The detrimental effect of the middle class of COVID-19 on our economies

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By Dr. Jagannath Patnaik, Educationist and Motivational Mentor

The trepidation caused by COVID- 19 is sweeping the world. With cases around the world rising day by day questions arise in our minds; fear and uncertainty have taken control of our lives, be that as may people are still keeping faith and displaying courage to give strength to their loved ones. However, uncertainty about the future is wiping off smiles as days, months and quarters are fleeting by.

As news of a novel virus- COVID 19 emerged in China in December 2019 and when the Director-General of the World Health Organization (WHO) declared it a pandemic- countries have closed their national/international borders, enforced strict social isolation and quarantine procedures, and have increased testing for the virus. Travel has almost ceased worldwide, businesses have closed and economies are almost collapsing. Yet it seems the virus continues to spread, and health care systems are being overwhelmed. Why are some countries responding better than others?

The most affected persons in this shut down are those who live and work in low- and middle-income countries who have held their collective breath. As the single red dot on the world map morphed into red dots in almost every country in the world, the enormity of the problems faced by all countries especially those with serious economic and health resource challenges became evident. India is witness to the biggest lockdown of people in the world since it was announced. As many as 1.3 billion people were confined to their homes in an attempt to cease the spread of COVID-19.

While many Indians accepted new terms and practices like “social distancing,” many didn’t and continued to go to public places which led the government to enforce a complete lockdown. In our states, police personnel has been tasked to enforce this. After much public pressure, schools, colleges, and universities have shut down indefinitely.

In many countries the direct impact of COVID-19 is much lesser than the impact of the lockdowns – this is an economic and social crisis, not just a health crisis. The middle-class may shrink as the world battles the biggest health scare in a century. The tax-paying, quick-footed, clever, and sometimes crooked salaried middle-class keeps the giant machine of the economy moving while the rich pump in money and the poor the muscle. The middle never identified with the poor because it wore its education on its sleeve. It aspired to be identified with the rich but it couldn’t afford the perfume. The middle is left in the middle with a little bit of this and a little of that but nothing ever complete enough, to nurse a grudge for a lifetime. While everyone knows it is clear that the middle-class is the stomach of the society, consumer of all human industry, and host to bacteria- good and bad. It indeed nourishes the entire body politics but it excretes a lot of excreta in the process. Remember that is disliked universally and the body politics wants to keep a distance from it, flush it away from its sight.

Many organizations took swift action by advising their staff to work from home and schools and colleges were asked to take online classes. The disaster has become so dire so quickly owing, in part, to the legacy of the 2008 financial crisis. Minimum wage, in real terms, is more than forty percent lower than it was fifty years ago. Meanwhile, housing costs have more than doubled since 2000. When people say they live paycheck to paycheck, it’s not that they’re managing their money poorly instead their housing costs are taking up a disproportionate share of their incomes. The result is a slim margin of error: the majority of Indians don’t have savings to spare in an emergency and would need to rely on credit cards, health insurance, or friends and family to come up with the money. We know for low-wage workers, three unpaid days away from a job threatens their ability to buy food for a month or take care of their health.

This is worse than anything anyone has ever seen. We know how to wrap our brains around the bursting of an asset bubble amid yield hunt debt in the housing market, or the end of the dot-com boom but we don’t have practice in dealing with the fallout from this pandemic. We are beginning to see who will be most affected by the economic downturn. The crisis has also been increasing racial economic disparities and the migrant workers who were working service-industry jobs—in restaurants, bars, hotels, malls, construction—and these sectors were the first to shut down, and the least likely to fully reopen in the near term. We always see this during recessions, but this one is likely to be worse.

Beyond the economic tragedy, there is a direct economic impact from lives lost in an outbreak. Families and loved ones lose that income and their in-kind contributions to household income such as childcare. Of note, the distribution of COVID-19 fatalities skews old, which means many of those most likely to die are no longer working and are less likely to be the primary provider for their families. Though less likely to pass away from COVID-19, many working-age adults still fall ill and their families will feel the financial burden as they miss work for days or weeks.

Coronavirus Disease 2019 (COVID-19) is spreading rapidly around the world with devastating consequences on patients, health care workers, health systems, and economies. As it reaches low- and middle-income countries, its effects could be even direr, because it will be difficult for them to respond aggressively to the pandemic. There is a great shortage of all health care providers, who will be at risk due to a lack of personal protection equipment. Social distancing will be almost impossible. The necessary resources to treat patients will be in short supply. The result could be a catastrophic loss of life. A global effort will be required to support faltering economies and health care systems.

Normal life is suspended because of the pandemic. The data of infection and death are unreliable. As regards COVID-19 in India: several cases have been recorded so far but only a few cases are positive or have led to deaths. Yet there has been an extraordinarily uniform policy response: a ‘lockdown’ – despite the pandemic being different in different countries. Lockdowns limit infection by limiting social interactions but also stops the economic activity.It will not be possible to go back to business as usual. At the same time, there is a potential opportunity for reforms that are not only necessitated by the crisis but enabled by it as well.

Given the likely worse prognosis of severe COVID-19 cases in settings with weaker health systems coupled with the higher vulnerability of developing economies to the negative effects of stringent NPIs, the trade-offs lower-income countries face are complex given the ongoing uncertainty in the most appropriate and effective exit strategies.

How should India’s policymakers respond to economic distress? In the current global crisis due to the rapid spread of the COVID-19 virus, it is now more evident that migrant workers in the cities are the worst hit. They have to deal with triple jeopardy now: first, the grave threat of the coronavirus pandemic, second, the heartless neglect of civil society, and finally the hard and disciplinary measures of the state that have rendered them unemployed, hungry, and homeless.

Eventually, we need to go out. Cases will come up but we will build herd immunity.Can India afford to experiment with a different way to deal with the COVID-19 pandemic? Lockdown is not the only way to deal with this pandemic. The prolonged lockdown as the strategy to counter the pandemic in the country needs rethinking; considering the economic loss it entails, including the loss of livelihoods. Is there an alternative strategy?

This is how life under coronavirus will play out over the next year. Coronavirus will likely loom over us until we have an effective vaccine. We need to prepare ourselves for life to be strange for a long, long time. Amid this bitty crisis, a well-resourced government in central or state and organizations should remember the needs of those less well-off. Economies will be devastated all over the world. This is the time to consider debt erasure for most in need. Much more funds will be needed now and in the foreseeable future.

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