Grim choices

Published April 11, 2020
The writer is a professor at the Lahore School of Economics and former vice chancellor of the Pakistan Institute of Development Economics.
The writer is a professor at the Lahore School of Economics and former vice chancellor of the Pakistan Institute of Development Economics.

AS the recent issue of The Economist starkly puts it, the Covid-19 crisis has raised grim choices and trade-offs between ‘life, death, and the economy’ for almost all governments fighting this deadly pandemic: every course of action will impose vast economic and social costs.

In Pakistan, the major trade-offs are difficult to resolve for the following reasons. The first is the trade-off between a complete lockdown and ensuring the survival of the working poor — almost a third of the country’s labour force — and their families. Without access to work, they will have no income to meet their basic needs and the government’s capacity to provide support to them may well be insufficient, which could breed social unrest.

The second trade-off is between a lockdown and allowing limited economic activity to ensure the production and distribution of food and daily necessities. The third is the difficult decision concerning how long to continue the lockdown, which could eventually bring the entire economy to a grinding halt.

The biggest challenge is the distress of the poor.

These trade-offs reflect growing evidence that the more one relaxes or delays the enforcement of a complete lockdown, the more lives and time will be lost in bringing this virus under control. This is the lesson from China, which seems to have finally contained the virus in Wuhan — where local authorities were able to enforce a complete lockdown — against the much higher price in terms of lives lost in Italy, Spain, the UK and the US, which delayed doing so. The fact is that many people may be asymptomatic carriers, and only social distancing can prevent the chain reaction of a spread resulting in rising numbers.

Pakistan has so far been spared the high death toll witnessed in many other parts of the world. Even if the total numbers of those affected (over 4,500) may be a gross underestimate, they are not alarming per se, given the size of the population. Partly, these numbers may also reflect Pakistan’s having enforced and implemented a partial lockdown in major cities and towns more sensibly than in neighbouring India. There must, however, be real concern that, of those tested, as many as 15 to 20 per cent have tested positive, even in rural areas. No wonder the health ministry has suggested that the numbers could rise to 50,000 by the end of April. Some numbers emerging from recent studies are suggesting 20 times this number by the end of May.

It is therefore becoming increasingly urgent for the government to spell out its overall strategy as well as the criteria on which it will decide what economic activities are to be allowed.

On this critical choice, the government has not yet, unfortunately, come up with a convincing rationale. The recent measures announced to revive the construction industry is a case in point. If the aim is to create jobs for daily wage earners who have been most seriously affected by the lockdown, these measures would certainly help, but in the process, even the limited lockdown in urban areas will become extremely difficult to implement.

This is because the construction industry has very strong backward and forward linkages with the rest of the economy, encompassing industry, imports and services. One would need to open up these sectors as well, if the construction industry is to function. Has the government thought through the consequences of this for the possible spread of the virus?

These piecemeal measures point to the need for an integrated strategy that clearly weighs each policy step the government takes and the trade-offs involved as the situation changes. It must also realistically weigh the extent to which measures taken by the government have been successful, for example, in delivering income support to the poor. This strategy must also take into account where a lockdown is possible and where it is not and adjust accordingly. In the case of the latter, the emphasis should be on ensuring safe working conditions.

The biggest challenge the government faces is the increasing distress among the poor who find themselves without wages and incomes. With hardly any savings, they can barely meet even their basic dietary needs. The income support promised to them by the federal and provincial governments is taking longer than envisaged and the mood of affected people in urban areas is taking a violent turn in some cases. The government needs to review the situation very soon once all the welfare payments have been made. In making its choice, it should first bolster its resources and mechanisms to provide the needed support to these people, rather than prematurely relax the lockdown under this threat.

At this juncture, the cost of the pandemic must not be underestimated.

The writer is a professor at the Lahore School of Economics and former vice chancellor of the Pakistan Institute of Development Economics.

Published in Dawn, April 11th, 2020



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