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Rolph van der Hoeven and Rob Vos are the authors of a chapter* of the recently published book ‘COVID-19 and International Development’. In this blog, they elaborate on their chapter, ...

COVID-19: the disease of inequality, not of globalization

Binyam Afewerk Demena is one of the authors of several chapters of the recently published book ‘COVID-19 and International Development’. In this blog, he and his colleagues elaborate on their contributions to this book. We welcome you to join us for the book launch on March 17 (3:30-5:00 CET) at Pakhuis de Zwijger. Registration is now open.

The COVID-19 outbreak has posed a threat to both lives and livelihood. Because of the strong and interdependent global production value and linkages, coupled with the closure of international borders, businesses, and factories, the economic expectations and forecasts in the early months of the pandemic were generally pessimistic.

The prospect of the world plunging into another major and long-term economic recession comparable to the Great Depression in 1930s and the Great Recession of 2008/9 was on the minds of many economists, governments, international organizations, and citizens worldwide. The attacks on supranational governance and international cooperation were a symptom of an underlying disease – inequality – that has been illuminated by the pandemic. The de-globalization process was driven by increasing inequality, and a dreary lack of trickle-down of the benefits of internationalization.

COVID-19 and globalization

Globalization is a multifaceted concept that describes the process of creating networks of connections among actors at intra- or multi-continental distances. This emphasizes that globalization captures the increased interdependence of national economies, and the trend towards greater integration of different varieties of flows such as information, goods, labour, and capital.

More recently, however, there has been growing discontent and increase in negative sentiments about the impact of globalization. These negative sentiments have manifested in different ways, including through the election of the former U.S. President Donald Trump in 2016, Brexit, and criticism of the World Trade Organization. For instance, Afesorgbor and Beaulieu (2021) argue that the Trump presidency strained diplomatic relationships with close allies, and undermined the rule-based global system, creating uncertainty for the global economic system.

These occurrences constitute a major setback to the pace of globalization, and have set the stage for growing protectionism and nationalism around the world. As van Bergeijk (2019) highlighted, these actors were political. More recently, the principal actor was a virus. The outbreak of the COVID-19 pandemic introduced new health threats to globalization (see van Bergeijk, 2021 for details), emanating from the health risk posed by the contagious nature of COVID-19. In a sense, the pandemic clearly reflects globalization — the virus went global in a few weeks’ time due to the high level of globalization and interconnectedness. COVID-19, however, also relates to de-globalization — the breakdown of international co-operation, and the re-emergence of zero-sum thinking and raw beggar-thy-neighbour polices on the markets for medical productive gear, medical machinery, and vaccines.

We* set out to explore the impact of COVID-19 on the global economic system by looking at three components of globalization: economic, social, and political globalization. The pandemic and the economic policy response to the crisis have impacted these three aspects to different degrees.

  1. Economic globalization

Economic globalization has been conceptualized by means of flows of goods, services, capital, and information in connection to long distance market transactions. Although the pandemic is global, regions and countries have experienced differential effects on various indicators of the economic dimension of globalization. For instance, merchandise trade contracted for the global economy, but the rate of decline was more pronounced in advanced economies  compared to in developing and emerging economies. Moreover, not only were trade flows hit, but the impact of COVID-19 on foreign direct investment (FDI) was also immediate, as global FDI flows declined by nearly half in 2020.

  1. Social globalization

COVID-19 was also impactful, in particular, on social globalization, an aspect which involves interaction with foreign nationals through events such as migration, or actions such as international phone calls and international remittances paid or received by citizens.

Linking COVID-19 to social globalization is important since the former reduced interpersonal globalization, as many countries imposed travel restriction on both residents and foreign travellers. Border closures hindered temporary migration, especially tourists’ and foreign students’ movements in and out of countries. Migrant remittances were also affected, not because of any formal restrictions on remittances, but mainly because of a negative labour market shock on immigrant employment. Demena et al. (2022) found that the pandemic, overall, negatively affected various labour market outcomes. The impact has been most pronounced, in particular, in developed countries, reducing the number of remittances that could be repatriated to developing countries.

  1. Political globalization

Political globalization captures the ability of countries to engage in international political co-operation, as well as the diffusion or implementation of government policies.

