OF Discussion Board n°3 – 8 May 2020
Question asked : “What would you suggest as priority actions to reach out to the most exposed to the economic aftermath of the pandemic crisis in developing countries?”
Thanks for those of our contributors who ventured to react to the third question posed in this Discussion Board
Editorial – Squaring the circle between international good intentions and national (weak) institutions
by Virgile Perret & Paul H. Dembinski
|“… a world relief plan is necessary …”
The interdependence between world economic systems and local economies sketches a dynamic world map where no state, no economy, no man is an island. In these terms, the priority actions aiming at helping the developing countries should be interconnected in a nexus of global-local policies.
|“… debt relief or restructuring …”
|“… address the sovereign corporate debt issues of these countries …”
In the short term I would say that it is crucial to address the sovereign and corporate debt issues of these countries. The initiatives implemented so far by the international financial community (for example, IMF cancelled debt repayments due to it by the 25 poorest developing economies for the next six months, the G20’s “Debt Service Suspension initiative for Poorest countries”) are actually going in the right direction.
|“… it can be a chance for African countries …”
|“… less dependent of international trades and financialized globalization …”
When developed countries close their doors and focus on their economy, emerging or developing markets have to find new solutions when international cooperation and trades are braking. To avoid the dramatic social crisis that could emerge consequently, and it is not just a question of cash flow, existing debts of developing countries should be removed and new funding free of repayment. Actions and initiatives of institutions of World Bank or IMF should focus specifically on those countries, as they don’t have the means and skills to support the crisis themselves, with the monitoring of international organizations as UN. In the long time, international cooperation must include in their commitment the ecological and social counterpart to make those economies more resilient and less dependent of international trades and financialized globalization.
|“… support for health systems and minimize disruptions of supply chains …”
Many face the terrible challenge of fighting the virus in densely populated communities and poverty-stricken areas where social or physical distancing is hardly an option. With fewer resources to begin with, they are dangerously exposed to the ongoing demand and supply shocks, drastic tightening in financial conditions and some face an unsustainable debt burden as well. The majority of workers either as wage earners, self-employed or employed by small and medium-sized enterprises are especially exposed. And just as the health crisis hits, the economic crisis is expected to hit these vulnerable population the hardest. We need to continue with essential containment measures and support for health systems and minimize disruptions to supply chains. The actions we take now will determine the speed and strength of our recovery.
|“… a budgetary package of direct and timely aid …”
Jose Luis Fernandez Fernandez
|“… fairer ways of supporting investment … “
Subsidiarity sets the frame. What can we do here in the heart of the developed world to help the world’s most deprived meet their own needs? As Calvin reminds us, any means we use to enrich ourselves at the expense of others counts as theft.
|“… develop proper social safety nest in developing countries …”
1.6 billion workers in the informal economy (about half of the global workforce) are at risk of loosing their livelihoods, according to the ILO.
|“… basic income should be again considered …”
Developing countries will face high unemployment rates accompanied by consequences of climatic problems (drought, other plagues). So, the preservation of the basic-needs level and working places should be in focus. Micro-credits and other local institutional help can encourage new entrepreneurial initiatives and maintain old ones which may provide people with work and/or allow for covering basic needs. We shall also support local initiatives, volunteering, participative institutions, and schools, which have access to information about most vulnerable children and their families. Moreover, we need investments in technology, so that children won’t remain without access to education again in case of further waves of the pandemic, which can cause loss of human capital in future. In most vulnerable areas with high unemployment rates, basic income should be again considered.
|“… international attention to fragile situations …”
You are right to ask this question, but it takes me off-side, given the intense concern for the economic catastrophe right here and the unequal capacity of European countries (North, East, South) to offer State help to protect employment.
|“… local and international solidarity … “
Focusing on humanity, the most exposed should include those, who do not have a voice now and later, including children and unborn tax payers. Human flourishing then includes not only a measure of financial certainty but also feeling physically and psychologically secure and being appreciated by society, all associated with economic revenues. Priority actions by those with the responsibility or the opportunity: governments, firms and individuals, should focus on providing measures in these realms of wealth and health to groups in society with highest needs and risks now and in the not-so-distant future. Local and international solidarity is then a fair and reasonable expectation. Structural improvements to the world’s economic and political fabric may be needed to enable this care and then recalibrate, moving to a world with renewed opportunities.
|“… debt relief …”
Priority actions at national level directed at the most exposed – in areas like public health, support for income and nutrition, support for agriculture, pollution control, etc. – should be decided at national level in developing countries in accordance with national priorities. At international level debt relief for existing debt and the avoidance of new debt associated with financial transfers in the form of loans should be a major part of the global response to the pandemic. The reduction of more than 50 per cent in the face value of German pre-war and post-war debt owed to the victorious allies of WW2 in the London Debt Agreement of 1953 furnishes a much cited precedent. But debt amnesties have distant historical precedents as early as the third millennium BC.
“… the importance to abandon indifference and self-centeredness …”
Pope Francis has paved the way for our reflection regarding the support of developing countries in their fight against the COVID-19 pandemics: debt reduction and relief. So far developing countries have, rather unexpectedly, showed the World capacities to tackle alone the emergency phase of pandemics, however in the future they will need the solidarity of global leaders to recover from the socio-economic consequences of the COVID-19. It will be crucial to understand if governments in developed countries, in particular in the EU and the US, hit hard and suddenly by the pandemics, will be able to explain their electorates, often short-sighted, the importance to abandon indifference and self-centeredness.
Valerio Alfonso Bruno
“… correctly identify the most exposed to the economic aftermath …”
If the country is developing, then maintaining the manageability of the process of overcoming any social crisis is the main task of the government. There are three primary sources of threats to the realization of this task: the imperfection of market regulatory mechanisms, a weak civil society, and the poor quality of managerial culture and state institutions. The combination of these threats can prevent the implementation of the highest priority measure – correctly identify the very ones “the most exposed to the economic aftermath of the pandemic crisis”. The next priority is effective communication with citizens, which will help provide more room for manoeuvre between the need to support business and avoid a social explosion, political destabilization.