Printing money can save both lives and livelihood: Abhijit Banerjee

The economy may have come to a halt because of the coronavirus situation, but there is nothing to be greatly alarmed about. Once things are running again, the economy may even gain stronger impetus. There is precedence of this.

The common poor people must be reassured about the future. They must be given cash. Money must be printed. This lockdown period must be used to draw up proper plans for the future. Nothing will happen magically.

These comments were made by Nobel laureate economist Abhijit Vinayak Banerjee. He was speaking on Thursday afternoon at a TV programme ‘Bashai Thaki’ (Staying at Home), jointly organised by the NGO BRAC and Ekattur Television. This professor of economics at Massachusetts Institute of Technology (MIT) joined the programme online. BRAC director Nobonita Chowdhury anchored the programme.

Also participating in the programme were BRAC’s executive director Asif Saleh and economist Ahmed Murshed Mobarak.

The government in Bangladesh declared a holiday from 25 March in order to prevent the spread of coronavirus. On Wednesday, for the fifth time, this holiday was extended till 5 May.

As in other countries of the world, in Bangladesh too industries and businesses have closed down. The economy has come to a standstill. But hunger has not halted. In developed countries, people can survive while the economy is on hold, but what about developing economies like that of Bangladesh?

Such questions were posed to Abhijit Banerjee during the television programme.

Regarding the current dilemma between lives and livelihood, Abhijit Banerjee said that such a question was bound to create panic among the common people. They cannot imagine such a situation will be prolonged. The question is, how much longer? If one could specify that this will be for three months and then we can emerge from the problem, then people would accept this suffering. But the problem is, we don’t know when it will end.

Commenting on the effectiveness of restrictions being imposed in Bangladesh and India, economist Abhijit Banerjee said, “The question is whether these restrictions have failed entirely, or partially. Even if partially, even if it is 60 to 70 per cent effective, that is beneficial and these restrictions are essential.”

But hunger is raising its head amid all this. How long can this impact on the economy be accepted?

Abhijit Vinayak Banerjee was not too pessimistic. He said, “Not much work has been done on this impact. If there is no social crisis, then we have seen that once the economy is released, it takes no time to grow again. The economies of Germany and Japan, after World War II, and the economy of Vietnam after the war there, recovered very quickly. It did not take long. I don’t know how relevant this will be for Bangladesh. But as far as I understand, if we shut down the economy today, that does not mean the economy will remain shut tomorrow.”

Abhijit Banerjee is among the economists who are strongly advocating stimulus packages from the governments. He feels that the stimulus package declared by the Indian government is not adequate.

But will these incentives keep the economy running? The professor replied, “It is not that this is just a matter of 6 months. Loans must be taken from foreign agencies. In the US, they are printing money. People do not have cash in hand. If this continues, they will not buy anything. If they don’t buy anything, then those who sell will have no cash in hand either. That is why they are printing money. But India and Bangladesh are hesitant about this. They cannot decide how much to print.”

Abhijit Banerjee went on to say, “We have created a big dilemma over lives and livelihood. There was no need for this. Money could be printed and both lives and livelihoods could easily be saved. We are still not doing that. We may be fearing that this will cause inflation. Or there may be a different reason. I don’t know why we are not doing this. We need to take firmer steps and go ahead. We need to print money and place it in the hands of the people. It is not about handing it over today. If there is food today, we may survive. But what about the day after tomorrow? The people must be reassured that they will be given money. If there is scope to spend money, the economy will remain alive.”

The question arose about an efficient system that ensures the money actually reaches the people. Citing his own country India as an example, Abhijit Banerjee said that certainly many people will be left out though they should receive the money. But even so, at least 60 to 70 per cent of the poor and the ultra poor will receive the money. Then they will spend this. Some money may go to the wrong hands, but now is not the time to worry about that. It is time to move forward.”

There has been criticism against developing countries like India and Bangladesh for going into a lockdown right from the start of the coronavirus outbreak. How justified is it for us to emulate the steps of developed countries?

In reply, Abhijit said, “If we assume that this situation will persist for quite some more time, then it was justified to call for a lockdown at the outset. It gives more time to think. That is the logic behind the lockdown. I do not see any data that says the stoppage harms the economy massively. It may have slumped now, but that does not mean it will not rise up again. There is the possibility of the economy growing even more than before. I am not so worried about this. It is possible to keep things on hold for three to six weeks. Then something will have to be done.”

Abhijit Banerjee went on to say, “As the virus is spreading slowly in Bangladesh, it will continue to spread for quite some time, that is certain. We will have to think, what next, where will this end? Which areas will we address first? We have to decide on all this. There is the matter of harvesting the crops. We have to do something. We will make mistakes and then turn to new situations. Young people can wear masks and gloves and go to the fields to harvest the crops. This may be a risk to some people’s lives, but we can go ahead and make these mistakes. We have to accept this.

While things are locked down, at least a new substructure can be formulated. It will take time, but we need to use the time properly. It is not that the matter will end within two to four weeks. We have to fight this battle for six months, maybe nine months.

The ways and means of restarting the economy are a matter of time. This may be possible for developed countries, but in developing countries how long can the governments go on assuring people of support?

Even the US is struggling, commented Abhijit Banerjee. There too the people are calling for a lift of the lockdown. No country can keep things shut. We need to best use the time which we have. Young people must be given work which is essential, like cutting the crops. How all this is to be done, needs proper thought and consideration.

Concerning Bangladesh, Abhijit Banerjee’s advice was, “In Bangladesh things will remain closed till 5 May. That means there are 10 days in hand. We can think of how all this can be one, where technology can be used, we can take ideas from those who deal with the supply chain and so on. I do not say that everything can be kept shut. No one can do that. That does not mean we should waste this time.”

Abhijit Banerjee said, “In India the curve of the coronavirus spread has turned downwards, not that all data is credible. I do not have Bangladesh’s data. If the data is credible, then that means there is some time in hand. Let’s put that time to use. Let’s open up where we can. If we err, then let’s fix out mistakes and learn. Let’s use the lessons we learn. Instead of expecting magic to happen, if we concentrate on how to solve the problem, then things will be easier.”