We are pushing the world’s poorest to the brink

Long-read

We are pushing the world’s poorest to the brink

The lockdown in the West will have a devastating impact on the inhabitants of the world's poorest countries.

Daniel Ben-Ami

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Perhaps the most striking statistics of the many quoted during the Covid-19 pandemic is that three billion people do not have access to proper hand-washing facilities. The figure is not a typo. Three billion people – 3,000,000,000 – do not have the facilities to wash their hands with soap on a regular basis. That is 40 per cent of the world’s population.

In some cases, they do not have any access to running water at all, perhaps having to walk long distances in search of it. In other instances, they have to share facilities with people living nearby.

That means that the most basic health measure in the efforts to manage Covid-19 is not feasible for a huge number of people in poorer countries. Politicians and health workers can talk about the importance of regular hand washing all they want, but putting it into practice is not possible.

Take, for example, this report from the Financial Times on the poor neighbourhoods of India’s largest city:

‘Mumbai’s slums, where an estimated 40 per cent of the city’s 20million population lives, are particularly susceptible to the spread of Covid-19. Families or groups of migrant workers often live in single rooms. Many share public toilets and water taps, requiring multiple daily trips. And poverty means that staying at home and losing income is untenable for many.’

But it is important to recognise that the three-billion figure does not just illustrate the difficulty poorer countries have in even taking basic health measures. It is also a reminder that their economies are poor and that poverty has consequences. It means that a lack of resources severely constrains their ability to counter the impact of the pandemic or the associated economic shock.

Indeed, the global economic shutdown could have a far more devastating effect on poorer countries than Covid-19 itself. Even if the direct health effects turn out to be relatively small, the human impact of the world’s self-imposed economic shutdown could be enormous.

Multiple shocks

Poorer countries – sometimes called developing economies or emerging markets – are facing not one but several interrelated shocks: the health impact of the pandemic itself; the domestic economic impact of shutdowns; the economic shock caused by the falling demand from the West; and the painful reverberations of tightening financial conditions.

A caveat is necessary here. Poorer countries vary in many important ways, including income per head. At the top end of the scale are countries with an average GDP per head of about $30,000 (roughly £24,000), such as Malaysia and Turkey, according to the International Monetary Fund (IMF) (figures measured at purchasing power parity). At the bottom are the world’s poorest countries, with a GDP per head of less than $1,000, such as Burundi, the Central African Republic, and the Democratic Republic of Congo (DRC).

Those at the top end of the scale, often described as middle-income countries, have considerably more resources than the poorest, but they are still well below the advanced economies. Those classified in this band by the World Bank include Argentina, Mexico, Russia, Thailand and Turkey. However, both Argentina and Turkey were already financially fragile, so the economic shock of the pandemic could push them over the edge.

Nevertheless, it is of course the poorest countries that will suffer the most. These low-income countries are mainly in sub-Saharan Africa, but they also include Afghanistan, Haiti and North Korea. Lower-middle income countries – which are still extremely poor in aggregate – include the likes of Egypt, India, Nigeria, Pakistan and the Philippines.

These categories are not perfect. For example, Brazil and South Africa are both classified as upper-middle-income economies, but there is a wide gulf between the richest and the poorest within them. So although both have a substantial number of affluent people, there are many more who are extremely poor.

The advanced economies of North America, Western and much of Central Europe, East Asia (including Japan, Singapore, South Korea and Taiwan) and the richest oil producers are not considered here. Neither is China, which because of its huge scale is a special case, despite being classified as a middle-income country.

Nevertheless, the group of countries under discussion here constitutes perhaps five billion people (once China is excluded), or just under two-thirds of the world’s population. This general framework enables us to understand the challenges these countries face in general terms, although each of them has their particular circumstances.

Direct health effects

Probably the most obvious way in which the poorer countries will suffer as a result of the Covid-19 pandemic is the direct health effects. This is because they have minimal resources to deal with Covid-19.

Perhaps the clearest example of a shortage of resources is in Africa. According to a study by management consultancy McKinsey, the entire continent of Africa, populated by 1.3 billion people, may have just 20,000 intensive-care beds. That, on average, is about 1.7 intensive care beds per 100,000 people, compared with 3.6 in China and 29.4 in the US. There are also, of course, similar shortages of masks and testing equipment.

Social distancing, moreover, is simply not possible in large parts of many cities in these poorer countries. It cannot be practiced in large parts of Cairo, Delhi, Dhaka, Jakarta, Johannesburg, Karachi, Kolkata, Lagos and Rio. Many of the inhabitants of these huge cities live in densely populated areas, and often have to share facilities with others.

It is true that some poorer countries have natural advantages in relation to Covid-19. For example, poorer countries, on average, tend to have much lower average ages. Nigeria, for example, has a median age of 18.3 compared with 40.5 for Britain. Given that it tends to be older people who are most susceptible to the virus, that gives poorer countries a rare advantage. And some experts have also argued that the virus is less virulent in hotter weather. If this is the case, that, too, would give many poorer countries an advantage.

