Revitalizing Economic Development in the Aftermath of a Pandemic
Epidemics interrupt a country’s economy, causing temporary closures of businesses, industries, and agriculture. The labor force, which drives all economic activity, is impacted by sickness, death, and recovery from illness. Aside from the need to care for ill relatives, families suffer long term problems if the breadwinner dies.
As the 28 April 2020 PKSOI paper, US Global Stabilization Strategy for the COVID 19 Pandemic points out, the ability to regenerate the economy in the aftermath of a pandemic is an important joint stability function and has an enduring impact on the wealth of a country. Economic recovery requires prioritization through economic stabilization and repair of infrastructure. The level of infrastructure degradation is dependent on the length of the pandemic, impacts from neglected repairs, derelict projects and social destruction from rioting or other activities. Economic activities are a bottom-up process with the majority of attention focused on regenerating local economies.
This paper addresses the salient features of economic recovery: 1) Evaluation Local Economic Drivers; 2) Regenerating Local Economies; 3) Financial Wellbeing and perception; and 4) National Government Economic Incentives. As this paper avers, a little economic assistance at local levels provides the most effect boost for a country’s recovery.
Evaluation Local Economic Drivers
A pandemic not only devastates human life; it also interrupts economic activity throughout an afflicted country. The incapacitation of economic production inflicts direct and indirect shocks to the populace. The direct jolt is the immediate disruption of jobs, supplies, and monetary flow. The loss of employment and salaries causes people to stash rather than spend money. Even if supplies exist, the drop in demand decreases money flow and causes inflation. In this situation, people barter for goods, which fuels a black market. The indirect impact is a matter of public perceptions (i.e., hope and confidence) and psychological trauma, which leads to personal futility and desperation. Consequently, an even greater rate of mortality, through suicides and murder, adds to the toll of the pandemic. An increase in violence can be fueled by desperation.
In the aftermath of a pandemic, economic recovery should comprise two elements: supporting existing economic activities and regenerating activities. Prompt economic action at the local levels arrests the direct and indirect impacts of the pandemic. Every economy has its own unique drivers and essential activities, so US assistance must identify and restore them.
As with any disaster, economic stabilization requires a thorough assessment of existing economic and cultural activities that stimulate the economy. Understanding the specific economic drivers accelerates the recover from a pandemic. For instance, while most cultures have a critical reliance on their supply chains, some cultures may shorten logistical movement of goods and services resulting in a greater impact. Targeting the key drivers that are important for specific locales within a country has the greatest return on investment.
Regenerating Local Economies
Pandemics ironically do not cause immediate mass starvation. Higher than normal mortality rates mean fewer people to feed, and existing reserves of food, and essential items, are sufficient for the immediate period. Farmers, fishermen, and herders are relatively isolated from the rest of society, so they are less susceptible to pandemics. Supply chains may be more susceptible to pandemics, due to the greater integration with the population. This can lead to a slowdown in goods delivery causing a perceived shortage. Perceived scarcity of basic needs can obscure facts, and can lead to theft and wanton destruction from marauding bands.
Equipment repairs and livestock replacement this takes time and therefore a gap in the food supply suffice to regenerate agriculture, fishing, and herding quickly; agrarian impact will be subject to the time of year and the activities that are affected. Prioritizing essential resource generation and protection facilitates the recovery of the economy. Essential resource production will need to fulfil demand and inventory requirements in order to replace expended inventories.
Opening markets may involve repairing or replacing private and commercial transportation. Farmers and fishermen need wagons, trucks, and trains to transport goods to the market. Infrastructure repairs, if needed (e.g., storage, bridges, and marketplaces), which may impede commerce, must receive priority. Delays in opening markets can increase the perceived resource scarcity and increase black market and smuggling activities.
Hoarding of food and other goods is prevalent during a crisis, so investigations of such practices serve to prevent black market, other illicit activities, and inflation. The police are often aware of illicit activities due to tips and experience. Since some policemen may be corrupt (i.e., taking payoffs to ignore illicit activities), assessments and investigations of the police are often needed during an intervention. However, the exigencies of the disaster require their retention for the nonce, so corrective action should wait until the crisis abates.
