Global issues affecting COVID-19 and recovery

CROSSROADS TOWARD PHILIPPINE ECONOMIC AND SOCIAL PROGRESS - Gerardo P. Sicat (The Philippine Star) - September 16, 2020 - 12:00am

How do we recover from a recession and move forward during these pandemic-damaged times?

The review of this important subject has two components: how local or domestic actors (leaders, government, institutions, businesses and households) interact together. The other concerns global issues which we take up ahead.

Global perspective. First, we recognize that global development institutions have been with us for many decades. They render support and assistance, but they are not charity organizations. They are more like lenders and friendly advisers for our actions and decisions.

The multilateral development institutions (World Bank, IMF, regional development banks, and even their associated bilateral institutions, those run by friendly governments) act in concert. Their policies regarding the support they render individual countries are agreed upon by their major owners, the owner countries.

These institutions have also undergone changes in response to scrutiny by member states and have experienced rebirth and repurpose especially after recent global events that have affected their operations.

The institutions have been recapitalized as times and world economic conditions have changed. And, after the challenges of the last financial crisis, these institutions have been re-purposed to be keen to their mandates of assistance.

For instance, as a consequence of the 1997 financial crisis, these institutions have been recapitalized well to serve important economic emergencies to this day.

Because all countries, rich and poor, have been inflicted economic pain by the pandemic, some relaxation of normally stringent standards of assistance would be relaxed. However, this will only be up to a limit.

They are development institutions after all, not aid-giving agencies contrary to common belief. They provide assistance at cost to those who seek help. Assistance, in general, has to be earned through repayment of loans to their borrowers, even if terms are soft and long term.

The other part of the global framework is the politics under which most of these institutions work. In today’s turbulent times, the outcomes of assistance for different countries vary in results.

Global politics is under great stress. Today, the global politics under which these institutions work is under great stress. Signs of this stress is found in “America First”, “Brexit”, trade wars, climate change and a Paris accord without teeth, more intense Middle Eastern wars, and renewed East-West tensions.

All of these indicate that world politics is changing and that single superpower dominance over what to do is being shared by many voices, some disagreeing. Some clarity, or perhaps more disarray, could come out of the US presidential elections six weeks away. The US was the great superpower of the last half century of our contemporary times, but that appears to be on the decline.

Out of this confusion, a multipolar world of several great powers is emerging. Countries are re-aligning to determine how their own national self-interests are affected by the undetermined struggle for supremacy and influence of the principal players.

A victim of this issue is the way the world is the handling the pandemic and the policies to govern the future. A further big problem is action on climate change issues. Almost everyone in the world believes that climate change needs immediate attention from the great powers.

The question that needs to be asked is, considering the importance of the problem, there appears to be no political will to coordinate the global solutions and work together to conquer big problems of the moment.

The vaccine war. The race to find the vaccine to tame Covid-19 and eradicate it is a consequence of the current problem. There is a race among countries and institutions and combinations of companies and nations and scientists. While this is a good sign about the frantic activity to find a cure, there is lack of worldwide cooperation. There is no common plan on how to share or distribute vaccines once manufactured in massive quantities.

While the work to find a vaccine (or vaccines) is important, equally important is how the world will share in its beneficial impact. That issue needs a coordinated plan of action.

This issue is murky. Vaccine availability is sugar-coated by promises of worldwide distribution by the potential producers of it. Vaccine competition has been fostered around individual countries and institutions and pharmaceutical companies. The conclusion is that they would be made available commercially. Countries that are at the forefront, even those under state guidance, might behave like the drug companies, tempted by the profitable options.

Pricing and proper access of all countries are, therefore, likely to be important issues to arise. How high or low the price would depend on the role played by governmental institutions and international agencies.

The most important issues about the vaccine when available is the distribution among countries. As important is the pricing of the vaccine. Ideally, governments should be in a position to provide subsidy in part for that activity so that countries – and ultimately, people – would not have to pay heavily to obtain the cure.

Ideally, the vaccine should be a public good (that is, a good made available at very low cost and very widely, if not free). Governments could help in the production by supporting its production through some subsidy. On a world scale, that is how it should be when the vaccine is found to be effective and made available.

Poor countries should have equal access. But if it is sold at a high price, that price could become the barrier that prevents the poor of the world from obtaining it.

The World Health Organization (WHO), which is the worldwide institution designed to take care of global health issues, has been a victim of the broken international framework in cooperation. Its function and clout in dealing with the problem has been weakened by the announced withdrawal of the United States.

For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.p h/gpsicat/

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