However, these have to be set against the severe disadvantages associated with poverty. Poor nutrition, for example, is closely associated with weak immune systems. Poor countries also find it hardest to take basic health measures, such as supplying clean water. So it tends to be the poorest who suffer the heaviest burden of infectious diseases.

So even if the poorest populations are relatively young, they can still be highly susceptible to infectious diseases. In South Africa, for instance, 7.7million people are living with HIV, according to UN figures. That means inhabitants could be vulnerable to Covid-19 even if they are, say, only 20 years old.

Slum dwellers in New Dehli, India, on 25 March 2020.
Slum dwellers in New Dehli, India, on 25 March 2020.

In that context, it is also important to recognise that many poorer countries are already blighted by communicable diseases. For example, according to the World Health Organisation (WHO) there were 228million cases of malaria worldwide in 2018, and 405,000 deaths, mostly of African children. Yet malaria is a preventable and curable disease. It is only poverty that is making it such a blight on humanity.

Tuberculosis (TB) is an even bigger killer of the poor. WHO figures show 1.5million people died of TB in 2018 (including 251,000 with HIV). India has the largest total number of cases, followed by China, Indonesia, the Philippines, Pakistan, Nigeria, Bangladesh and South Africa. Yet TB is also, like malaria, a preventable and curable disease.

Then there is Ebola, which, while receiving little attention, continues to wreak havoc. The DRC, for instance, is still grappling with the world’s second largest Ebola epidemic on record.

The terrible irony is that shifting resources to tackle Covid-19 could increase the death toll for other diseases, including dengue fever, HIV, malaria and TB. For example, the WHO has estimated that deaths from malaria could jump, from a projected 386,000 to 769,000, as a result of delays in mosquito spraying, bed-net distribution and the provision of anti-malarial drugs.

A similar shift in resources also looks likely in relation to TB. As an Indian epidemiologist has argued, ‘the global Covid-19 response will likely result in diversion of healthcare workforce and resources away from routine TB services, or reduction in the number of health workers because of illness and self-isolation. TB wards could become Covid wards.’

Two conclusions should already be clear just from looking at the health effects of Covid-19 on poorer countries. Certainly for the poorest – and these include a huge number of people – they simply do not have the resources to pursue those strategies adopted in the advanced economies. The bulk of their populations cannot, in reality, live under lockdown, socially distance, afford masks and access testing.

In addition, what is called ‘flattening the curve’ – slowing the spread of Covid-19 so that health systems are not overwhelmed – is meaningless to them. Their health systems are already incapable of handling the huge burden of existing disease because they are so poor.

The effect of domestic shutdowns

But it is not just the disease that could take a heavy toll on poorer countries. The bulk of the world’s population is living under harsh lockdown measures, even though these are unworkable, let alone undesirable.

According to an estimate from the International Labour Organisation (ILO), a UN agency, 81 per cent of the world’s workforce was living under lockdown conditions at its peak. That figure fell to 68 per cent after changes in China, but it is still a huge proportion of people.

Most of these people work in what is sometimes referred to as the informal economy. In other words, they either work as casual labourers, or are self-employed but working on a tiny scale, and play no part in the tax system. What this means in practice is that if they stop working, they immediately lose their income, with few, if any, savings to keep them going. Often there are no state benefits available, which means that if they stop working they quickly face the spectre of starvation. Not because there is necessarily a lack of food, but because they lack the means to pay for it.

Take the following story from South Africa. Two women were arrested in Soweto for breaking the Covid-19 regulations. Their reported crime? Selling peanuts, boiled eggs and biscuits. When one was asked whether she was aware that special permits were needed, she replied: ‘We heard, but it is the hunger. We couldn’t stay at home any longer. Our families are hungry.’

The plight of migrant workers within these countries is essentially an extreme version of this problem. Not only do most of them work in the informal sector, but they do not have family support or their own small plot of land to fall back on. That explains, for example, why large numbers of migrant workers felt compelled to walk hundreds of miles from Mumbai to their home villages.

In any case, it is clear that the impact of lockdowns – rather than of the pandemic itself – will destroy incomes and cause hunger to rise. For instance, the ILO estimates that relative poverty levels of informal workers will increase by as much as 56 percentage points in low-income countries.

Meanwhile, the World Food Programme, another UN agency, estimates acute hunger is set almost to double by the end of 2020. It says 265million people will be under severe threat unless swift action is taken. That is up from the current figure of 135million.

So the impact of lockdown measures – related to but distinct from the pandemic itself – will cause great harm to poorer countries. They are undermining their own economies through a generalised lockdown, and at the same time damaging the welfare of their citizens.

What is more, these countries have meagre economic resources to soften the blows they face. Compared with rich countries they lack the capacity to increase state spending, or to pump money into the economy through their central banks.

The impact of the slump in developed economies

Even if the middle-income and low-income countries were miraculously spared the Covid-19 virus, they would still take a heavy economic and human hit from the impact of the self-imposed shutdown of the developed economies. If economic output in the advanced economies contracts by six per cent this year – as forecast by the IMF – and their economies slump, the poorer countries will suffer a loss in income from exports.

