Published in The Business Standard on Tuesday 19 May 2020
Economists: Exit should be gradual, selective
The Business Standard talked to senior economists on the government’s policy response to the impacts of Covid-19, on setting priorities in the next budget and the route to economic recovery. Moderated by Dr Zahid Hussain, the discussion was joined by Executive Director of the Policy Research Institute of Bangladesh Ahsan H Mansur, Distinguished Fellow at the Centre for Policy Dialogue Dr Debapriya Bhattacharya and Director General of Bangladesh Institute of Development Studies (BIDS) Dr KAS Murshid. They expressed their views on the effectiveness of the policies taken thus far to overcome the current situation and what else is required. Inam Ahmed, The Business Standard Editor, opened up the discussion. This is the first part of a two-part discussion
Economy had to be shut abruptly in the face of spread of coronavirus, but it cannot restart suddenly in a way that can harm both life and live- lihood, senior economists have said.
Economy has to reopen gradually and selectively, they said at an online discussion arranged by The Business Standard on Friday.
Economist Dr Ahsan H Mansur, executive director of Policy Research Institute, said Bangladesh did not follow any model perfectly in enforcing lockdown and relaxing it.
Lockdown started as ‘general holidays’ allowing people to go to village homes in a cheerful holiday mood and then workers were called back to factories and shops and markets reopened, he said, being a bit critical of the abrupt decisions by authorities and factory owners.
“Thus we have created a recipefor a big spike (in infection),” he said, pointing out that lockdown was relaxed in Germany or other countries after prior announcement made 7 to 8 days earlier, while in our country announcement comes just a day before.
“The question now is will we be able to contain the pandemic or should we give up everything for herd immunity?” the senior economist asked, alerting the policymakers to health, social and economic costs of ‘herd immunity.’
Dr Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue, asked who would bear the cost of herd immunity. “By sacrificing whom we want to protect ourselves?” he posed a question.
He termed the conflict between life and livelihood as ‘false’ as he believed livelihood is not just earning money, it also means health, social and mental securities and many other things.
Economists discuss Covid-19 crisis
Inam Ahmed: I welcome you all on behalf of The Business Standard for joining us. We are organising a series of video conferences where we are discussing different aspects of the current great depression. Dr Zahid Hussain is in the role of the moderator of these discussions. Earlier we discussed the issue from a historical context. Today we will try to see the crisis from the perspective of Bangladesh.
We know that coronavirus has been lowering the growth of Bangladesh and increasing poverty. We will discuss the effectiveness of the policies that are being taken to face the situation and we will also discuss if anything more is needed.
Now I’ll welcome Dr Zahid Hussain to begin the discussion.
Dr Zahid Hussain: Thank you Inam. In the beginning I am thanking The Business Standard for organising this discussion. We have three honourable guests who need no introduction as they are renowned in their respective fields in Bangladesh.
Now I want to directly go to the topic of today’s discussion which is basically the macro policy response to manage the crisis. Generally we can divide macro policy in two parts.
In recent times we have seen discussions only on demand management policy in global fields and in different forums of our country. But in the present crisis, the crisis of demand and supply has evolved together. In the seventies and eighties many new information arrived on supply side economics or supply side liberalisation etc. I think the crisis has put the supply side economy in a new context. So, I want to start with supply side policy response then we will focus on demand management.
“We are talking and analysing a trade-off between life vs livelihood. I’ll say [it is] the view of the epidemiologists that to save life we have to make some sacrifices on livelihood. Esther Duflo and Abhijit Banerjee have talked on this topic. But many have been challenging the concept of this trade-off. I can find two challenges here. One has been raised by Paul Krugman that there is nothing called this trade-off. It will not be possible to save livelihood if you do not save life. He said if we relax lockdown, people will go to their work. It will probably increase employment and GDP growth. But people will stop maintaining social distancing which will increase community transmission of the virus and infection rate and thus, as a result, the lockdown could be strengthened again.”
On one thing, I want to draw your attention, that is, with supply side policy responses we are talking and analysing a trade-off between life vs livelihood. I’ll say [it is] the view of the epidemiologists that to save life we have to make some sacrifices on livelihood. Esther Duflo and Abhijit Banerjee have talked on this topic. But many have been challenging the concept of this trade-off. I can find two challenges here. One has been raised by Paul Krugman that there is nothing called this trade-off. It will not be possible to save livelihood if you do not save life. He said if we relax lockdown, people will go to their work. It will probably increase employment and GDP growth. But people will stop maintaining social distancing which will increase community transmission of the virus and infection rate and thus, as a result, the lockdown could be strengthened again.
What will happen, we will lose the gain that we initially achieved and it will also do no good to the economy. It will only harm both life and livelihood. It would be suicidal.
On the contrary, the other view is life could not be saved if we do not save livelihood. Especially in countries like Bangladesh where the number of marginal people is huge who could not stay at home. If we continue the lockdown it will raise their poverty, malnutrition, and sickness. The pre-existing conditions will be weaker. And it will increase the risk of Covid-19 infection and death. So the thing that we want to achieve by lockdown will be lost because the labour force will be sick staying at home because of hunger. So lockdown will have no use. As a result if we can protect the livelihood it could save life.
