Note to readers: EL PAÍS offers the Future Planet section openly for its daily and global contribution to the 2030 Agenda, the eradication of poverty and inequality, and the progress of developing countries. If you want to support our journalism, subscribe here.
The world is not yet sufficiently alarmed by how the COVID-19 pandemic has affected the global economy. We track daily numbers of infections and deaths, but we do not pay attention to job losses and disrupted lives, especially in the developing world, where the pandemic has barely elicited a public health response.
So far, the impact of the coronavirus on major economies has been four times worse than that of the 2008 global financial crisis. In the second quarter of 2020, US GDP fell by 9.1% compared to the previous three months. , dwarfing the 2% quarterly contraction in the same period of 2019. The eurozone economy fared even worse, shrinking by 11.8%. Several developing countries have seen entire sectors of their economies disappear, as if they had suffered a war. Consequently, a postwar mindset is necessary to plan, invest and rebuild.
Certainly, G20 governments have put in a staggering $ 7.6 trillion (€ 6.2 billion) – and adding – to fiscal stimulus, and major central banks are pumping money to resuscitate the global economy. The US Federal Reserve is spending 2.3 billion dollars (1.88 billion euros) to support businesses and financial markets, far exceeding the rescue package from the 2008 crisis, which amounted to 700 billion dollars (570 billion euros). These measures are all the livelihoods available to many, from laid-off restaurant workers to small business owners, who now have access to unemployment insurance and social security programs.
However, less is said about how the fiscal and monetary stimulus in the richest countries has worsened the situation of those countries with less income. Even before the pandemic, much of the developing world was struggling with historic debt levels, low growth, and climate challenges. As a result, its citizens had fewer safety nets for when the going got tough.
The not-so-secret news headline is that, for large areas of the developing world, the economic impact of the coronavirus is far more devastating than the virus itself
Today, the weakening of policies in advanced economies is causing the currencies of developing countries to appreciate, resulting in a loss of export competitiveness and foreign investment, inflation and economic destabilization. Poor countries rely heavily on informal economies, commodity exports, tourism, and remittances, factors that the pandemic has hit hard. Along with the collapse in oil prices, stimulus packages from advanced economies have left the economies of countries like Ecuador and Nigeria on the brink of collapse.
The policies of rich countries also contribute to higher food prices for their poor counterparts. While supermarket shelves in the developed world are full of affordable food, nearly 700 million people were already starving before the pandemic, and now more than 130 million could be joined by COVID-19. In countries like Uganda the price of staple foods has risen 15% since March. People say they eat less abundant, less diverse and less healthy meals, which is a recipe for future disasters.
Poor people living in low-income countries are generally unable to work from home and, if they do not work, they do not eat. The not-so-secret news headline is that, for large parts of the developing world, the economic impact of the coronavirus is far more devastating than the virus itself.
Consider that, in just six months, the pandemic has erased a decade of progress in reducing poverty. Between 1990 and 2017, the number of people in extreme poverty fell globally from about two billion to 689 million. But due to the pandemic, that total is growing again, for the first time since 1998. More than 140 million people could slip back into extreme poverty this year, with Southeast Asia and Africa being the hardest hit regions.
A mere 3% of what the G20 countries have earmarked for their covid-19 stimulus packages would be enough to avoid these bleak scenarios. If the G20 countries contributed a one-time, voluntary humanitarian tax that raised $ 230 billion (€ 187 billion), infrastructure and communication technologies could be improved to feed the hungry in the areas. rural. For example, an annual investment of 10 billion dollars (8.2 billion euros) over ten years to improve roads and highways and storage facilities could reduce the loss of food for 34 million people. Similarly, a $ 26 billion (€ 21 billion) investment could increase access to mobile phones for nearly 30 million rural residents, enabling them to raise their income through information on crop prices and weather forecasts. .
Foreign aid is a smart investment, but the political will is low. The United States, by far the largest donor to global health and development programs, is donating tens of billions of dollars to pharmaceutical companies to ensure they get a COVID-19 vaccine just for their citizens, even at a time when other countries join forces to expand global access to them. This year, the UK cut its aid budget by 2.9 billion pounds (3.22 billion euros) and merged its development agency with its foreign affairs office. These approaches can be described as myopic.
In contrast, in 2003 US President George W. Bush launched the Presidential Emergency Plan to Fight AIDS to provide antiretroviral drugs to people living with HIV / AIDS in Africa. With a budget of 85 billion dollars (70 billion euros), so far the program has saved about 18 million lives. Furthermore, it has strengthened the general health infrastructure in countries like Botswana, which is undoubtedly helping the country fight the current pandemic.
Similarly, the world economy prospered after World War II because the United States, through the Marshall Plan, revived a war-ravaged Western Europe. Today we face a similar scenario. Any policy intervention should treat the fight against the coronavirus as a war and the worst affected economies as conflict zones. The world must understand the disaster on its full scale and get down to the challenge of rebuilding.
Maximum Bullfighter is Chief Economist of the Food and Agriculture Organization of the United Nations (FAO).
You can follow PLANETA FUTURO in Twitter, Facebook e Instagram, and subscribe here a nuestra ‘newsletter’.