LONDON – The end of the pandemic is finally in sight. This also applies to the rescue from the most traumatic global economic catastrophe since the Great Depression. With the entry of Covid vaccines into the bloodstream, recovery has become a reality.
However, the benefits will not be evenly distributed by far. Wealthy nations in Europe and North America have secured the bulk of limited vaccine supplies and positioned themselves for greatly improved economic fortunes. Developing countries – home to most of the people – need to secure their own doses.
The unilateral distribution of vaccines seems to be worsening a defining economic reality: the world that emerges from this terrible chapter in history will be more unequal than ever. Poor countries continue to be ravaged by the pandemic, forcing them to divert meager resources already strained by growing debt to lenders in the US, Europe and China.
The global economy has long been divided by profound differences in wealth, education, and access to vital elements such as clean water, electricity, and the internet. The pandemic has trained the death and livelihood destruction of ethnic minority groups, women and lower-income households. The ending is likely to add another divide that could shape economic life for years, separating countries with access to vaccines from countries without vaccines.
“It is clear that developing countries, and poorer developing countries in particular, will be excluded for some time,” said Richard Kozul-Wright, Director of Globalization and Development Strategies at the United Nations Conference on Trade and Development in Geneva. “Despite the understanding that vaccines must be considered a global good, their supply remains largely under the control of large pharmaceutical companies in the advanced economies.”
International aid agencies, philanthropists and wealthy nations have come together on a pledge to ensure that all countries have the tools necessary to fight the pandemic, such as protective equipment for medical teams, as well as tests, therapeutics and vaccines. But they failed to back their pledges with enough money.
Leading initiative, the Act Accelerator Partnership – a World Health Organization company and the Bill and Melinda Gates Foundation – has secured less than $ 5 billion out of $ 38 billion.
A group of developing countries, led by India and South Africa, tried to increase the supply of vaccines by making their own vaccines, ideally in collaboration with the pharmaceutical companies that made the leading versions. To ensure leverage, the group has suggested that the World Trade Organization abandon traditional intellectual property protections to allow poor countries to produce affordable versions of the vaccines.
The W.TO. works by consensus. The proposal has been blocked by the United States, Britain and the European Union, where pharmaceutical companies exercise political influence. The industry argues that patent protection and the benefits it brings are a prerequisite for the innovation that creates life-saving drugs.
Proponents of patent suspension note that many blockbuster drugs are brought to market through government funded research, arguing that doing so is a need to put the social good at the center of politics.
“The question really is,” is this a time to profit? “Said Mustaqeem De Gama, Councilor for the South African Mission to the WTO in Geneva.” We have seen governments shut down economies and curtail freedoms, but intellectual property is seen as so sacrosanct that it cannot be touched. “
In the rich countries that have secured access to vaccines, the public health emergency is currently solving the economic disaster. The restrictions that closed businesses could be lifted and bring significant economic benefits as early as March or April.
At the moment the picture is bleak. The United States, the world’s largest economy, has suffered the equivalent of September 11 death daily, which makes a return to normal seem far away. Large economies like the UK, France and Germany are locked again as the virus continues to gain momentum.
After a decline of 4.2 percent this year, the world economy is expected to grow by 5.2 percent next year, according to Oxford Economics. That forecast assumes annual growth of 4.2 percent in the US and an expansion of 7.8 percent in China, the second largest economy in the world where government measures have controlled the virus.
According to IHS Markit, given the spread of the virus, Europe will lag behind as the continent’s economy does not return to its pre-crisis size for two years. An agreement signed Thursday between the UK and the European Union that will keep much of their trade ties in place after Brexit has allayed worst fears of a slowdown in regional trade.
According to Oxford Economics, the long-term economic damage from the pandemic in so-called emerging countries will be twice as high as in wealthy countries by 2025.
Such predictions are notoriously inaccurate. A year ago, no one predicted a catastrophic pandemic. The variables that the global economy is currently facing are particularly large.
