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The post-Covid economy

Over two million infected and more than 150,000 dead world-wide. That is the toll the new coronavirus has caused at the time of writing these lines.

The pandemic may wind down with most people staying home but the final toll could be considerably higher. The devastation caused by this uncontrollable bug in China, where it was first detected, is relatively moderate. The damage in terms of casualties and the economic shock in West Europe and the United States is much greater. Economic losses have begun to cripple the Western capitalist system with millions already rendered jobless.

If the Western economies are devastated, as it appears, a new world order no one anticipated would have arrived in such disarray that it might as well be renamed as the new global disorder. Unlike other major shifts of power in history, this one is not unleashed by a Genghis Khan or an Adolf Hitler but by a virus of obscure origin. Whatever caused the respiratory epidemic, it spread first in the Chinese province of Hubei, and more specifically in the city of Wuhan with large numbers succumbing to death every day.

In the absence of a remedy, the Chinese authorities placed large areas under curfew to stem the epidemic. As cases started to surface in Iran, Italy and other countries, most governments applied restrictions on the intermingling of people. However, strict measures directed at lockdowns, quarantine and social distancing were too late as the number of deaths mounted to hundreds and then thousands every day. Europe and America ended up suffering a much wider spread of the virus and number of deaths.

The overall situation remains complicated as no remedies are available for Covid-19, and treatment is limited to alleviating the symptoms like high fever and a failing respiratory system. A new vaccine might be available in time but the fear of a new mutation of the virus also persists. Pharmaceutical research in general, and particularly in the advanced countries, needs to overcome the lapse. In addition, the international community needs to cooperate to improve the global reaction and response mechanism to cope with the pandemic.

The opposite is happening as US President Trump has ordered to stop funding to the World Health Organization for being ineffective in the face of a rapid spread of the novel coronavirus.

As the death toll from the pandemic keeps rising, efforts are underway to measure the colossal damage to the global economy and find ways to overcome its free fall in the coming weeks. The widespread economic disaster could very well be the worst the world has ever experienced. Some have rushed to paint doomsday scenarios questioning the potential of humankind to bounce back. Yet, the world could change in ways not foreseen before Covid-19. These could influence social as well as economic patterns. We can only speculate at this stage about those changes.

A possible consequence of the damage to Western economies may be a boost to the so-called Asian century which was already underway with the steadily increasing share of China, Japan, South Korea and India in the global GDP. Looking at the available statistics, Asia has managed to contain the spread of the corona pandemic and may recover more easily from its consequences. We cannot at the same time afford to underestimate the damage to the Asian economies by a plummeting demand in the West that represents half of the world’s GDP. China, which had received the bulk of global outsourcing of manufacturing capacity, could suffer grievously.

Nearer home, it would appear that on account of various factors, notably due to less exposure and perhaps better inherent immunity to infectious diseases, the virus has so far caused only modest damage in South Asia. The region’s vast population has escaped unscathed and its industries can be revived. Here again, problems are likely to arise from a slump in the bigger economies that sustains industrial production and economic development in South Asia. Exports to Europe and North America as indeed to China would be constrained.

The oil producing Gulf region that employs millions of South Asian workers may take longer to recover. We are already witnessing plane loads bringing back immigrant workers who have lost their jobs. Major works in the Gulf region may have to be shelved causing further layoffs of labour from the South Asian countries.

In these circumstances, a country like Pakistan must find ways to stimulate the domestic economy. The government should capitalize on this opportunity to kick-start the construction sector and related industries. Some of the unskilled and semi-skilled labour returning from abroad can be gainfully employed. Pakistan’s agro-based industry needs stimuli for a relatively young domestic market.

The services sector has grown considerably over the last two decades as our textile and garment industries lost their share in export markets to more competitive producers. The retail sector, restaurants and catering activities and tourism have considerable untapped potential which needs incentives as well as infrastructural development.

The incessant clamour for subsidies and bailouts to the conventional manufacturing sector may be justified but this is a time of paradigm shift, to boost sectors which can meet the considerable demand within the country rather than pumping public funds in non-competitive export units. If we cannot come out of the age-old groove, the fifth most populous nation of the world will continue to remain in the category of ‘also ran’. That trend cannot be reversed without placing greater emphasis on vocational training and giving greater responsibility to professionals in public administration.

M Saeed Khalid, "The post-Covid economy," The News. 2020-04-20.
Keywords: Economics , Economic losses , Western economics , Capitalist system , Public funds , Public interest , Construction sector , Social distancing , China , Europe , WHO