Economics of pandemics: Looking through the wrong lens
Skip to main content
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
The Business Standard

Tuesday
January 31, 2023

Sign In
Subscribe
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
  • More
    • Subscribe
    • Videos
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Games
    • Long Read
    • Interviews
    • Offbeat
    • Podcast
    • Quiz
    • Tech
    • Trial By Trivia
    • Magazine
  • বাংলা
TUESDAY, JANUARY 31, 2023
Economics of pandemics: Looking through the wrong lens

Thoughts

Zulfiker Hyder
21 April, 2020, 05:20 pm
Last modified: 21 April, 2020, 05:22 pm

Related News

  • Euro zone economy unexpectedly grows in Q4 but weak 2023 looms
  • IMF's blueprint for Bangladesh's upper middle income goal
  • IMF eyes 'turning point' for world economy as growth bottoms
  • France economy grew 2.6% in 2022
  • Asian stocks slip as investors eye central bank hikes

Economics of pandemics: Looking through the wrong lens

No policy should be devised at whim, no lockdown relaxed under pressure from vested interests or suddenly overnight. The government should patiently hear out the critics because they help to view the world through a different lens; at times the right lens

Zulfiker Hyder
21 April, 2020, 05:20 pm
Last modified: 21 April, 2020, 05:22 pm
Economics of pandemics: Looking through the wrong lens

In the event of an economic calamity, the general governmental response is often to boost demand and attempt policy stunts to encourage spending in every sector.

With the pandemic holding the sway over our economic activities, the government actions have not digressed much from the classical responses designed to move money through the economy and create or retain jobs to breed or sustain demand. The nomenclature agreed upon for such action is summarised within the three-syllable word 'stimulus'.

However, the unnatural magnitude of the current crisis, the effect it has had on both households and business confidence, the pervading economic uncertainty that it has precipitated raises the question of whether the policymakers are looking at this calamity of epic proportions through the wrong lens. 

The stimulus packages proposed by the government regardless of their quantitative and qualitative adequacy (or inadequacy) characteristically emphasises on mitigating post-pandemic economic impacts.

These programmes inject much-needed liquidity in firms but do not resolve a bigger looming issue: insolvency. The gap between the dip in revenues and plateauing payables – including the new loans that firms have to eventually repay – has to be addressed.

There is also doubt regarding whether the actions such stimuluses are designed to instigate (such as regular pay, employment retention etc.) will encompass the intended beneficiaries in the last yard of the organisational and socioeconomic hierarchy: the low skilled/unskilled worker.

Another question that looms overhead is whether businesses will take the bait. With the future gloomy, global supply chains disrupted and countries imposing higher restrictions on trade to keep scarce resources at home, will the credit be worthy to borrow at subsidised interest rates?

For the government providing loans, guarantees are good as it implies that the firms will have to pay back. It does not implicate immediate fiscal costs (in contrast to direct transfers) but for the businesses, it raises their liability.

With the demand side of our export-oriented industries dwindling in tumultuous waves of an anticipated global recession will the firms and the ancillary industries borrow to regain or retain the pre-pandemic productivity and productive capacity?

News reports are already surfacing on some businesses laying off workers amidst this ongoing crisis without paying off due wages and entirely ignoring government directives to retain workers.

In the clout of such events, the question of whether the right businesses will borrow seems to be a rhetorical one. 

Filing for bankruptcy or adoption of standard rescheduling procedure has been the practice the big players often engage in.

When circumstances are usual and the economy rolls regularly on its wheels these digressions from the ethical norm of paying off debts when it's due do not usually disrupt the macroeconomic balance. However, this time it is different.

Any failure to flag unworthy borrowers will raise the pressure on the budget in the long run and raise it at a time when the government might not have the required solvency to counteract and restore equilibrium.

An eagerness to keep the pressure on the budget low (while risking high budgetary pressures in the long run) at the expense of passing on the burden to a banking system that is already lacerated with its morbid weaknesses can cause more institutional failures than the government has the capacity to handle.

The government should realise that a pandemic can quickly escalate to a full-blown financial crash and a long recession, not just a V-shaped pause. The government should take account of the worst possibilities and should look at the economic crisis through a different lens. 

To this end the government should consider suspending bankruptcy procedures temporarily; doing so will prevent illiquid firms from transferring their assets to the banks. If done right this will force the firms to make attempts to stay afloat on the government subsidised loans now and resume business once draconian restrictions on mobility are eased.

Investment in reengineering workplace and work practices contingent to the preventive measures necessary to reduce the possibility of a contagion once lockdown is lifted should be a prerequisite to being a successful allottee of government assistance and the loans disbursed could be quantised with the firms reported profits in the previous fiscal period rather than leaving it all at the mercy of the much exploited 'bank-client relationship'. 

