straight to the point – from different points of view

COVID – an economic balancing act

COVID – an economic balancing act

Decision making at the highest level of government during a pandemic like we are experiencing is as difficult as it gets. There are so many unknowns and variables, so many interactions between health, economy, work and all aspects of life where every decision impacts upon and is impacted by every other decision. Mix unpredictability and interaction on this scale and we have a nightmare scenario for those tasked with making the weighty decisions that will shape our future for more years than we might imagine.

Given those realities I cannot fathom the thinking of our politicians who boast that they have done a perfect job, nobody could have done better. The goal should have been simply and realistically to do the best job possible with the limited information available. The statement that nothing better could have been done points either to a total lack of understanding of the complexity of the task at hand or a Trump like belief that the speaker and his colleagues know it all and hence a better job could not be possible. Such an attitude guarantees that we will learn no lessons and will surely flounder in the years to come.

Have we as a country really done such a fantastic job? Are we now well set to see the end of the crisis and herald a bright new future? That would be the expectation if we had done a job that could not have been bettered as the Minister so boldly suggests.

It was clear from a very early stage that there was going to be a massive negative impact on the economy as a direct result of the restrictions imposed to get COVID under control. Dealing with that impact would require the expenditure of vast sums of money regardless of who was in power. But how much money was needed and how was it to be spent? It seems that questioning the choices made by the ruling administration are to be treated as partisan and wrong given that we have been told by our Minister that it couldn’t have been handled any better.

Just imagine the challenges involved with those decisions. How do you determine how long the restrictions will be held in place, and therefore how much money will be required? What are to be defined as essential services and why (what criteria are to be applied)? How do we ensure that we capture the data that we need in order to support the best decision making possible? What is the New Normal that we expect to achieve and how do we prosper under it?

I had assumed that these and other critical questions would be researched and answered by the Roadmap to Recovery Committee. That is why I supported it enthusiastically. I was especially happy that they promised an “all hands on deck approach”. The committee would have the requisite technical expertise and would be free of political bias. Sadly that has proven not to be the case and I do not see the level of analysis that would lead to improved prospects for our future post COVID, at least not in the pronouncements from Ministers nor in releases from the committee. The Minister’s statement suggests that he and his colleagues seek all credit. Yet any criticism is being treated as unpatriotic or worse, party political.

In developing plans and making decisions, what assumptions were made about the duration of the pandemic and the necessary lock downs that followed. Should this not have been shared with us? How were businesses and workers supposed to plan their existence going forward? If there was some underlying assumption about the duration, what contingency plans were put in place for a greater duration, or was it left to be decided when that time arrived, as it has?

Did we plan for the capture and analysis of the key data that would support decision making? Coming at the same time as our pre existing digitisation thrust, was there a sub committee working with relevant ministries to fast track the analysis, design, development and deployment of data management systems? Were those systems designed to make the testing, contact tracing and vaccination processes as efficient and informative as they could possibly be? Did the ministry recognise and embrace the once in a lifetime opportunity to capture significant health data about our population?

The committee also spoke at one stage of ensuring that our investment dollars were better spent than previously. The expression that they used was that we should focus on “shovel worthy” rather than “shovel ready” projects when determining where to spend scarce investment dollars. Instead, we seem to have simply carried on with plans that existed pre COVID with no public explanation of analysis that was done in this New Normal. It looks like they want every citizen and business to reassess their plans and to tighten their belts while the public sector was exempted.

The apparent decision that it will be business as usual for government projects is reinforced by the approach to recurrent government expenditure, particularly with respect to salaries and wages. Salaries and wages in the public sector have been maintained except at the margins (reduced hours for CEPEP workers for example). By this act, the government has signaled that government’s recurrent expenditure mimics its capital project expenditure and shall be much the same post COVID as it was pre COVID. Does anyone expect that they have borrowed lavishly to maintain the size of the public sector wage bill through COVID but plan to reduce it thereafter?

On the economic front this is of the utmost concern to me. Even before COVID there were many commentators who felt that our economy was over burdened by a runaway public sector that was draining the Treasury at the same time as our traditional revenue streams (energy based) were diminishing. We already faced a need to re-balance the economy as between public and private sectors. The former needs to be pruned and the latter needs to be developed.

COVID has made that requirement even more urgent. Instead, we have gone in the opposite direction, the consequences of which will be dire in my estimation. I fear that we are on a collision course with a wall of economic pain. My only perverse hope is that because I’m not an economist by training that I have got this completely wrong.

The reality that I see is that we have not paid any heed to the recommendations of the Roadmap to Recovery Committee and have foolishly made decisions on gut feelings, personal preferences and instinct. We have no vision for how we emerge from this crisis, what the New Normal will look like or with a road map that our young entrepreneurs can work with. Worse, we blindly follow the example set by America in ratcheting up government debt as a short term solution with no regard for the simple fact that America pays less than 1% against their debt while we pay more than 5% for most of ours. There will be a terrible price to pay.

I will return to the issue of the maintenance of the public sector and the simultaneous contraction of the private sector at another time as it is in my view the most pressing aspect of our economic management through and beyond the current crisis.

What is one to make then of the words of our Health Minister? “What we knew at the time is what we did at the time,” he said. “There is nothing that we have said that we could have done better or done differently.” I beg to differ.

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