Council on
Foreign Relations (CFR) says that due to rising Chinese labor
costs and advances in robotics, automation, and 3D printing, multistep,
multicountry supply chains will be relooked at in a localized manner. It is
fair to conclude that most political analysts seem to think that there will be a
seismic effect throughout the political spectrum, with more countries looking
inwards and towards the East.
However, I feel it is important
to note that the problems of today were created by the perceived solutions of
yesterday. These problems are multinational and multidimensional. Therefore,
solutions cannot just be localized. For example, global warming cannot be
solved locally. Furthermore, some of the problems that we face now are
existentialist in nature. If climate change cannot be controlled now, we, as a
species, will cease to exist in the future. As such it is important that we get
our priorities straight and make our solutions viable.
We can no longer say that
children are the future and promise more expenditure on education and health,
if everything else we do harms the sustainability of the planet. If COVID-19,
climate change or any other challenge threatens our existence then we need to deal
with those first. And in doing so we must not forget the moral values which have
been inculcated into our social fabric.
Testing times can lead to higher
degrees of tribalism and even alternate interpretations of one’s faith. In this
context I am perplexed to see social media posts calling for the establishment
of authoritarian/military regimes. Furthermore, I am confused by opportunistic
politicians calling for the reconvening of a dissolved parliament. Whilst these
politicians build a narrative about democracy, it is clear that their ulterior intentions
are to destabilize the country. They are aware that a recalling of the
parliament would lead to a minority government which they are eventually likely
to conspire to topple, as per their liking.
The need of the hour remains to
combat COVID-19, and I believe that we can do it within the provisions of our
constitution and through the government apparatus that’s already in place. Any
future constitutional changes will have to incorporate more centralized
mechanisms to combat disasters, be it COVID-19, or any other natural catastrophic
disaster. The current situation also validates why the proposed constitution of
the Yahapalana regime, based on extensive power devolution, will not work
under such testing circumstances. Therefore, any future constitutional changes
should not only reflect ethnic aspirations but also the practicalities of
governance, as well as the basics relating to a more efficient discharge of
administrative functions.
Economic Challenges
Renowned economist Nouriel Roubin
points out that the impact to the global economy from COVID-19 has been both
faster and more severe than the 2008 Global Financial Crisis (GFC) and the
Great Depression. In those two previous episodes, he says “markets collapsed by
50% or more, credit markets froze up, massive bankruptcies followed,
unemployment rates soared above 10%, and GDP contracted at an annualized rate
of 10% or more. But all of this took around three years to play out. In
the current crisis, similarly dire macroeconomic and financial outcomes have
materialized in three weeks.” Nobel Prize-winning economist Joseph Stiglitz
expects unemployment to reach 20% or 30% in the United States. He also brings
to light the deficiencies of the neoliberal model by pointing out that in a
market economy there shouldn’t be a shortage of masks when we have such
incredible demand. Paul Krugman endorses a similar view by comparing the
present state of the global economy to a medically induced coma.
In Sri Lanka too, the economic effects
of COVID-19 is likely to be devastating. Sri Lanka’s foreign exchange earners,
worker remittances, garment exports, tourism and value-added agricultural products
will all see depressed demand. Foreign direct investments, significant portion
of which were Chinese-induced, will likely experience reductions too.
These eventualities are likely to
create huge pressure on balance of payments and the rupee. As borrowing costs
increase further in the backdrop from a lack of liquidity, Sri Lanka would have
no option but to look at assistance from “friendly” nations. This assistance
too will come with us having to compromise little of our sovereignty to satisfy
the geopolitical aspirations of powerful nations. In order to prevent developing
countries falling into failed states, an international debt moratorium would be
useful.
However, all will still not be
lost. Import restrictions will mean people will adopt more home-grown
solutions. As they say, necessity is the mother of invention. We can already
see many innovative concepts coming out from e-commerce. Technological
companies will do better once recovery starts. Concepts such as “work from
home” will probably become the norm in future. Localized food security will
also be a major concern in future. And to this effect we have already seen encouraging
signs of people engaging in agriculture and home gardening.
Although we are yet to determine
whether the economic downturn would be a “V” or “U” curve (or even a possible “L” curve – recession followed by stagnation), I
do feel that Sri Lanka’s recovery would be relatively faster than that of western
countries which are more dependent on intricate financial markets. A
significant 23% of our labor force is engaged in agriculture. Additionally,
China is already showing signs of recovery which means soon our supply lines could
be in operation. Furthermore, Middle Eastern countries have not been greatly
affected by the virus thus somewhat buffering our labor remittance. As we have
seen after the Easter attacks, tourism too can bounce back in a relatively
short period of time.
It is estimated that more than 5
million people in Sri Lanka are daily wage earners. So, the top priority should
be ensuring their subsistence. With the gradual decline of death rates in Western
Europe, countries like Austria and Denmark are already considering reducing
lockdown restrictions. Slowly but steadily, we would have to get our factories
running and our supply chains functioning. If not, the death toll from the
economic consequences could be far more than that from the Coronavirus.
Conclusion
COVID-19 will have devastating
consequences socially, politically and economically on our societies. The best-case
scenario is that the virus will disappear as quickly as it appeared, or we will
find an antidote. It is expected that an antidote would take a year and a half
at minimum, to formulate. If the virus takes a long time to disappear, we would
have no option but to learn to live with it. We would have to continue the
social distancing policy and somehow develop an exit strategy whereby we can
integrate industry by industry, or sector by sector, back into the economy. The
issue with this strategy remains that with integration the virus can once again
resurface. We have seen similar viruses mutilating and reappearing at a later
stage. We have seen the deaths per day in Western European countries reducing
mainly because of social distancing. Therefore, in order to defeat this virus,
we will all have a part to play; be it small, that part we play can be vital.
This is also a good time to
reflect on policies for the future, and I hope in this regard, subjects such as
sustainability, climate change, global warming and population growth will be
brought to the forefront. We have ignored the wisdom of scientists and
biologists such as Paul Ehrlich for so long, partly because we were in denial
and partly because their predictions have been inaccurate. And now, we see that
inaccuracies in predictions do not mean a that problem at large does not exist.
So now, we need to act. And when we do, let us remember the fitting ending to Albert
Camus’s novel La Peste, in which, while a town celebrates the end of a
terrible plague, Camus says of the chief protagonist, “Rieux knew that this
chronicle could not be a story of definitive victory. It could only be the
record of what had to be done and what, no doubt, would have to be done again,
against this terror.”