Financial Wellbeing and Perception
Financial services provide a unique psychological role during a pandemic. These institutions drive economic mechanisms and provide psychological stability to the population. Every effort should be made to keep financial institutions open and to show confidence in the financial system. Financial institutions should remain empowered to use digital payments and other resources, including setting their own daily withdrawal limits in order to manage cash levels.
Financial institutions are always at risk for corruption and illegal activity, which the pandemic compounds. These activities may already be present in the system or as a result of economic fluctuations. Economic assistance may provide opportunities to combat illicit activities. However, the goal should be to stabilize the financial system, and improvements should be secondary—if they do not negatively affect the recovery.
The postal system is another, often overlooked, economic driver. This system is especially vital during pandemics as it continues to move goods and drive the flow of money through the economy. Using proper precautions to prevent the spread of a virus, the postal system can provide needed items to a wide range of citizens. The postal system can also be used to augment the logistical systems.
Economies rely on the velocity of money to drive their economies, so invigorating the circulation of money is essential. During a pandemic, people instinctively hoard money or avoid spending money due to uncertainty. Paradoxically, lower demand can cause a collapse of normal markets, creating deficits in basic commodities. In turn, the price of goods rises which decreases spending power (i.e., inflation). People then resort to bartering and black market activities. To prevent this occurrence, economic assistance should target businesses to stimulate employment. Once people have assured incomes, they begin buying, thereby putting more money into circulation.
National Government Economic Incentives
Directly combating economic effects are done at the local level. At the national level the economic drivers are indirect and should be used to facilitate the local efforts. Understanding the existing national economic system facilitates the regeneration of the economy. Small adjustments at the national level serve to increase the effectiveness of local efforts. Expansive economic policies during or immediately after a pandemic are likely to stymy the recovery. While these policies may be desired, they should wait until immediate economic recovery occurs. If local efforts are proven ineffective and are not able to effectively target instabilities in the economy stimulus maybe required. Stimulus efforts should be used to supplement local level actions.
Understanding the country’s regulatory environment permits adjustments to facilitate recovery. Regulatory changes are dependent on the culture and effects of the pandemic. Boosting the private sector should receive priority since it is more susceptible to the shock of the pandemic. Public sectors, while still important in the economy, typically can withstand a loss in production better than private sectors. Public sectors also generate a lower velocity of money than private sectors, so the private sectors have a greater return on investment from the national point of view.
Improving market factors can facilitate economic stability, through better prices, products innovation, and inventories. Prices of products are likely to fluctuate due to supply changes and psychological perception during the pandemic. Improving public perceptions of resource security and utilizing economic drivers can ensure appropriate prices and production, which are unique to the economy. Perceived resource scarcity can lead to hoarding, price inflations, and illicit activities. The perceived scarcity can have a dramatic effect on inventory levels, and may create future problems as normal reserves are exhausted.
Fluctuations in the economy create opportunities for legitimate and illegitimate activates. Depending on the extent of the disaster and the level of economic degradation, illicit activities are likely to occur and expand if countermeasures are not implemented. Real or perceived scarcity of goods can increase smuggling and black market activates. These changes can lead to counterfeiting and illegal trafficking. Addressing these activities early can prevent them from spiraling out of control. Since illicit activities (i.e., human, arms, and drug trafficking) often have regional and global impacts, combating them is an international concern. Every country experiences illicit activities, so the main goal is to arrest their expansion rather than complete eradication.
Economic development differs among countries, so lesser developed countries are more susceptible to the effects of a pandemic. Economic assistance should not aim to transform a country beyond its level of development prior to the pandemic. The idea is to regenerate existing economic systems and avoid the temptation to remodel a country’s economy. Improvements can occur, but only after the country recovers from the pandemic.
Revitalizing an economy after a pandemic is a dynamic, multi-faceted challenge. An understanding of the afflicted country’s economy and prompt assistance can help avert the disaster of a pandemic from consigning a country to protracted poverty. While some public economic measures are needed to encourage money flow and confidence in the economy, immediate assistance should focus on the private sector, especially in local communities.
Taking steps to mitigate economic degradation before problems worsen can be effective. Managing public perception, availability of necessary resources and economic drivers can mitigate the negative economic effects of a pandemic. Targeting local economies allows for a direct approach to economic events, while managing the financial system and national government incentives can have an indirect approach. Prioritizing activities can create an economic resilience to survive future plagues/pandemics of the future.