So I can see these two challenges. What my question to you is- how the economy could be started again in this situation? What are your assessments? On which position of flattening the curve we are in? Today more than 1,200 people have been infected. In this circumstance, we have to reopen the economy. We have stopped it suddenly but we will not be able to start it suddenly. There is a consensus on this. It has to be done gradually and selectively. How do we go about doing this? I will go alphabetically so I will start with Ahsan Mansur bhai.
Ahsan Mansur: We have not followed any model perfectly. And when we started lockdown we called it general holidays. Everybody went to their village home with a cheerful mood of holidays. Then when they were called back by their employers for work they came back to the garments. And after arriving at Dhaka they realised that it’s a false call and returned back and came back again on April 26. In the meantime, we opened the shops and markets. Thus we have created a recipe for a big spike. We have been observing the impact of the reopening of April 26 in the rise of infected cases after May 10. And I think we will feel the impact of shops reopening after Eid.
So we have really not followed any particular recipe and we have been driven by caution and pressure from different lobbies or groups.
The relaxation of lockdown by the government was unregulated but in Germany or other countries there are pre-announcement that the factories will be opened after seven or eight days but in our country the announcement comes only a day before opening the factories. There was no preparation. So in this situation infection is inevitable.
In these decisions there was a huge mismanagement which caused a big failure in our effort to contain the virus. We have to accept this.
The question now is will we be able to contain the pandemic staying in this stage or should we give up everything for herd immunity? This is the main debate now that is it controllable any more or is it going that way.
Particularly in the societies of South Asia including India, maintaining social distancing is extremely difficult. So, maybe, we are inevitably going forward toward herd immunity. But we have to think about the health, social and economic cost of this.
Zahid Hussain: Thank you Ahsan Mansur bhai, you mentioned herd immunity, but there are some confusions about herd immunity that whether it will really be achieved or whether it will be achieved in six months or one year or two years. Science is not ready with any concrete answers specifically about this. So here we will incur the cost of herd immunity but what will be the benefit is uncertain. So how will we go forward in this situation?
Now I welcome Debapriya Bhattacharya to discuss this question.
Debapriya Bhattacharya: Thank you Zahid bhai. Thanks to The Business Standard too. And also thanks my two seniors here Ahsan Mansur and Murshid bhai and to Inam and his team.
I want to start with the question that Zahid bhai raised that we will incur the cost of herd immunity without having the benefit. I want to add that who will bear the cost of this? This is the most important point. By sacrificing whom we want to protect ourselves and who took the social and political decision to sacrifice these expendable lives that is also a point.
So I want to begin with the question of a conflict between life and livelihood. I think it is a false conflict. What is the meaning of livelihood? It means which provides support for life, which helps to stabilize life. We see in many discussions in Bangladesh the meaning of the word livelihood has been transformed in a narrow way as the activities to earn money. I think livelihood does not only mean earning activities. It also means health securities, social securities, mental securities and many things. I will not agree with you if you say that livelihood only means to open the shops. So it is a false situation. Why? Because everything has gone through a mismanagement, what Ahsan Mansur bhai has said, I think Murshed bhai will also agree with me, the way our garments were opened, our shops were opened, how our transport services were stopped in the name of holidays… my basic question is what is behind these decisions?
If you look at different countries you will see that a team of highly qualified specialists are working with the state leaders. They are not only from the health sectors they are also from different sectors of human sciences. Who are advising the government in Bangladesh? Where is the accountability?
We get different directives from the head of the government, but who have provided the elements to formulate her decisions? A technical committee has been formed of seven or eight members two weeks ago. We have not seen any actions of them to feel confident. So my point is, whatever advice we give, if the government does not have any adequate system to make decisions then there will not be any concrete results. We shall see that the health minister will say that it is not right to open everything even after the announcement of the head of the government. We will see contradictory statements from the health minister and the health services department. Until we are able to create an adequate internal policy making process which will be more transparent and accountable, whatever discussion we do here will be enclosed in this digital sphere. It will not reach the proper place.
I want to add another short point. I think at the present moment lockdown is the right decision. And applying it properly was the only responsibility. And this decision should be made on the basis of a national consensus together with the consultation of social organisations, productive forces, and citizen forces along with the bureaucratic and administrative apparatus.
I think in this moment the question of life, livelihood will get the priority but later we will need a gradual exit plan from the crisis. And there needs to be an interim plan to implement this exit plan. Now the question is- is my country and state ready to do all these things?
Zahid Hussain: Thank you Debapriya. I quite agree with you. The question that you have raised about the lack of coordination and what should be the basis of these decisions? There will be a cost but who will bear this cost? Now we are in a time when the policies are being made on science, information and data. And I’ve seen that with the so-called holidays our banks stopped preparing data. They said they were on holiday and we were not ordered by their management about preparing data. If we labeled it as work from home rather than holidays the situation would have been different.
