Coronavirus is a crisis for the developing

world, but here's why it needn't be a

catastrophe

While countries in east Asia and Europe are gradually taking steps towards
reopening their economies, many in the global south are wondering whether the
worst of the pandemic is yet to come. As economists who work on poverty
alleviation in developing countries, we are often asked what the effects of
coronavirus will be in south Asia and Africa. The truth is, we don’t know. Without
extensive testing to map the number of cases, it’s impossible to tell how far the
virus has already spread. We don’t yet have enough information about how
Covid-19 behaves under different conditions such as sunlight, heat and humidity.
Developing countries’ more youthful populations may spare them the worst of
the pandemic, but health systems in the global south are poorly equipped to deal
with an outbreak, and poverty is linked to co-morbidities that put people at a
higher risk of serious illness.

Without the information widespread testing provides, many poorer countries

have taken an extremely cautious approach. India imposed a total lockdown on
24 March, by which time the country had about 500 confirmed cases. Countries
such as Rwanda, South Africa and Nigeria enforced lockdowns in late March,
long before the virus was expected to peak. But these lockdown measures can’t
last forever. Poorer countries could have used the quarantine to buy time, gather
information about how the disease behaves and develop a testing and tracing
strategy. Unfortunately, not much of this has happened. And, far from coming to
their aid, rich countries have outrun poorer nations in the race for PPE, oxygen
and ventilators.
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In many places, the human toll of the lockdown is already becoming obvious.
Children go without vaccinations and crops are not harvested. As construction
projects stall and markets are shuttered, jobs and incomes evaporate. The effects
of prolonged quarantine on developing nations could be as harmful as the virus
itself. Before Covid-19 rippled across the world, 15,000 children under five died
every day in the global south, mostly of preventable diseases associated with
poverty. It’s likely that many more will die if their families are plunged further
into poverty.

What can poor countries do in the face of this pandemic – and how can rich
countries help them? First, the systematic testing strategies that have been
crucial to containing the epidemic and easing lockdown measures in Europe are
equally critical in poor countries. In places where public health authorities don’t
have information about the spread of the virus and resources are limited, the
response to coronavirus needs to be targeted at active hotspots. In this way,
rather than imposing a universal lockdown, health authorities can identify the
clusters where quarantine measures are required.

Second, developing countries must be able to improve the ability of their health
systems to cope with a potential sudden influx of sick people.

And third, it’s crucial that poor countries are able to guarantee people a secure
livelihood in the months to come. In the absence of such a guarantee, people will
grow tired of quarantine measures and lockdowns will be increasingly difficult to
enforce. To protect their economies from a collapse in demand, governments
must reassure people that financial support will be available for as long as it’s
needed.

In our recent book, written before coronavirus struck but with a title that is now
eerily appropriate – Good Economics for Hard Times – we recommend that poor
countries implement what we call a universal ultra basic income (UUBI), a
regular cash transfer that amounts to enough for basic survival. The virtues of a
UUBI are its simplicity, transparency, and its assurance that nobody will starve.
It avoids the problems of many welfare systems that are designed to exclude the
“non-deserving”, even at a cost to the needy. During a pandemic, when
governments need to help as many people as quickly as possible, the simplicity of
a UUBI could be lifesaving. Reassuring people that nobody will be excluded from
subsistence aid also limits the feeling of existential foreboding that so many
individuals in poor (and not so poor) countries are currently experiencing.

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These ideas aren’t mere fantasy. The small west African country of Togo, with its
eight million inhabitants and its GDP (purchasing power parity) per capita of
$1,538, is working on all these fronts. In addition to testing 7,900 suspected
cases, the country is deploying 5,000 test on a random basis to assess prevalence.
Health authorities will use the results to determine when and where to restrict
peoples’ mobility. The government has also launched a cash transfer
scheme linking an electronic wallet to peoples’ cellphones; it already has 1.3
million people registered and has sent money to 500,000 in the region of Greater
Lomé (the capital) alone.

The good news is that many countries, particularly those in Africa, already have
the infrastructure to rapidly transfer money across a population using cellphones.
Many people already use these systems in private exchanges, so government
schemes based on this infrastructure can be up and running in a matter of days.
If phone data indicates that some regions are experiencing greater economic
distress, the transfer could be more generous in those places.

In fact, the greatest constraint we face isn’t the feasibility of these measures – it’s
the willpower to finance them. Developing countries will need a substantial
amount of help from richer nations if they are to pay for a UUBI. Some fear that
their currencies will depreciate if they act aggressively, potentially spurring a debt
crisis. Richer nations will need to work with global financial institutions to offer
debt relief and additional resources to developing nations. Many developing
countries will need to buy food and medical supplies with hard currency, which
will become increasingly difficult because of faltering export earnings and
collapsing remittances.

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Given the unprecedented collapse in earnings that many people face,

conventional fiscal prudence is perhaps less important now than it was in the
recent past. Now is the time for governments to help citizens and economies by
spending more, rather than less. The governments of developing countries may
need to accept large budget deficits in order to finance a UUBI, at least in the
short term. When countries begin to loosen their lockdowns and resume
production, they will face extremely weak demand. Pledging that cash transfers
will continue for some time in the future will allow people to go out and spend
money when it becomes safe to do so. In turn, this will drive the revival of the
economy.

None of this means that governments should simply ignore concerns about
macro-economic stability. But a clear spending plan that responds to the
immediate shock of coronavirus, in conjunction with a longer term strategy for
how the lockdown will end, offers the best hope for preventing the present crisis
developing into a future catastrophe.

• Esther Duflo and Abhijit Banerjee won the 2019 Nobel prize in economics for
their work on poverty alleviation. They are the authors of Good Economics for
Hard Times