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ABSTRACT
Faced with cruel dilemmas posed by the COVID-19 pandemic, many developing countries have been reluctant to impose a strict shutdown, and even when they did they have tended to relax it prematurely. This is a manifestation of the way most policymakers continue to be guided by the single-minded pursuit of economic growth even if at the cost of human misery. This paper argues that there is a better way of handling the pandemic – one that places human capability at the centre of policymaking. The proposed strategy consists of a judicious combination of three types of policy instruments: (a) physical distancing through economic shutdown, as a means of containing the spread of infection, (b) bold measures of economic support, especially entitlement support to households, who are facing the spectre of hunger as a consequence of economic shutdown, and (c) an effective system of public health support, as a means of ensuring that the economy can be reopened ‘safely’. While all three instruments are important, special emphasis is given on the role of entitlement support, in the form of income protection for households who have lost their livelihoods. The specific empirical focus is on Bangladesh, but the arguments have more general validity.
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Acknowledgments
The author would like to thank Dr. Imran Matin, Executive Director of BRAC Institute of Governance and Development (BIGD) and Dr. Shamsul Alam, Member (GED) of the Planning Commission of the Government of Bangladesh for inspiring him to prepare this paper. A special word of thanks is owed to Shahadat Siddiquee and Zeeshan Abedin for the invaluable research support provided by them. The author would also like to acknowledge his indebtedness to an anonymous referee for valuable suggestions and the following persons who were kind enough to read and comment on various drafts of the paper – Imran Matin, Mohiuddin Alamgir, Rizwanul Islam, Monzur Hossain, Rajiv Chowdhury, Mushtaq Khan, Atiqur Rahman, Mohammad Mofidul Islam, Sadiq Ahmed, Zaidi Sattar and Muhammad Muqtada. The author benefitted greatly from their comments, and also from a very instructive conversation he had with Dr. Zafrullah Chowdhury of Gonoshaysthaya Kendro; however, the usual disclaimer applies. Finally, the support provided by the International Growth Centre (IGC) and the BRAC Institute of Governance and Development (BIGD) is gratefully acknowledged.
Disclosure Statement
No potential conflict of interest was reported by the author(s).
Notes
1 It is sobering to note that on the very day (31 May, 2020) the Government of Bangladesh allowed significant relaxation of economic shutdown, with a view to reviving the economy and restoring livelihoods, the country recorded the highest daily levels of both new infections and COVID-related deaths. See, https://www.thedailystar.net/coronavirus-deadly-new-threat/news/highest-number-covid-19-deaths-reported-day-40-die-total-infected-crosses-47000-1906948.
2 There are other measures too, such as regular handwashing, wearing masks in closed environments and maintaining a healthy life style, which are also important for containing infection. We are focusing here on physical distancing through economic shutdown because of its enormous economic impact.
3 For reliable evidence on the properties of the novel coronavirus and COVID-19, see Verity et al. (Citation2020) and WHO (Citation2020). It must be remembered, however, that the evidence is it itself evolving and some of the parameters reported below may change over time.
4 An alternative possibility is that the virus might mutate into a variety that is far less lethal so that we can live with it (like the coronaviruses that cause common cold). But we cannot bank on that happening.
5 For a lucid discussion of the concept and relevance of herd immunity in the context of the current discourse on coronavirus, see O’Grady (Citation2020).
6 Whichever path is chosen, success depends on controlling a parameter called the virus’s basic reproduction number denoted as R0, which stands for the average number of persons that can be infected by a single infected person. As R0 falls, so does the rate of infection; and when it becomes less than 1, it heralds the gradual demise of the virus, as fewer and fewer people will be infected over time and eventually the virus will find no way out. For a simple exposition of the meaning and significance of R0, see Fisher (Citation2020).