The initial outbreak of the COVID-19 pandemic negatively affected international co-operation, mainly because of the blame game between the two largest economies in the world, the US and China. Although global co-operation to fight the virus did not begin immediately with the outbreak of COVID-19, there were many efforts later by different countries to co-operate in fighting the pandemic. China, for example, supported countries like Italy, which became the epicentre of the COVID-19 pandemic in Europe in April 2020. Politically, the outbreak of the coronavirus could, therefore, be used as a building block in the future to reinforce international co-operation and strengthen the pillars of political globalization.

Optimistic outlook for the global economy

There are, in fact, reasons to be optimistic about the COVID-19 economic recovery, as well as about the future of globalization. The main reason for optimism is the noteworthy resilience of world merchandise trade and investment during previous global crises. Multinational enterprises have already had their stress test during the 2008 – 2009 collapse of world trade. That collapse kick-started the process of de-globalization. However, global merchandise trade and industrial production recovered to previous peaks quickly, and this recovery has occurred even quicker during the COVID-19 crisis.

This is the big and fundamental difference with the Great Depression of the 1930s, and it may be related to the fact that world trade is governed and supported by the multilateral trading system. The shock of the pandemic was sharp and immediate, but so has been the recovery. The so-called invisible flows (FDI, remittances, tourism, official development cooperation) have been hit harder compared to the two major historical economic crises during the Great Recession and the Great Depression, and a full recovery of these invisible flows is not to be expected before vaccination is ‘sufficiently global’ in scope. Yet, the expectation of a speedy recovery is realistic at the time of writing. For instance, global FDI has shown full recovery in the last quarter of 2021, although recovery has been highly uneven regionally, and was concentrated in developed economies. Recovery efforts, therefore, took hold early, compared to the two major historical episodes of economic crises. This suggests stronger resilience of the global economic system than anticipated.

The disease of inequality

The prediction and reports of the expected “death” of globalization, however, were, with hindsight, grossly exaggerated. Yet, the pandemic has taught us that inequalities are the breeding ground for the spread of disease and the suffering that follows. Reducing epidemic vulnerabilities, therefore, requires tackling those inequalities. The fight against next potential pandemics, however, implies that we cannot limit ourselves to domestic developments only. Inequalities around the world – within and between countries – provide the breeding grounds and disease pools from which new variants, viruses, and other contagious diseases emerge. Adhering to the United Nations Sustainable Development Goals (SDGs) is a high-return investment project, in particular SDG 10 (reduced inequalities). A recent study by Fantu et al. (2022) pointed out that the COVID-19 pandemic exacerbates the inequalities between migrants (in particular Eritrean and Ethiopian migrants) and ordinary citizens in the Netherlands. Likewise, Murshed (2022) highlighted that the COVID-19 pandemic is likely to accelerate the various forms of inequality.

And last but not least, the outlook for openness of the world economy is still much better than in the 1930s. Yes, de-globalization exists. Yes, overall globalization will probably be lower for the foreseeable future. Our societies will, however, remain much more open than at the start of the globalization wave in 1990. We are now connected via the internet with an intensity that has never been observed before in history. Even though the push towards de-globalization certainly still exists, economies are now digitally connected in ways they have never been before.

Conclusions and recommendations

In conclusion, the eradication of the spread of the virus will require international co-operation, and a global effort to make sure that no single country is left behind. A pool will be forged to prevent new variants and potential future outbreaks. Vaccines must be made available to all countries and must be affordable, something that has been reiterated by the promise of the leaders of the G7 nations as a ‘big step towards vaccinating the world’ – to supply one billion doses of vaccine to poorer nations. A global initiative recently called for urgent further funding to supply a minimum of 600 million additional doses.  Just as globalization has ramifications for all countries, the health of different nations is intertwined. The health of one nation affects the health of the other, as the pandemic has demonstrated. The implication, therefore, is that fighting a pandemic requires us to tackle inequalities, as the latter determine pandemic vulnerability to a large extent. Moreover, it requires a global approach to ensure equality for all the world’s citizens.


References:

*Afesorgbor, S.K., van Bergeijk, P. and Demena, B.A., 2022. COVID-19 and the Threat to Globalization: An optimistic note. In E. Papyrakis (Ed.) Covid-19 and International Development, Springer.

Demena, B.A., Floridi, A. and Wagner, N., 2022. The short-term impact of COVID-19 on labour market outcomes: Comparative systematic evidence. In E. Papyrakis (Ed.), Covid-19 and International Development, Springer.

Fantu, B., Haile, G., Tekle, Y.L., Sathi, S., Demen, B.A., and Shigute, Z., 2022. Experiences of Eritrean and Ethiopian Migrants during COVID-19 in the Netherlands. In E. Papyrakis (Ed.), Covid-19 and International Development, Springer.