The government should also acknowledge and recognise that the economy rides on the strength of the middle class.

Unfortunately enough, due to our consumerist attitudes that fed much of our past fast growth, the average middle-income household constituting a salaried individual do not have the savings necessary to see them through a quarter.

These households will need support. Rather than direct transfers, the middle-income households can be issued zero-interest loans equal to a quantum of their quarterly recorded earnings.

A loan is better as it can be recovered. Rest assured it is the hard-working middle-class people who have the least tendency to be a defaulter. Should the government adopt this policy it will reduce the salary burden on the firms and the need to subscribe to government rescue packages.

This can prevent unwanted layoffs and help restore both households and business confidence while allowing the government to redirect the rescue net where it is most needed.

The policymakers across the politico-economic realm should realise that this is not a demand-side recession needing 'stimulus'. The policy challenge now is to allow the economy to shut down, and make sure it does not die in the process. A pragmatic change is needed in the way these financial aid packages are framed and anchored.

In all aspects, there will be an immense need for forbearance from all parts of society. No policy should be devised at whim, no lockdown relaxed under pressure from vested interests or suddenly overnight. The government should patiently hear out the critics because they help to view the world through a different lens; at times the right lens.

 

The author is the founder of Rational Nudge

Top News

Economy / pandemic

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Illustration: TBS
    Think of the poor when adjusting prices
  • Illustration: TBS
    IMF reform suggestions reasonable
  • Dr Salehuddin Ahmed. Illustration: TBS
    Reforms for country's sake, not just IMF loan

MOST VIEWED

  • Abrar Fahyaz. Illustration: TBS
    Why Dhaka's traffic woes might soon get worse
  • Abdullah Hil Rakib/Director,BGMEA. Illustration: TBS
    Bangladesh apparel industry: Steps to move the industry forward in 2023
  • Shaikh Yusuf Harun. Illustration: TBS
    BEZA's roadmap to a smart and developed Bangladesh by 2041
  • Barrister Aiman R Khan/Lawyer. Illustration: TBS
    Why we need an e-marriage and divorce system
  • Illustration: TBS
    Locating opportunities amidst challenges
  • In many cases, RMG female workers end up having to hand over their salaries to their husbands while only 5% of women in the RMG sector are employed in management or have top posts. These are hardly signs of empowerment.  Photo: Mumit M
    So what do we understand by ‘women’s empowerment’?

Related News

  • Euro zone economy unexpectedly grows in Q4 but weak 2023 looms
  • IMF's blueprint for Bangladesh's upper middle income goal
  • IMF eyes 'turning point' for world economy as growth bottoms
  • France economy grew 2.6% in 2022
  • Asian stocks slip as investors eye central bank hikes

Features

Photo: Collected

Tips to incorporate sustainable construction

12h | Habitat
Photo: Noor-A-Alam

How did mud walls find their way into urban designs?

13h | Habitat
Spotify is among the tech platforms that saw record growth during Covid lockdowns
Photo: DW

Could tech layoffs spread to rest of US economy?

17h | Panorama
Leepu realised his love for cars from a young age and for the last 40 years, he has transformed, designed and customised hundreds of cars. Photo: Collected

'I am not crazy about cars anymore': Nizamuddin Awlia Leepu

17h | Panorama

More Videos from TBS

Adani’s shares fell sharply after allegation

Adani’s shares fell sharply after allegation

3h | TBS World
Why was Messi was blocked on Instagram?

Why was Messi was blocked on Instagram?

2h | TBS SPORTS
Who will benefit if the Buriganga Rail Bridge is opened?

Who will benefit if the Buriganga Rail Bridge is opened?

25m | TBS Stories
Bangladesh in better position than Sri Lanka, Pakistan to navigate forex crisis: UCB Asset Management

Bangladesh in better position than Sri Lanka, Pakistan to navigate forex crisis: UCB Asset Management

5h | TBS Insight

Most Read

1
Bapex calls candidates for job test 9 years after advert!
Bangladesh

Bapex calls candidates for job test 9 years after advert!

2
Illustration: TBS
Banking

16 banks at risk of capital shortfall if top 3 borrowers default

3
Representational Image
Banking

Cash-strapped Islami, Al-Arafah and National turn to Sonali Bank for costly fund

4
Photo: Collected
Energy

8 Ctg power plants out of production

5
Photo: Saqlain Rizve
Bangladesh

Bangladeshi university students identified as problematic users of Facebook, internet: Study

6
Photo: Collected
Splash

Hansal Mehta responds as Twitter user calls him 'shameless' for making Faraaz

EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2023
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]