7 The total number of estimated deaths depends on the peak value of fatality rate, which in turn depends on two parameters: the value of infection rate obtaining at the time the threshold of herd immunity is reached and the infection fatality rate (the percentage of infected people who die because of infection). Since the novel coronavirus is so new, scientists do not yet have firm estimates of either of the two parameters. Based on the evidence available so far, their best estimate is that somewhere between 50 and 70 percent of the population will have to be infected if herd immunity is to be achieved through the natural path. The value of infection fatality rate is also uncertain (Llyod Citation2020), but a conservative estimate would be around 0.6 percent, based on the experience of Wuhan, China. By applying this fatality rate to the lower end of the infection rate associated with herd immunity (50 percent), it can be estimated that at least half a million people will die in Bangladesh (168 ml 0.5
0.006) if the epidemic is allowed to run its natural course.
8 The effect of distancing is thus akin to that of low population density. Technically, it amounts to reducing the basic reproduction number R0.
9 The term ‘distress mortality’ is used here as a shorthand expression for all kinds of distress caused by lack of entitlements, including pangs of hunger, morbidity and mortality.
10 In this and the ensuing analysis, “final” means the point at which the epidemic comes to an end. As discussed earlier, this will happen when the threshold of herd immunity has been reached either through community transmission or with the help vaccination.
11 The way the curves have been drawn suggests that as the stringency of distancing rises the fall in infection mortality more than compensates for the rise in distress mortality so that overall mortality falls. But this need not be the case. The rise in distress mortality could in principle exactly offset or even overwhelm the fall in infection mortality, in which case the curve will be either horizontal or upward sloping instead of being downward sloping. But none of this will alter the substance of our argument. For our argument to hold, all that is needed is that the gap between the two curves widens with the stringency of distancing.
12 The centrality of public health support has been stated eloquently by Eichengreen (Citation2020): “In the fight against the Covid-19 pandemic, economists, economic policymakers and bodies such as the G7 should humbly acknowledge that “all appropriate tools” imply, above all, those wielded by medical practitioners and epidemiologists.” (Emphasis added)
14 The situation prevailing on May 31, 2020: “A total of 11,876 samples were tested in 52 labs across the country in the last 24 h.” See, https://www.thedailystar.net/coronavirus-deadly-new-threat/news/highest-number-covid-19-deaths-reported-day-40-die-total-infected-crosses-47000-1906948.
15 This test was developed by the Gonoshaysthaya Kendro initially as an antibody test but was subsequently modified to serve as an antigen test as well, and is currently undergoing validation assessment.
16 The information related to the G-Rapid Dot Blot test reported in this paragraph was obtained through personal communication with the scientists involved.
18 The reach and scope of entitlement support is discussed in section V, where we estimate that nearly half the population will need entitlement support for a prolonged period.
19 Organisational improvement encompasses many dimensions – for example, (1) training a large cadre of health assistants and/or and lab technicians nationwide to do millions of tests per month, (2) improving operating procedures with respect of health and safety during sample collection, optimal processing and analytical protocols that need to be maintained to ensure reliable results, (3) monitoring and evaluation of training, supply chain and quality, (4) ensuring compliance with testing, (5) governance structure, and (6) contact tracing.
20 It is obvious that Bangladesh has yet to meet either of the two conditions at the time of completing this paper (June 1, 2020). The rate of infection is still rising – the peak is nowhere in sight. And the proportion of population being tested is still pitifully low (as noted in section III). And yet one observes with consternation that the government decided to relax economic shutdown significantly starting from May 31, 2020, as if the first phase is over. Though well-intentioned, this pre-mature reopening of the economy could cost the country dearly. It will not only cost more lives as infection spikes ever more strongly, increased fatality might eventually oblige the government to reimpose shutdown even more harshly than before, thus prolonging the agony. Instead of treading such a dangerous path, the government should focus on fulfilling the first two conditions, so that safe re-opening can be possible in about three months from now.
21 For an intuitive justification for adopting the two-sector approach towards COVID-response, see Krugman (Citation2020). A more technical analysis is provided by Guerrieri et al. (Citation2020).