Murshed, S.M., 2022. Consequences of the Covid-19 pandemic for economic inequality. In E. Papyrakis (Ed.), Covid-19 and International Development, Springer.

van Bergeijk, P.A.G., 2021. Pandemic Economics, Edward Elgar: Cheltenham.


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Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.

About the contributors:

Binyam Afewerk Demena: International Institute of Social Studies, Erasmus University

Peter A.G. van Bergeijk: International Institute of Social Studies, Erasmus University

Sylvanus Kwaku Afesorgbor: Agri-Food Trade and Policy, University of Guelph

Are you looking for more content about Global Development and Social Justice? Subscribe to Bliss, the official blog of the International Institute of Social Studies, and stay updated about interesting topics our researchers are working on.

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COVID-19 | How exclusionary social protection systems in the MENA are making the COVID-19 pandemic’s effects worse

The COVID-19 pandemic has made the majority of people living in the MENA region even more vulnerable, adding to existing structural problems that include under-resourced public health services, a high degree of labour informality, and high poverty and unemployment rates. Temporary social and economic support measures to mitigate the pandemic’s effects are not sufficient, however – the region has to go beyond piecemeal policies. Countries need to expand the scope and scale of social provisioning and social protection as well as the quality of and access to public health services by moving towards a universalist approach to social policy, writes Mahmoud Messkoub.

In the Middle East and North Africa (MENA), the COVID-19 pandemic has thrown into sharp relief the importance of state-centred approaches in managing pandemics and mitigating their socio-economic impacts on the population. But public health services in most MENA countries are underfunded and inadequately designed to cope with the pandemic. The MENA population has suffered, especially those people living in low-income and non-oil-exporting countries.

Here, as elsewhere in the world, to mitigate the impacts of the pandemic, states have taken a number of measures ranging from temporary cash payments to the poor and vulnerable, furlough schemes, and financial support to employers and industries to the relaxation of regulations governing financial market support to companies and individuals through lower interest loans. Most MENA countries adopted a combination of these measures (OECD, 2020).

However, these short-term measures cannot deal with the long-term structural insecurity and vulnerability facing the majority of people in the MENA who live precarious lives in highly unequal societies, where the top 10% of the population takes 64% of the total income (Alvaredo et al., 2017). Their vulnerability to a large extent can be ascribed to the concentration of economic activity and employment in the informal sector, which is usually overlooked in social security and regulatory measures that tend to focus more on formal employment sectors (ILO, 2019; O’Sullivan et al., 2012). The exclusionary character of the countries’ social protection programmes is a great cause for concern, as even in ordinary circumstances vulnerable populations working informally do not have adequate social protection against health problems, a loss of income, and other contingencies.

Informality and unemployment rates are high in the MENA

According to OECD (2020), in the MENA the informal sector employs some 68% of the workforce, while in individual countries such as Yemen and Lebanon the portion rises to 74% and 71%, respectively. Another structural problem is persistently high unemployment rates that have particularly hit the youth as well as educated women across the MENA  (O’Sullivan et al., 2012). In 2018, the youth unemployment rate was around 30% in the MENA – the highest in the world (Kabbani, 2019). And large-scale poverty and vulnerability are also high in the MENA despite its riches. MENA countries are heterogeneous in terms of their resource base. The headcount poverty rates of a-dollar-a-day (or more) are high in the labour-abundant and resource-poor countries like Egypt. But poverty is also present in the populous, resource-rich and industrializing countries of Iran and Algeria. The other aspect of poverty is its regional spread: rural headcount poverty rates are higher in rural areas than in urban areas (Messkoub, 2008).

The most vulnerable are being overlooked, also during the pandemic

It is against this backdrop of poverty and vulnerability that the pandemic emerged, plunging the weakest countries in the region into a deeper crisis, with very limited social protection measures to help protect vulnerable populations. Whilst all countries in the region had some kind of social protection programmes before the pandemic, and in some cases extensive ones, coverage in most middle- and low-income MENA countries is limited to members of the civil service, police, and military, as well as those in the modern, regulated private sectors of manufacturing and services. The majority of the population working in agriculture, the informal sector, and other unregulated activities have very limited access, if any, to state social protection programmes. To start with, entitlement to most of these programmes requires a formal labour contract. But entitlement and access vary depending on the area of social protection: health, old age, unemployment, work injury, or family allowance.

