24/04/20: The distribution of pandemic costs


Efraín Gonzales de Olarte

The unprecedented coronavirus pandemic is presenting us with a series of economic, social and political challenges. There is an ethical dilemma between saving lives and resuming economic activity, others say: between starving or dying of coronavirus. According to statistics: between 2% and 15% of those infected die, more than half are over 60 years of age with previous ailments, on the other hand, more than 190 thousand deaths are already worldwide and the figure could easily double, despite the social isolation that is being practiced.

The problem with the resumption of economic activities, without being sure of a flare-up, is that it could turn into a truly lethal pandemic and there would be millions of deaths. The problem is relatively clear, it is necessary to do everything possible to maintain social isolation until the contagion curve flattens or until the number of infected is decreasing, this can last from three to four months. However, it will have a very important cost: a strong economic recession in all countries, due to the paralysis of its activities, with higher unemployment, lower wages, higher poverty and other psychological and social costs that are difficult to assess.

The biggest problem of this crisis is: how are its costs distributed? How this distribution is equitably, those who have the most should contribute proportionally to their incomes and the poorest should receive income from transfers, during the crisis. But: how do you go about achieving this goal? First, companies must reduce their earnings and support their workers for two or three months, people must reduce their wages and consume less, so that their employers support them. Second, a reprogramming of all debts will be necessary, so that the debtors retain additional liquidity. For this purpose, the Central Bank of Peru has made a very important fund available. Third, we will have to think of an extraordinary tax on profits and high income, to recover the fiscal box. That is, today more than ever a MACRO-ECONOMIC SOLIDARITY is required, to get ahead.

The next step is as or more important than saving economy during quarantine. What to do after such an economic downturn?

The first thing is to learn to consume less and invest more, as the Nobel Prize winner Jean Tirole points out, we have to change some habits, not only to get out of the crisis, but to remember that global warming has hyper-consumerism as a main cause. It has been observed that during economic inactivity the CO2 emission rates have decreased, showing unequivocally the relationship between consumer capitalism and global warming.

The second is to review and control the perverse effects of globalization, such as the increase in inequalities between and within countries and poverty. Third, this pandemic has shown us that a global health system is required to prepare us for future pandemics. Cooperation between states and the integration of their health systems should be on the world agenda. Fourth, seriously rethink reducing informality. This crisis is showing that countries with lower levels of informality can better respond to the needs of the poor and informal population. Finally, we are obliged to think about moral values ​​and about our organization as a society.

April 2020

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