Long Story Short: Poverty, Development & Coronavirus

Written by Ryan McGuine //

Poverty and development are intimately related, and COVID-19 provides an example of that connection as it continues to spread worldwide, including to ill-prepared regions like South America and Africa. Combating poverty typically involves short-term, programmatic interventions, while promoting development usually consists of long-term, macro policies. These were long considered two separate fields, but in truth they are becoming ever-more intertwined.

Whereas the obvious solution to large migration flows was once a refugee camp, today’s poverty dynamics are such that the average refugee spends 17 years away from home, and 59% of refugees live in urban areas rather than established camps. At the same time, many of today’s poor countries are on track to achieve significant increases in living standards in coming decades, but rapid growth can leave some behind. The humanitarian and development communities have been working together more frequently to address these new realities. Examples of bridging the divide include Jordan’s “special economic zones,” as well as assistance to West African countries to fight Ebola from the World Bank, an organization historically removed from humanitarian efforts. The COVID-19 outbreak is unprecedented, but these fields prove that it is possible to connect thinking on different time horizons.

According to growth economics, an event like war reduces a country’s level of output by destroying human and physical capital, but output grows at a faster rate after the drop, eventually getting back to the pre-war level. The shocks induced by virus-related lockdowns similarly reduce output, leaving capital intact but unused. A country’s output level before a crisis is important, since growth over time creates wealth, and wealth makes it easier to manage crises that emerge. This is true both between individuals within a country, and across countries — richer countries tend to have more resilient and better-funded health systems, while richer individuals usually have more savings and food stocks to draw on, making them less dependent on daily labor.

Of course, wealth is an imperfect measure of overall well-being, and other factors matter for the ability of countries to respond to emergencies. One of those factors is state capacity — that is, the ability to mobilize financial resources, and to create and enforce laws and regulations. State capacity is often higher where incomes are higher, but this is not always the case. During the COVID-19 outbreak, Taiwan, Singapore, and South Korea have all experienced smaller disruptions to their economies than the US, despite all having a lower GDP per capita than the US. Their governments reacted to early cases with widespread testing and self-isolation, while the US had no test kits prepared before infections spiked.

It is important that COVID-19 is not used as an excuse for more closed and authoritarian governance. While authoritarian governments are good at mass mobilization, democracy plays an important role in assuring credible public information and avoiding policy mistakes. China provides a clear example — during the early days of the pandemic, the government took measures to repress information about the severity of the outbreak, but later took sweeping measures to slow the spread with an efficiency unimaginable in the West. The processes of democratization and building state capacity are difficult, slow, and non-uniform. Nevertheless, they are worth pursuing, since some combination of democratic decision-making and strong capacity is the best route to rapid, equitable responses to crises.

The urgency required by a pandemic renders some typical policy prescriptions, like targeting the poor, or preventing the adverse incentive effects of welfare, unimportant. More crucial is for governments to increase testing capacity, enable social distancing — opening up government buildings and renting out private hotel rooms for quarantine where population densities and intergenerational cohabitation are high — and enact swift fiscal transfers to the poor and economically vulnerable. There are also many global financing needs that warrant immediate attention, like GAVI’s next replenishment, the UN’s appeal for food security funding, and the WHO’s ask to help prevent, detect, and respond to COVID-19.

In the long term, there are numerous things that can reduce the likelihood of similar outbreaks. At the national level, countries should work toward building strong laboratory systems, and epidemiological capacity to achieve sufficient testing and surveillance coverage. All countries face budget constraints, but since a pandemic in one country is a threat to all countries, international cooperation is necessary. One idea is to establish a global health security challenge fund, whereby low-income countries would identify gaps in their outbreak preparedness schemes, pay half of the money to fill those gaps themselves, and receive the difference if they make measurable progress getting started. International collaboration is also necessary to conduct “germ games,” similar to how armed forces conduct war games, and to accelerate research and technology transfer for vaccines and diagnostic tools.

The modern world is complex and highly-integrated, and crises like COVID-19 make clear that poverty and development are intimately linked. Similar to development as a whole, the policy response to COVID-19 needs both immediate aid aspects, and longer term structural aspects. There is plenty of precedence for success against disease — in just the last 50 years, coordinated global campaigns have been remarkably successful at combating malaria and HIV. It is inevitable that there will be future pandemics, but it is not inevitable that they be as deadly as the current one.

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