Most people alive today have not experienced a crisis so large, so worldwide and yes, so scary, in our lifetime. While we improvise on how to deal with the health related issues, from arresting the community transmission of the virus, to finding effective care and cure for the diseased, to a search for vaccines, the economic consequences of the life disrupted and its long term effects loom large on all our minds.
What are the lessons from history that can provide us with some clues on how to quantify the potential damage to the economy, life and liberty? The misnamed Spanish Flu of 1918 and the Great Depression are two important historical benchmarks. There’s plenty of evidence by economic historians that documents a large and sustained damage to the economy in both. Are we resigned to a fate similar or worse this time around too? Not necessarily. We are better prepared this time around.
There are three big reasons for being optimistic. One, the revolution in information infrastructure has made transmission of useful knowledge about best health practices, results of scientific and medical breakthroughs instantaneous. Two, food security, in terms of the quantity of food available and distribution systems in place, including large countries such as India, is much better than it was a hundred years ago.
Three, and this may be the most important factor, we learnt from the big failure during the Great Depression that while the economy is in pause we cannot allow the physical, human and organisation capital to deteriorate. Again, the institutions we have cultivated in the last hundred years such as the central banks, the digital infrastructure for instantaneous transfer payments to the needy, and the information technology that allows for education to continue using digital platforms are all game changers. Let me elaborate.
Think of a pause, whether this lasts for three months or a year, as a long period of sleep from which we will all wake up. However, while we’re asleep we need to ensure three things, that (i) we stay alive; (ii) that our physical infrastructure such as machines, hospitals, automobiles, planes and trains, roads, electricity, telecom remain well oiled; and (iii) our human capital does not depreciate. Is that possible? Yes, i think it is.
First, i understand that tragically there will be many lives lost to the coronavirus. We will try and minimise this loss of lives, by lockdowns, by extensive testing and social distancing, and hopefully by finding effective cures as we try and buy time for research and scientific breakthroughs. Further, distribution of food and essential items to everyone will also make sure that no lives are lost either to starvation or malnutrition.
Second, we will transform our factories into make-shift production facilities for ventilators, medical equipment and supplies, and use the transportation infrastructure to move essential health and basic need supplies, vulnerable human populations to safe places. We must ensure that infrastructure such as electricity and telecom remain healthy and functional throughout this period.
Third, the degradation of human capital that occurred during the Great Depression will be prevented this time around. We must ensure that our children continue to get education, our workers continue to acquire skills for the 21st century. We will transform our educational and skill building institutions and infrastructure to ensure that human capital degradation does not happen. If we’re lucky, we may even be more ready after this pause because a coordinated and large-scale fixed cost investment in this infrastructure is now a necessity, not a choice.
We’re all in this together no matter where we live. The crisis has reminded us that our vulnerabilities, our fears and hopes, and our humanity are universal. We’re able to rise to the occasion and help, comfort and take care of each other despite our differences and disagreements. And most importantly, we’re reminded once again how connected we all are, all over the world. I remain optimistic that when we wake up from this long sleep, this long pause, we will be ready to take on the new transformed world and its new challenges with vigour and compassion for all.
DISCLAIMER : Views expressed above are the author’s own.