Both lives and livelihoods need to be protected

There is a debate over whether lives are more important of livelihoods. It is a difficult dilemma.

The Nobel laureate couple, Abhijit Banerjee and Esther Duflo, said the biggest problem at the moment is protecting the lives of the people and the major problem in the near future will be to bring them back to work. The next problem will be returning to a normal economy.

We must take care so that the steps we are taking now to save lives don’t become the reason that the people lose their livelihoods in the future, Abhijit Banerjee and Esther Duflo advised.

As the situation worsens, the World Health Organisation (WHO) and International Monetary Fund (IMF) have taken up a joint initiative.

WHO director general Tedros Adhanom Ghebreyesus and IMF managing director Kristalina Georgieva have jointly written an opinion piece: ‘Save lives or save jobs – this is a false dilemma’.

The chiefs of these two organisations said both the protection of lives and of jobs must continue simultaneously.

Making a special call to the countries of emerging and developing economies, they said the protection of public health and bringing people to work have to be done simultaneously, not as an alternatives to each other.

Economy in recession

It will not be easy to protect lives and livelihoods simultaneously.

The IMF has already said the world economy has entered into a recession. The economic crisis will deepen further as the stay-at-home time to protect lives is prolonged.

Abhijit Banerjee said, “I think the war will continue for six months but lives will not be lost to that extent. But the world economy will collapse. The rich countries will stop buying from outside. We will see a big recession. The stock market has already collapsed. The income of the middle class has decreased.”

The consumers stop buying when they see uncertainty in the economy. Their income decreases and they lose jobs. The consumers also fear that they may lose jobs in the days to come.

Overall demands collapse as people do not want to spend their savings. As a result, fresh investment decreases, and new employment opportunities are not created. Recession intensifies further. In such a situation, the main target of economic recovery is to place money in public hands. Various countries have already declared the creation of substantial funds.

The way ahead

The chiefs of WHO and IMF chiefs in their article clearly said the highest priority is to invest in the health sector.

Emergency investment in the health sector includes wages for physicians and nurses, building hospitals and emergency rooms, arranging necessary personal protection equipment (PPE) and awareness programmes such as washing hands regularly.

Targeted assistance has to be provided to protect professions. Such assistance includes cash assistance, subsidy in wages and a arranging short term work.

Special steps have to be taken in those countries where the informal sector is big and people depend on their daily earnings. It is difficult to continue social distancing in such countries.

A big portion of the labour force in Bangladesh works in the informal sector. The first job would be to make plans as to who will need special assistance and what type of assistance.

After determining who will be given assistance, the sources of the funds must be determined and also the means of ensuring the right people receive the money.

A fund of Tk 50 billion for export oriented industries will not be able to boost the economy.

It would not be easy to collect the huge funds that will be necessary. It cannot be arranged only by downsizing the budget. Some money will be saved due to the low price of oil in the international market.

Besides, Asian Development Bank (ADB)and IMF have created special funds.

Some money will come from those organisations. Moreover, economists across the world have recommended printing currency notes, of course taking the inflation into consideration.

Abhijit Banerjee advised India to print currency notes.

How much money will be needed?

Policy Research Institute (PRI) executive director Ahsan H Mansur said a total of Tk 500 billion, which is 2 per cent of GDP, may be required to recover losses caused by coronavirus. Countries like the US and UK have allocated funds of 11-12 per cent of their GDP to recover loss from coronavirus.

Speaking to Prothom Alo, Ahsan H Mansur said about 10 million people have become jobless due to coronavirus in Bangladesh. They have to be fed for three to four months. There will be no food crisis in this country.

But many people will have no purchasing power. Alongside the export sector, there are many small businesses. These businesses have shut down. The government has to pay half of the three months’ rent of small business owners including restaurants, shops and salons. That will provide them with relief and they will not need to shut down their businesses.

Ahsan H Mansur also suggests providing loans on easy terms.

The government can also provide funds to top businessmen on partnership, he said adding the US took such initiative during the recession in 2008.

The government has to adopt a complete package. The recovery plan should not be taken by decreasing budget and diverting money, he warned.

He said the government can increase liquidity in the market by printing currency. Bangladesh Bank will buy bonds on auction from different banks.

Banks will ask for a higher rate if bonds are sold on auction. It will help decrease the interest rate. Initially the central bank can print notes worth Tk 250 billion. This can help stable liquidity supply in the market during the crisis period.

• This report, originally published in Prothom Alo print edition, has been written in English by Rabiul Islam.