Analysts, historians weigh in on creative solutions to mitigate fallout from coronavirus pandemic
Finding ways to secure international food supply chains and freezing various types of debt could stop economies from crumbling as the COVID-19 pandemic drags on, experts believe.
Prof. Scott Reynolds Nelson is a professor of history at the University of Georgia who specializes in the history of labor, capitalism and economics. As many countries continue to juggle health and economic considerations, he is particularly concerned about how the pandemic might affect international trade and food supply chains.
“The scary thing is going to be food in the next couple of years,” Nelson told The Media Line. “One of the things that might happen is a stronger kind of control over long-distance supply chains. You already see that in grain, for example. Basically, grain is controlled by four or five big players in the world.”
The scary thing is going to be food in the next couple of years. One of the things that might happen is a stronger kind of control over long-distance supply chains. You already see that in grain, for example. Basically, grain is controlled by four or five big players in the world
Preventing food security from becoming a serious issue goes hand in hand with strengthening work safety regulations, he added.
“The United States has had really terrible OSHA [Occupational Safety and Health Administration] regulations the last four years,” he asserted. “We’ve seen beef and chicken prices go way up… in part because meat packing plants have been closed. They’ve gone up 30-40% here.”
In this vein, a recent report by the International Food Policy Research Institute (IFPRI) also warns about worldwide supply chains being at risk.
In an article published last week in the journal Science, researchers from the IFPRI revealed that agricultural and food markets have already faced disruptions due to labor shortages emerging from lockdowns, restaurant and school closures, and income losses.
“Export restrictions imposed by some countries have disrupted trade flows for staple foods such as wheat and rice,” the researchers wrote, underlining that all four pillars of food security – availability, access, stability and utilization – had so far been affected.
Poorer countries, where agriculture is more labor-intensive, are more likely to bear the brunt of these disruptions for now, although rich countries are also susceptible. Specifically, meat processing plants have suffered from widespread closures due to outbreaks of the virus.
“It is critical to exempt agricultural practices and actors from COVID-19 lockdown measures to ensure the adequate flow of food from farm to fork,” Rob Vos, IFPRI’s Markets, Trade and Institutions Division director, said in a statement.
In addition to workplace disruptions, trade protectionist measures represent a major risk going forward, according to Nelson.
European nations dropped trade barriers in the mid-19th century following the Irish potato famine, which took place from 1845 to 1849, he explains. Due to repeated crop failures caused by blight, roughly 1 million people died from starvation or other famine-related diseases.
“Famines were happening in Europe every century, but then they go away because the only solution is to lower tariff barriers and rely on an international market to protect you,” Nelson stressed.
His forthcoming book Oceans of Grain: Food and the Fate of Empires looks at how new technologies revolutionized food distribution in the late 19th century.
While food storage has undoubtedly improved since then, Nelson believes that the current political climate and ongoing China-US trade war are dangerously reminiscent of the early 19th century tariff and trade barriers that led to sweeping famines across Europe.
“The international market is fragile,” he cautioned. “All of those things together make me worry about a tit-for-tat tariff war growing out of this, which could lead to famine in many parts of the world.”
On top of the necessity of ensuring food security, economists point to the need for governments to implement pointed and efficient fiscal policy to help businesses stay afloat.
Prof. Leonardo (Leo) Leiderman is a professor of economics at Tel Aviv University and chief economic adviser at Bank Hapoalim, the largest commercial bank in Israel.
“I think everyone in the economic arena, especially policymakers, is in the process of learning how to deal with this strange crisis,” he told The Media Line. “Clearly, our textbooks, theories and policy tools were not prepared for this type of surprise pandemic event.”
I think everyone in the economic arena, especially policymakers, is in the process of learning how to deal with this strange crisis. Clearly, our textbooks, theories and policy tools were not prepared for this type of surprise pandemic event
As the pandemic persists, it has become increasingly clear that small and medium-sized businesses need their own special policies, he said, adding that many countries, including Israel, lack serious data on these kinds of businesses. Because of this, initial emergency aid packages were not crafted with them in mind even though they are crucial for any kind of market recovery.
“I wish that in Israel we had been more developed in this sense,” Leiderman said.
“There is a need for surgical intervention,” he continued. “Some sectors, like restaurants, cultural events – all kinds of services that require face-to-face interaction – all of these are now in lockdown…. We need to specifically help these sectors and do it in a very targeted and pointed way.”
Leiderman, who referred to the economic fallout of the pandemic as being akin to a “great earthquake,” believes that central banks have been doing a good job overall of responding to the crisis by lowering interest rates and providing liquidity. However, he argues that Israel’s government is suffering from bureaucratic hurdles that have needlessly delayed emergency aid and compensation.
“Speed has a lot of impact here,” Leiderman explained. “What has happened is that people have lost their confidence in policy-makers, and when people lose their confidence, the first thing that happens is they postpone their plans. So we’re seeing quite a significant drop in investment, for example.”
At the end of the day, he concludes, policy measures will not be enough to mitigate the economic damage, the ultimate remedy being a return to normalcy brought about by a treatment or vaccine.
Indeed, in a report released in June, the World Bank forecast a 5.2% contraction in global GDP in 2020 as well as the “deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn with fiscal and monetary policy support.”
The report further called for urgent action to cushion the fallout of the pandemic, including strengthening public health systems and implementing reforms to support sustainable growth for the post-COVID world. It also stated that most countries were likely to fall into recession in 2020, with advanced economies projected to shrink by 7%.
Businesses might be a long way off from recovery for other reasons, especially since the long-term health impact of the coronavirus remains shrouded in uncertainty. Still, some industries such as such as digital health, e-commerce and pharmaceuticals have been better able to adapt and even flourish as a result of the crisis, while many others are struggling to survive.
“Some people are able to work [from] home and some people are unemployed,” Dr. Eoin McLaughlin, a senior lecturer in economics at University College Cork in Ireland, related to The Media Line.
What kind of creative solution could immediately help businesses and individuals in need? Freezing their debts, he notes.
“One [thing] that Italy did was to suspend mortgage payments,” McLaughlin said, “like a moratorium on payments or debt. This is something that you don’t really see being talked about, but this would help get us through.”
One [thing] that Italy did was to suspend mortgage payments, like a moratorium on payments or debt. This is something that you don’t really see being talked about, but this would help get us through
Like others, McLaughlin believes that economies will make a full recovery only when the root cause of the problem is treated: the coronavirus.
“The shock is from the virus and not from anything else,” he said.
Of particular concern in the meantime is the pandemic’s long-term impact on the labor market and those who have lost their jobs.
“If you’re unemployed for more than a year, then your skills start to depreciate and it’s harder to get a new job,” McLaughlin explained. “This is going to affect younger generations. [For] people who are graduating from college this year, it’s going to be harder to get a job. So what’s the effect of this in the long run? These are unknowns.”