22 The broad definition includes not just production but also transportation and distribution networks constituting the supply chain of the food sector, as well as ancillary services such as public administration, public utilities and financial intermediation, including both banks and microfinance institutions, that are needed to support both production of food and its supply chain. All these activities must be allowed to operate in a relatively unencumbered manner even in the first phase.
23 For evidence based on large-scale rapid surveys, see PPRC-BIGD (Citation2020) and Ahmed et al. (Citation2020).
24 Apart from timing, the treatment of smaller and larger enterprises will also have to differ in terms of content. For smaller enterprises, the grant element will have to have precedence over loan, while for the larger enterprises the opposite will have to be the case.
25 It might be argued that the very first package – aimed at the export sector, mainly the garments industry – was actually a kind of entitlement support in disguise since the purpose of the support was to enable the firms to pay salaries to their workers. But it is not at all clear why, in any comprehensive scheme for entitlement support, protecting the entitlement of garment workers should receive priority over protecting the entitlements of other segments of the society, especially workers in the informal sector.
26 This is in sharp contrast with the approach adopted by some other countries, for example, India. While there has been well-deserved criticism of some aspects of the response by the Indian government, at least they got the sequence right. The first economic package it announced was focussed entirely on protecting the entitlements of people who had to stop working because of the shutdown. This was followed by a package aimed mainly at small and medium enterprises.
27 As noted in section IV, the core of the ‘essential’ sector is the food sector broadly defined to include production, import, transportation and distribution of food as well as ancillary services such as public administration, public utilities and financial intermediation which are necessary for efficient functioning of the food sector.
28 For a comprehensive discussion of economic support, including enterprise support, that are needed in the context of Bangladesh, see Osmani (Citation2020).
29 This is based on author’s calculation from the raw data of HIES 2016.
30 Author’s calculation from the raw data of HIES 2016.
31 The government has recently prepared a list of 5 million beneficiaries, as part of its COVID response, for providing one-time cash support of Tk. 2500 each, which has already been disbursed. But this list was meant to cover only the informal sector workers in urban areas, whereas we are proposing a comprehensive list for the country as a whole covering all sectors and both urban and rural areas. As discussed below, the list will have to cover nearly 20 million households, accounting for half the population of the country.
32 For details of the policy package, see Osmani (Citation2020).
33 Furthermore, there is no reason to believe that the government will be able to carry out this massive operation more efficiently than those who are already involved in the process.
34 See, for example, the discussion on this topic in Banerjee and Duflo (Citation2019).
35 The Daily Star, April 18, 2020: https://www.thedailystar.net/frontpage/news/theft-subsidized-food-rogue-dealers-political-links-blame-1894459.
36 On paper, the combined financial value of official packages announced so far comes to about 4 percent of GDP. But, as a measure of fiscal burden, this figure is misleading, because the lion’s share of the packages will be delivered in the form of loans, mostly at subsidised interest rates although there are some unsubsidised loans as well. Only the cost of subsidy involved in these loans ought to be counted as the fiscal burden. The government will of course have to make budgetary provisions for the loans to be disbursed; and this will require considerable budgetary readjustment and perhaps expansion of total expenditure in the forthcoming fiscal year. But, for the purpose of counting the fiscal burden from a medium-term perspective, the loan amounts must be left out, especially since most of them are very short-term loans, to be repaid in less than two years.
Additional information
Notes on contributors
S. R. Osmani
S. R. Osmani is Professor of Development Economics at Ulster University in the United Kingdom. He has published widely on issues related to poverty, inequality, hunger, famine, nutrition, microcredit, rights-based approach to development, and development problems in general His publications include Economic Inequality and Group Welfare; Nutrition and Poverty; Macroeconomics of Poverty Reduction: The Case Study of Bangladesh; Poverty and Vulnerability in Rural Bangladesh and Theory and Practice of Microcredit.