The pandemic will change public life as we know it | Analysis

on 16 Apr, 2020

The State’s role will expand. There will be more welfare projects, and a greater openness to technology

Several changes may usher in more egalitarian growth, driving investments the government should always have made and enabling a wider base of consumption(Himanshu Vyas / Hindustan Times)

No one should seek to read much into the economic predictions at the moment with the coronavirus disease (Covid-19) in full flow. However, Covid-19 is likely to profoundly impact the way governments, companies and citizens behave, changing public life as we know it.

Former United States President Ronald Reagan famously said that the nine most scary words in the English language are: “I’m from the government and I’m here to help”. This approach influenced political thought for a quarter-century. But Covid-19 has put governments at the forefront of the response. There is now a greater questioning of why the role of the government has been needlessly reduced in many countries. India too has edged towards an erroneous consensus that we need to keep government small. This is likely to change.

Former national security adviser and foreign secretary, Shiv Shankar Menon, wrote in Foreign Policy that governments will take on a renewed confidence in their power to shape the destinies of their nations. In responding to the crisis, governments have perhaps found powers they either did not know they had or were unwilling to use.

This new-found power will influence how other matters of state are dealt with later. The climate crisis fraternity may now see greater receptiveness to demands for more stringent environmental emission standards. Demands for strengthened health care, better social security nets and the like have been denied for long, due to various fiscal reasons. The boundaries of the envelope of what government can do has clearly been expanded way beyond what people would have expect only a few weeks ago.

For long, there has been an uncritical acceptance of lower wages in some jobs such as nursing and teaching. Caught in the middle of a pandemic, we now see that these groups take on an unusual level of importance. To this list of critical roles are included not just doctors and nurses but also teachers, delivery staff, store clerks and bank tellers. While granting that, in most cases, wages will be determined by market forces, other forms of benefits such as additional income support could be promised to such groups to partially offset the personal risks taken by these groups when they are expected to keep essential services afloat.

Historically, governments have claimed an absence of fiscal space to fund such welfare activities. In India, there should now be a strong case to increase spending on health care and insurance. Budget 2021 will hopefully place greater importance on these. As we debate how adverse individual health outcomes impact society at large, there will also be a recognition that large-scale unemployment, partly caused by a potential economic slowdown, too damages the economy. Governments will need to implement Keynesian steps to create more jobs and would be well advised to breach their current fiscal target. Now they should have the confidence to push back on the deficit hawks. Fiscal deficits in the United States rose to 10% of GDP under Roosevelt’s “New Deal” in the mid-1930s. That was a major factor in enabling the US economy to recover. Indian must move to a 5% fiscal deficit for some years — as long as the money is used in a directed manner.

Greater governmental powers do come with their own risks. Kishore Mahbubani, dean at the Lee Kuan Yew School of Public Policy in Singapore, has pointed out that at a cultural level, so far, East Asian economies have demonstrated better capability in handling the pandemic. Taiwan, Hong Kong, South Korea and Singapore, all stand as poster children of good administration. This crisis will be a shot across the bow of those in the West who claim that their models of government have little to learn from others. Citizens, in many countries, seeing governments with stronger hand work well could perhaps push democratic nations towards greater authoritarianism.

Another medium-term impact of Covid-19 should be a greater openness to using technology. Telemedicine, which has been untapped, will see a surge. It has always seemed unambitious that this market is estimated by India to be just about $32 million, roughly one day’s revenues of one of the many IT majors. In the sphere of education, several lobbies have taken the position that no version of online education will be acceptable for the award of formal degrees. Now, they have scrambled to find ways to make online learning and assessment possible.

In a similar vein, for long, working mothers, those with ageing parents, and the disabled have requested organisations to display greater flexibility in offering work-from-home (WFH) options. However, even enlightened companies have generally offered WFH facilities for a maximum of two or three days a month. The pandemic has shown that it is indeed possible to manage some parts of our business on a remote basis. This is a dramatic change in lifestyle for those who need it. One would expect the share of women in the workforce, which has been dropping in India in recent years, to see some revival.

The 2008 financial crisis led to a distrust of experts, especially those prone to making economic prognostications. This distrust of a small part of the educated elite spilt over into scepticism of other classes of experts who indeed had something useful to say.

A consequence of this trust deficit was the inclination to vote persons without meaningful expertise in public office. Governance is for serious persons who have dedicated their time to politics and administration. It is no surprise that the best administrative responses have come from thoughtful leaders in Singapore, South Korea, or Germany. One hopes that we will see a diminished enthusiasm to vote for TV stars, actors and sportsmen.

Several of these changes may well usher in a period of more egalitarian growth, driving investments the government should always have made and enabling a wider base of consumption.

The trente glorieuses (three decades of high growth) in France and the Golden Age in the US were driven by deep-rooted and sensible governmental interventions. India has to do the same.

Govind Sankaranarayanan, former COO and CFO at Tata Capital, is currently vice chairman at ESG Fund ECube Investment AdvisorsThe views expressed are personal

This post was originally published in Hindustan Times dated 14 April 2020