So, for example, if fewer cut flowers from Kenya are sold in British supermarkets, that means the African economy will take a substantial hit. In the Kenyan case, such flowers are an important part of export revenue. Other countries, to a greater or lesser extent, depend on other types of goods.

A woman wearing a protective mask delivers food in Caracas, Venezuela, on 23 March 2020.
A woman wearing a protective mask delivers food in Caracas, Venezuela, on 23 March 2020.

Those countries heavily dependent on exporting raw materials will probably take a particularly heavy hit. For example, the price of oil has slumped alongside the collapse in demand from the global economy. That will particularly hit oil-producing countries, such as Angola, Mexico, Nigeria, Russia and Venezuela. In some cases, such as Mexico, the economy is relatively diversified, but in others, such as Nigeria, oil is overwhelmingly its main source of export revenue.

But falling exports is not the only channel through which poorer countries will suffer a substantial economic hit. Another is remittances. These constitute payments from migrant workers, usually in the developed world, back to the poorer countries. Although these are not a subject of much discussion in the West, they are hugely important to low- and middle-income countries.

The World Bank forecasts that global remittances will fall by about 20 per cent in 2020, as a result of the Covid-19 pandemic and the shutdown. That means a total fall in remittances to low- and middle-income countries of over $100 billion. Remittances to sub-Saharan Africa are expected to fall by 21.1 per cent and to South Asia by 22.1 per cent.

Finally, there is the impact of falling tourism revenue. Many countries in the poorer world depend on foreign tourists to generate a high proportion of their income. But the shutdown of Western economies means not just that we in the West have more limited holiday choices, but also that poorer countries will suffer badly.

Figures from the United Nations World Tourism Organisation tell a shocking story. Tourist numbers are expected to fall by 60 to 80 per cent this year. In the first quarter of 2020 alone, it is estimated there were 67million fewer international tourist arrivals and $80 billion lost in export earnings. These are global figures, so they include the advanced economies, but developing economies will be the hardest hit.

In absolute terms, the countries with the largest number of tourist arrivals include Malaysia, Thailand and Turkey. However, many other countries derive a significant proportion of their revenues from tourism, including Egypt, Indonesia, Kenya, Morocco, South Africa, Tunisia and the nations of the Caribbean.

So the lockdown of the advanced economies is taking a heavy toll, not only domestically but on the poorer countries, too. For them it means lower exports, reduced remittances and a slump in revenues from tourism.

Deteriorating financial conditions

The impact of deteriorating financial conditions might be harder to understand, but it can have a huge impact on poorer countries. It means they can quickly run into difficulties servicing their debts. Restructuring their debt, as typically demanded by creditors, tends to come with strict economic conditions. Over 100 countries have already requested or expressed interest in assistance from the IMF to help tackle such problems.

One way in which such problems can hit the poorer countries is through capital flight. According to the Institute of International Finance, a global association of financial institutions, there was a record-breaking outflow of $83 billion from poorer countries in March alone. Although this was followed by a small inflow, of $17.1 billion in April.

The outflow of capital is also associated with weakening currencies. That means that poorer countries have to pay more, in their own local currency terms, to service their debt. Some countries, notably in East Asia, have built up significant currency reserves so they have some degree of protection against short-term weakness. But others – most notably Argentina, South Africa and Turkey – were already on the brink before the crisis. The pandemic will no doubt make their condition worse.

What can be done?

The Covid-19 pandemic and the associated shutdown measures are clearly an ongoing story. It is still unclear how long they will go on for. But clearly the longer the shutdown, the greater the impact on the poorer countries. Yet there are at least three things those of us who live in the West can do to help relieve their plight.

First, support demands for debt forgiveness. Developing economies are facing a substantial added burden through no fault of their own. That means requests for debt forgiveness should be accepted.

Second, reassert the importance of economic progress. Despite the fact that the world is enduring a severe economic contraction, it is still common to hear Western commentators bemoaning economic growth. There is even an expanding genre of columnists claiming that the reversal of growth is a ‘silver lining’ to the pandemic. But in the real world, economic contraction is taking a heavy toll, both in the developed economies and even more so in the poorer ones.

Finally, the plight of the poorer countries gives added weight to the demands to end the generalised lockdown in the West. Certainly, the most vulnerable section of the population should be shielded. But shutting down economies for prolonged periods will have devastating human consequences, not only on the richer countries, but, even more so, in the poorer ones.

Daniel Ben-Ami is a writer. An expanded version of Ferraris for All: In Defence of Economic Progress is available in paperback. (Buy this book from Amazon (UK).)

Pictures by: Getty Images

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Comments

DAVID MCDONALD

24th May 2020 at 8:38 pm

More unadulterated crap from a goody two shoes! The fact is the world is overpopulated by 3 to 4 billion people and can no longer sustain itself. Mother Nature continues to try to wipe out the excess but is having a difficult time doing so. If these 3 billion go to and over the brink then Mother Nature will be able to get on with her task.

Kimberly KJ

24th May 2020 at 3:59 am

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