Global economic prospects have sharply contracted in the face of drastic cuts in demand and disruption of industrial supply chains, which is being corrected just on the margins, as life remains in relative doldrums of activity as yet. Chances that economic activity will return to normal are limited, as major economies are having trouble shrugging off the pandemic; infections rise with opening.
What many activists have been underlining is that economies in Africa and beyond should not come back to full activity or relatively unhinged production and distribution on the same terms as before. Many have insisted that countries ought to take up ‘green reopening,’ and sorting out bottlenecks of marginalization of substantial portions of the population which have been worsened by the Covid-19 pandemic. All that concern is valid and urgent but there are limited options for governments to work around those matters.
The most important avenue for governments to sort out painful situations in economic life is to use what is often known as an ‘economic surplus’ to direct it where it is needed most. That is a process known as resource allocation, but the key is that the resources have to be extracted from somewhere, normally by means of taxation. What changes in a Covid-19 situation is that it isn’t an atmosphere where people are basking in the sun and a portion of society has been forgotten so we are trying to take account of it, say.
Covid-19 policy environment is a situation where practically all sectors are demanding ‘something’ from the government, ranging from pumping oxygen into tourism companies and hotel chains, to forgiving or vastly rescheduling payments of loans to small and medium firms, cutting taxes on medical imports, etc. There is also a breadth of job losses that is painfully taking its toll in society by disconnecting education from job markets, not trying to fit in as was the case earlier. Getting a job is now luck, not qualification.
As activists have been talking in general terms about a ‘green reopening’ or one that is focused on urgent elimination of Covid-19 based marginalization of considerable portions of society, it is hard to say what measures they actually expect governments can take. Routine economic wisdom is already being seen in the set of changes in macroeconomic levers in the financial sector, like borrowing rates from the central bank and bank deposit levels so as to enable commercial bank to lend more to clients. Still this can’t in good measure solve the problem as it is the demand that has shrunk, and this in policy terms has no cure.
So the reality is that the government will not be in a position to rectify vast drawbacks in economic activity that come with the threat of Covid-19 outbreaks or continuation in most countries, as the virus is like a sea wave that comes and goes. It means that a more humane global economy has diminished chances compared to the past, as taxable surpluses to help companies, households and population sectors to cope are less available or drying out as compared to the past. There is greater competition, less cushion.