The manufacture of vaccines is fraught with challenges that could limit supply while their endurance and effectiveness are not fully understood. The economic recovery will be shaped by psychological issues. After the deepest shock in memory, how will societies exercise their freedom of movement once the virus is tamed? Will lock-exempt people come together in cinemas and airplanes?
Persistent aversion to the human community is likely to limit growth in the leisure and hospitality industries, which are major employers.
The pandemic has accelerated the advancement of e-commerce, leaving traditional brick and mortar retailers in a particularly vulnerable state. If a persistent sense of fear leads shoppers to avoid shopping malls, it could limit employment growth. Online retailers like Amazon have aggressively embraced automation, which means that increasing business doesn’t necessarily translate into quality jobs.
Many economists believe that if the vaccines relieve anxiety, people will head for out-of-bounds experiences, crowded restaurants, sporting events, and vacation destinations. Households saved because they canceled their vacation and talked at home.
“If people’s moods are relaxed and some of the restrictions lifted, there could be a loss of spending,” said Ben May, a global economist with Oxford Economics in London. “Much of this will be about the speed and degree to which people return to more normal behaviors. It’s very hard to know. “
But many developing countries will effectively live on another planet.
The United States has made claims for up to 1.5 billion doses of vaccine, while the European Union has blocked nearly two billion doses – enough to vaccinate all of its citizens and a few more. Many poor countries could wait until 2024 to fully vaccinate their populations.
High debt burdens limit the ability of many poor countries to pay for vaccines. Private creditors have refused to participate in a debt suspension initiative advocated by the group of 20.
The promised aid from the World Bank and the International Monetary Fund has turned out to be disappointing. At the IMF, the Trump administration has spoken out against the expansion of so-called special drawing rights – the institution’s basic currency – and has withdrawn additional resources from poor countries.
“The international response to the pandemic has been essentially pathetic,” said Kozul-Wright of the UN Trade Organization. “We are concerned that we will see the same thing again when the vaccines are distributed.”
One element of the Act Accelerator partnership, known as Covax, is supposed to allow poor countries to buy vaccines at affordable prices, but it collides with the reality that production is both limited and controlled by for-profit companies that face shareholders are responsible.
“Most of the people in the world live in countries where they rely on Covax for access to vaccines,” said Mark Eccleston-Turner, an international law and infectious disease expert at Keele University in England. “This is an extraordinary market failure. Access to vaccines is not needs-based. It is solvency based and Covax does not address this issue. “
On December 18, Covax officials announced a deal with pharmaceutical companies aimed at providing nearly two billion doses of vaccines to low- and middle-income countries. The agreement, which focuses on vaccine candidates that have not yet been approved, would provide enough doses to vaccinate a fifth of the population in 190 participating countries by the end of next year.
India is home to pharmaceutical manufacturers who make vaccines for multinational companies like AstraZeneca. However, according to TS Lombard, an investment research firm based in London, the population is unlikely to be fully vaccinated before 2024. The economy is likely to remain fragile.
Even if masses of people in poor countries do not have access to vaccines, their economies are likely to take advantage of the normalization of richer nations. In a world of inequality, growth can coincide with inequality.
If consumer power resumes in North America, Europe, and East Asia, it will boost demand for raw materials, rejuvenate copper mines in Chile and Zambia, and boost exports of soybeans harvested in Brazil and Argentina. Tourists will eventually return to Thailand, Indonesia, and Turkey.
However, some argue that the ravages of the pandemic in poor countries, largely unchecked by vaccines, could limit economic fate worldwide. If the poorest countries don’t get vaccines, the world economy will lose $ 153 billion in annual output, according to a recent study by the RAND Corporation.
“You need to vaccinate health care workers around the world so you can reopen global markets,” said Clare Wenham, a health policy expert at the London School of Economics. “If every country in the world can say, ‘We know that all of our vulnerable people are vaccinated,’ we can get back to the global capitalist trading system much faster.”
