By Lars Hein and Daud Khan
WAGENINGEN, Netherlands / ROME, May 5 2020 (IPS)
Globalization has been a driver for increased prosperity world-wide, but it has been in reverse in the last years due to the growth of populism in the USA and Europe. The COVID-19 pandemic may well provide further momentum to increasingly national-interest oriented policies in the west.
Nevertheless, a common response to COVID-19 is needed, where rich countries support developing countries in alleviating the impacts on the poor. COVID-19 offers an opportunity to revive collaboration world-wide, but the public and political leaders in North America and Europe need to broaden their perspective on mitigating the pandemic’s impacts.
The last decades have seen the emergence of a highly interlinked world. There has been a massive increase in global trade, travel and tourism and this has brought major benefits to most of the world’s population with incomes rising and poverty dropping.
However, as with all such major trends there have also been losers in the rapid process of globalization. In developed countries, income inequality which had been falling since the Second World War, started rising again. Combined with this was a growing resentment from workers who were unable to shift out of dying industries, such as steel and textiles, where imports from developing countries were better and cheaper.
The COVID-19 pandemic may well be the last nail in the coffin of globalization. Firms in USA and Europe will step away from the long supply chains and just-in-time deliveries that helped drive down costs. All countries will attempt to build up production of “essential goods” including medical supplies and possibly even food items
The globalized system has been increasingly under threat for the past several years, particularly from populist parties working on fears and resentment of those who feel left behind by globalization.
The COVID-19 pandemic may well be the last nail in the coffin of globalization. Firms in USA and Europe will step away from the long supply chains and just-in-time deliveries that helped drive down costs. All countries will attempt to build up production of “essential goods” including medical supplies and possibly even food items.
All this will impact trade, especially from developing countries. At the same time credit and investment flows will be largely focused to helping domestic enterprises in developed countries with little left for flows to developing countries.
This reversal of globalized production chains is bad news for developing countries, coming at a time when the medical emergency responses to COVID-19 are drawing heavily on public and private resources, and lockdowns are hitting output and employment, both in the formal and informal sectors.
While globalization has many faults, it is useful to understand it did allow both developed and developing countries to substantially raise living standards. But much was built on the backs on workers in developing countries.
Many workers, often women, worked for long hours in unhygienic and unsafe factories producing clothing and manufactured components; in Africa, thousands toiled in mines to extract minerals needed for production of laptops and smartphones.
These workers were the silent victims of globalization who only came to the news when there was a fire in a garments factory or the collapse of a mine shaft. They are better off – many above the poverty line – but it remains a grim existence with the risk that even a small shock will send them spiraling back into poverty and destitution.
With the pandemic likely to lead to severe recession in the USA and Europe, much Government attention will turn to supporting those affected in their own countries and within the EU. This will certainly be the case in the USA where the coming presidential election will find the Republicans beating the drum of America First.
But there is likely to be similar rhetoric across Europe. Many have learned from their handling of the refugee/immigration issue that solidarity does not win votes. The economic impacts of COVID-19 are particularly high in Southern European countries.
In the coming year, a lot of the political energy in the EU will be wasted on a debate on how to balance support for dealing with the impacts of COVID-19 and pointless transnational funding of outdated institutional and economic models. Despite this political turbulence, efforts to alleviate the economic impact of crisis in OECD countries will take off. These will include increasing credit to businesses and the self-employed, delaying tax collection and ensuring basic income support.
However, in the emergency, there is hardly any mention in the policy and public debate of the impacts of COVID-19 in developing countries, let alone the economic impacts on the poor in these countries. But turning the backs on developing countries will be an epochal mistake for the USA and Europe for moral, economic and political reasons.
It is quickly becoming clear that the economic and social impacts of COVID-19 in developing countries will stretch far beyond the immediate medical and social costs. Currently, the WHO is reporting some 255,000 deaths from COVID-19 globally, and more than 3.6 million confirmed cases.
These numbers are very likely to underreport cases and fatalities in developing countries, where COVID-19 is rapidly spreading, but medical and testing equipment are in short supply. However, the secondary impacts may well go far beyond these primary effects. Hundreds of millions of people, many of who work in the small scale services sector will suddenly find themselves without jobs.
Traditionally, many of these people relied on informal networks in time of stress and hardship. However, safety nets that work through family and friends are unlikely to be sufficient: many relatives that could otherwise provide support will also have lost their job.
Family relations may be under strain from the lock-down: a doubling of domestic violence has been reported as a consequence of people’s confinement to their houses and neighborhoods in combination with job losses – putting further strain on social networks. Many of the poor will lose an important part of their savings to cope with the current crisis, affecting all phases of life including schooling, marriage and pensions.
Throughout developing countries, government, NGOs and private charities are rapidly gearing up to meet the immediate food and medical needs of the poorest and vulnerable sections of the population. But what is needed goes beyond the life-saving relief and survival support that is currently being offered.
Governments in developing countries will soon need to start to think about what are the key next steps to minimize damage to their economies and societies. In spite of the current crisis, it is crucial that OECD countries reach out to these governments and offer their support: the challenges to rebuild institutions and economies will exceed the capacities of many developing countries.
The support needed is diverse. Clearly, in the short term there is a need for medical assistance and, in the poorest countries, food support. This is immediately to be followed by debt relief – government and companies need to be able to survive the crisis so that economies can be built up quickly when COVID-19 has started receding.
A main priority for the poor in developing countries relates to reentering the labor market. In the short term, increased competition for jobs can be expected, potentially affecting pay levels. In addition, there is a need to rebuild financial buffers for events such as funerals, weddings and sickness, and for old age; ensure the continuation of education opportunities; address domestic violence, and sustain the psychological health of those affected by COVID-19 or its indirect impacts.
These responses would need to involve a broad range of national and multinational bodies including the IMF and UN agencies, NGOs and development aid agencies. Given the complexity and scope of the task, substantial funding and careful planning and coordination would be required. Also the private sector should take its responsibility. Potentially debt relief for companies could be made conditional on assisting employees coping with COVID-19 impacts.
Unfortunately, there is as yet very little attention in the West for mitigating the impacts of COVID-19 in developing countries. There is very little if any debate on how developing countries can be assisted in dealing with the various impacts of COVID-19.
Nevertheless, a slow response will only exacerbate the economic and social aftermath of the crisis in these countries. We are at a turning point: poverty reduction, pandemics, climate change and other global challenges require immediate and coordinated responses.
The COVID-19 crisis offers a choice: rebuilding global collaboration based on shared interests, education, respect and support for those in need, or an increasing focus on own short-term interests that will only lead to building up the next crisis and reduce capacities to cope.
Hence, we call for an urgent start of the debate, in particular in the West, on the various efforts needed to deal with COVID-19 focusing on those that need this support the most, i.e. the poor in developing countries.
Lars Hein is professor in environmental systems analysis at Wageningen University, the Netherlands. He worked in over 30 developing countries as UN staff and while employed in the private sector.
Daud Khan is a former senior United Nations official who now lives between Italy and Pakistan. He read Economics at the London School of Economics and Oxford University where he was a Rhodes scholar. Khan holds a degree in Environmental Management from the Imperial College of Science and Technology.
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