicit any sympathetic and significant response from the global community.

The agenda of rebuilding the ‘America we need’ rather than the ‘America that we have’ is going to be long and arduous. Assuming that there is a change of Presidency in the November elections, deeply embedded inequities in the American socio-economic fabric would need to be tackled. Whether this crisis will lead to a ‘better America’ remains to be seen. After the pandemic is over, one might well witness a resumption of rapid growth, a resurgent stock market and (eventually) a buoyant labour market, but if it means replicating the deeply flawed structural features of the US economy, then the ‘comeback nation’ will not be the ‘America we need’.

What’s in a language? Social distancing vs safe distancing

People maintain social distance as they shop during the tenth day of the lockdown imposed by the government amid concerns about the spread of coronavirus disease (COVID-19), in Kathmandu, Nepal April 2, 2020. REUTERS/Navesh Chitrakar - RC26WF9AZUOZ

KEEP YOUR DISTANCE – BUT SHOULD IT BE CALLED ‘SOCIAL DISTANCING’?

 

Social distancing – along with such terms as self-isolation, quarantine, stay-at-home orders, lockdowns – have now become part of everyday conversation as governments across the world seek to cope with the COVID-19 pandemic.

The American Psychological Association  observes:

Social distancing means keeping a safe distance (approximately 6 feet or 1.5 metres) from others and avoiding gathering spaces such as schools, churches, concert halls, and public transportation.

Yet, dissenting voices have emerged about the validity of using this term. Used in other contexts, social distancing has deeply embedded prejudicial connotations. In South Africa during the apartheid era, ‘social distancing’ of the privileged whites from blacks and the coloured community persisted for a long time. In the de facto caste system of India, social distancing between upper and lower castes is still prevalent. In general, social distancing is a time-honored means of marginalizing the ‘other’. In any case, social distancing as a term implies the severing of human connections that is so essential to one’s emotional and physical well-being. So, why use it in the context of public policy to respond to a global public health crisis?

Not surprisingly, this usage is beginning to change, albeit slowly. One analyst notes:

On March 20, the World Health Organization said it was officially changing its language. “We’re changing to say ‘physical distance,’ and that’s on purpose because we want people to still remain connected,” said WHO epidemiologist Maria Van Kerkhove announced (pdf) at the organization’s daily press conference. Singapore calls it “safe distancing.” Stanford psychologist Jamil Zaki suggests physical distancing or “distant socializing.” “’ Social distancing’ was the wrong term to begin with,” he said in this  Q&A on Stanford’s website.