Regarding health services, there is an urban-rural divide in favour of the former, in addition to high out-of-pocket expenditure and a general neglect of primary and preventive healthcare. High spending on expensive diagnostic and curative health care can be observed, and low-income/low-status migrants, displaced people, refugees, and ethnic minorities have limited access to public health services (WHO, 2010; Loewe, 2019).

The fragmentation of health insurance and service provision also limits the coverage and adequacy of social policies. In most MENA countries, there are different public and private health insurance programmes and health service providers. If these were integrated into a common national health insurance programme, the result could be increased coverage and an improvement of the services provided by reducing administrative costs and rationalising overlapping services (Loewe, 2019). Other complementary public health measures should also be placed on the agenda: the provision of clean water, improved sanitation, and a greater emphasis of preventative health care (Karshenas et al., 2014).

Why universal social protection is needed now more than ever

Thus, countries in the region are in urgent need of increasing expenditure on public health to manage the current pandemic as well as strengthening the health system to improve entitlement and access to health services. Reform and re-organisation of the health system beyond the public sector is part of this agenda. The region needs to return to the ideals of universal entitlement and access to health and other social services that are essential to the social policy agenda of developmental states. Selectivity and exclusion in terms of who qualifies for social protection benefits will only harm these countries, as responses to the pandemic have shown.


References and further readings

Alvaredo, R., Assouad, L. and Piketty, T. (2017) Measuring lnequality in the Middle East 1990 2016: The World’s Most Unequal Region? Reprinted  2020. [https://halshs.archives-ouvertes.fr/halshs-02796992/file/2017-15_.pdf] [Accessed: 10 September 2020.]

ILO, 2019. Working Poor or how a job is no guarantee of decent living conditions. April.

Kabbani, N. , 2019. Youth Employment in the Middle East and North Africa: Revisiting and Reframing the Challenge. Brookings Institution. [https://www.brookings.edu/wp-content/uploads/2019/02/Youth_Unemployment_MENA_English_Web.pdf ][Accessed: September 2020]

Karshenas, M., Moghadam, V. and R. Alami (2014), ‘Social Policy after the Arab Spring: States and Social Rights in the MENA Region,’ World Development, Vol. 64, issue C, pp.726-739.

Loewe, M. (2019), ‘Social Protection Schemes in the Middle East and North Africa: Not Fair, Not Efficient, Not Effective,’ in Jawad, R., Jones, N. and M. Messkoub (eds., 2019), pp.35 60.

Messkoub, M. (2008), Economic Growth, Employment and Poverty in the Middle East and  North Africa, Geneva: ILO Working Paper Series, No. 19.

Messkoub, M. (2021, Forthcoming), ‘Social Policy in the MENA Region,’ in H. Hakimian, ed.(2020) Routledge Handbook on Middle Eastern Economy. London: Routledge.

OECD, 2020. COVID-19 crisis response in MENA countries. Updated 9 June [https://read.oecd-ilibrary.org/view/?ref=129_129919-4li7bq8asv&title=COVID-19-Crisis-Response-in-MENA-Countries] [Accessed: 10 September 2020.]

O’Sullivan, A., Rey, M-E and Galvez Mendez, J. (2012) Opportunities and Challenges in the MENA Region. OECD.

An earlier version of this blog titled ‘COVID-19, Public Health and Social Policy in MENA’ was first published by the Alternative Policy Solutions, a public policy research project at the American University of Cairo.

About the author:

Mahmoud Messkoub (PhD Econs, University of London) is based at the International Institute of Social Studies (ISS, Erasmus University of Rotterdam, NL). He has researched and taught economics of development, social policy and population (mobility/migration, age structure and ageing) at universities of London (Queen Mary), Leeds and Erasmus (ISS). His current research interests are in the areas of economics of: social policy and population ageing, migration and universal approach to social provisioning. His recent publications are related to social policy, poverty and employment policies, cash transfers and evaluation of unpaid household work. He has acted as a consultant to ESCWA, ILO and the UN (DESA, UNFPA). He is currently working with an EU and African consortium on an EU funded – Horizon 2020 research project : ‘Crisis as Opportunities: towards a Level Telling Field on Migration and a New Narrative of Successful Integration 

 

Are you looking for more content about Global Development and Social Justice? Subscribe to Bliss, the official blog of the International Institute of Social Studies, and stay updated about interesting topics our researchers are working on.