Now I will go to Murshid bhai who will discuss the topics that Debapriya raised about the mismanagement of the government.
KAS Murshid: Thanks to The Business Standard for arranging the discussion.
In Bangladesh, there is a model. A model of how we do things. We never do anything very well. But at the same time we are also able to get something done. This is our tradition. For example, if you look at any project you will see that it has always been done but not done well. The problem is in this crisis there is no place for this half-done kind of thing. Either you do it, or you do not do it. There is no place for any compromise here because by compromising you are accepting defeat. This is actually the dilemma.
As we have developed this mentality, we think we need a lockdown and at the same time continue our businesses too. But from the health and epidemiological point of view this is not correct. So we have failed to make this balance. All kinds of complications and difficulties are involved in it.
If I say from the point of view of an epidemiologist, the answer is lockdown. From the scientific perspective, the lockdown is the answer. But we can’t implement a lockdown because of all the things that we are well aware of. I was listening to CNN this morning and found that in Atlanta and Georgia they have opened up restaurants. People are sitting there and drinking coffee without masks. And all the public health officials present at the programme, they were sitting out. So, there is something wrong with us human beings. We don’t understand that there is an invisible enemy before us. Now what do we do?
We couldn’t do the first best thing which was the lockdown. Then what is the second best? Mansur bhai said it. That is, we should have a priority, we should have a plan. We need to have that kind of strategy where we will start everything gradually in phases but before that we need a preparation. If we open it without any plan, and then shut down again, people will come and go, that is just scandalous.
So in a situation like this, I am surprised that we are not worse off than what it is. We need an explanation for why our situation is not ten times worse than it is. Maybe there is something there. But I don’t believe in miracles. I don’t think it is too late. Because we have not opened up on a massive scale so far. We have opened only the garments industry. Where is the 90 percent informal sector? How are we going to help them? That is not being considered.
Inam Ahmed: Are we helping the informal sector enough?
KAS Murshid: We are not doing anything enough. What do we mean by enough? It’s a new word altogether.
Debapriya Bhattacharya: What Murshid bhai and Mansur bhai are saying, I have no problem with that. That is we have to open everything gradually with preparation. I want to ask you a more fundamental question.
This Bangladeshi model where there is a binary solution only– of life and death- is there any institutional structure to solve this in our policymaking circle? Whatever consensus we arrive today must be taken by the policymakers and apply that in real action. It’s a very sensitive area. But it’s the prerequisite. In the current situation if we do not discuss that, it will be unfair.
KAS Murshid: I also think so. We have shortcomings, of course. We have a lack of coordination. We have mixed signals. Frankly speaking, sometimes I get the feeling that we have no decision that was needed to be implemented firmly or that no clear roadmap has been created yet. We must go beyond this situation.
In Bangladesh, there is a model. A model of how we do things. We never do anything very well. But at the same time we are also able to get something done. This is our tradition. For example, if you look at any project you will see that it has always been done but not done well. The problem is in this crisis there is no place for this half-done kind of thing. Either you do it, or you do not do it. There is no place for any compromise here because by compromising you are accepting defeat. This is actually the dilemma.”
But I still would say that we do not have the option of a complete lockdown. We must relax it gradually. We must manage it better. There is risk here. But we need to take steps to minimise the risks. Another big weakness we have is our management capacity marred by our indiscipline. So if we open it up too fast, it will be suicidal. In management capacity we need to know who are the people, who are driving the train? I do not know. Maybe you people know them.
Zahid Hussain: The questions that Debapriya has raised are very tough questions. To discuss these we need a separate discussion.
What I can agree with you is that in the present situation we need to make decisions on the basis of scientific knowledge. Epidemiologists talk about harm reduction, we need to have some ways of harm reduction. Mansur bhai you said about the situation in Atlanta where people at least have confidence in their health care system that if they get sick they will be able to have a test or treatment. But here we do not have that option.
Debapriya Bhattacharya: I want to say here that in Atlanta, people are more or less informed but in our country the awareness difference is huge. Here the upper class people are much more aware than the poor. They have less resilience. And we know what health system we have.
KAS Murshid: I want to add another point that I have noticed that people here wear masks in the street. But in America or in London I see people without masks in the street. What I want to say that they have a minimum healthcare system where they will at least get oxygen in the hospital. If we cannot ensure that in our country we should not open up.
Because it will not be helpful if we open up because you and I’ll not go outside. Anybody with a bit of common sense will not take the risk. I’ll take that risk if I am confident that I can get admitted to a hospital if I need to. But right now I have no confidence. If you do not have minimum confidence you cannot open up. Even if you do, you will see that the bankers are not going to the office. Or even if they are there, the work is not going on smoothly. The white collar people will not go to work. So the health system must be brought to a standard level if you want to return to the economy.
Debapriya Bhattacharya: Murshid bhai, you talk about a change in our health system. Now the crisis in the health system is not only felt by the corona related patients, patients with different types of ailments are also facing big problems. We are seeing these news every day.