How will COVID-19 impact frontier and low-income countries? Elias Papaioannou, Professor of Economics at London Business School and Academic Director of the Wheeler Institute for Business and Development was joined in conversation with Oriana Bandiera, Italian economist and academic and Professor of Economics at the London School of Economics, specialising in development economics, to discuss how her research in Bangladesh relating to the Ebola outbreak might have lessons for other developing economies during the COVID-19 pandemic.
- The Coronavirus pandemic has set the battle against extreme poverty back in Bangladesh, with a large proportion of jobs being lost, meaning households have no income;
- If this trend were to be extended across Sub-Saharan Africa, it would result in millions of households falling into extreme poverty, as well as a famine as large as the number of people killed by famines in the last 40 years;
- Lockdowns are problematic for teenage girls, who are at risk of becoming pregnant during the outbreak as schools are closed and men are unemployed; pregnancy can disrupt or end a girl’s education, with long-lasting consequences for their empowerment;
- The fragility of households to withstand lockdown policies will see many return to poverty, which casts doubt on the usefulness of current poverty measurement, as it looks at the ability to consume, rather than the capacity to withstand shocks.
Coronavirus could set the emerging world back 20 years in the fight against extreme poverty
Unfortunately, research from the IGC and BRAC has shown the progress made taking people out of extreme poverty in Bangladesh to be fragile. The coronavirus pandemic has led to wide scale job losses, up to half of the main income earners in every household, resulting in large numbers of people falling into poverty, including those who were not poor at the start of the pandemic. Using these numbers, the number of jobless households in sub-Saharan Africa could rise into the millions, eradicating any of the progress made since 2000 against taking people out of poverty, meaning we will go back 20 years in terms of the number of people living in extreme poverty. Moreover, the lack of food being created during lockdown could lead to a famine as large as the number of people killed by famines in the last 40 years. Bandiera’s fear is COVID-19 is bad news, but it is not what is going to kill most people; she thinks we will go back to a world where people are dying of hunger.
Bandiera’s research has looked at social protection availability in low-income countries; in Sub-Saharan Africa only 18% have access to social protection as governments do not have the capability or capacity to target support to those most in need in the form of benefits. In the past, when pandemics were mostly affected one region, such as Ebola in Sub-Saharan Africa, the international community could help. With COVID-19 being a global crisis, it is extremely hard for these countries to rely on external sources of funding. Bendiera also stresses the importance of not having a one-size-fits-all policy worldwide, as lockdown measures similar to those we have seen in the West might not work in Africa, because hunger will kill people before COVID does.
Most poor households only have savings that will last between a week and two weeks. So in a fortnight there will be a large segment of the population without any resources. Universal redistribution is essential, as these countries are not capable of targeting the poorest, as well as food distribution.
Urban households are at greatest risk, as this is where lockdown measures have a bigger impact
While everyone is in a pretty poor situation, Bandiera believes more focus should be given to urban households, as this is where the lockdown is having the greatest impact on economic activity. However, Bendiea does not think too much concern should be applied to inclusion errors, giving transfers to those who do not need them, as they are outweighed by exclusion errors; this is because not being given support at this crucial moment could kill.
The pandemic could have a generational impact on women; especially where policies exist to prevent pregnant girls from completing their education
During her research how the Ebola outbreak impacted on the empowerment of women, there are some symmetric effects that could result from the current epidemic. Research in Sierra Leone shows that when the schools close, the risk of pregnancy is much higher, as young girls spend more time with men, many of whom have no jobs. When the schools reopened after the Ebola outbreak, many government policies prevented pregnant girls from returning to their education. This meant that the short-term shock of Ebola had a long-term impact for a generation of girls who were removed from the education system as a result of pregnancy during the epidemic. Some of the young women had learned techniques to avoid or negotiate how to not get pregnant through clubs that were open for teenage girls; there was a markedly smaller impact when these exist, but for the majority, this situation is problematic for young girls with long-lasting consequences.
The pandemic magnifies any pre-existing inequalities, such as discrimination in vulnerable societies. Across the world the COVID pandemic is having devastating effect on every economy, but where families survive through subsistence, a recession is going to be really painful; Bandiera says this means we are talking about famines, which is something that really has not happened for many, many years. The nonlinearity of the poverty trap will mean it is very difficult for households to get out of poverty; once you are thrown back into it, it is equally difficult to emerge from it again. Bandiera says we should consider different ways of measuring poverty, as measuring poverty is a flow of consumption, which is a really fragile concept. Bandiera considers we should go back to measuring the ideas of resilience and the capacity to withstand shocks, because if all we are measuring is the ability to consume when the times are good, then maybe that’s not really measuring a reduction in poverty.
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Elias Papaioannou’s conversation with Oriana Bandiera is part of the Wheeler Institute’s COVID-19 series – bringing together the expertise and experience of our extended community to understand, illuminate and offer solutions to the challenges created by COVID-19. Our differentiating factor is the role of business in addressing these challenges, with a focus on the implications and actions for those in developing countries.
If you’re interested in following the Wheeler Institute COVID-19 series, check out our previous episode below.
Elias Papaioannou is academic director of the Wheeler Institute for Business and Development and professor of economics at London Business School, focusing on international finance, political economy, applied econometrics and growth and development.
Oriana Bandiera is the Sir Anthony Atkinson Professor of Economics and the Director of the Suntory and Toyota Centre for Economics and Related Disciplines (STICERD) at the London School of Economics, and a fellow of the British Academy, the Econometric Society, CEPR, BREAD and IZA. She is vice-president of the European Economic Association, and director of the Gender, Growth and Labour Markets in Low-Income Countries (G²LM|LIC) programme and of the research programme in Development Economics at CEPR. She is co-editor of Microeconomic Insights, and Econometrica, and serves on the board of the International Growth Centre. Her research focuses on how monetary incentives and social relationships interact to shape individual choices within organisations and in labor markets. Her research has been awarded the IZA Young Labor Economist Prize (2008), the Carlo Alberto Medal (2011), the Ester Boserup Prize (2018) and the Yrjö Jahnsson Award (2019)