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LONDON – The end of the pandemic is finally in sight. The same goes for the rescue from the most traumatic global economic disaster since the Great Depression. As the Covid vaccines enter the bloodstream, recovery has become a reality.
But the benefits will be far from evenly distributed. Wealthy countries in Europe and North America have secured most of the limited vaccine stocks, positioning themselves for significantly improved economic fortunes. Developing countries – home to most of humanity – must guarantee their own doses.
The uneven distribution of vaccines certainly seems to worsen a defining economic reality: the world that emerges from this terrifying chapter of history will be more unequal than ever. Poor countries will continue to be ravaged by the pandemic, forcing them to spend meager resources already stretched by growing debts to lenders in the United States, Europe and China.
The global economy has long been divided by deep disparities in wealth, education and access to vital items like clean water, electricity and the internet. The pandemic resulted in her death and destruction of the livelihoods of ethnic minorities, women and low-income households. The ending is likely to add another divide that could shape economic life for years to come, separating countries with access to vaccines from those without.
“It is clear that developing countries, and in particular the poorest developing countries, are going to be excluded for a while,” said Richard Kozul-Wright, director of the division of globalization and development strategies at the United Nations Conference on Trade and Development in Geneva. “While it is understood that vaccines should be seen as a global good, the supply remains largely in the control of large pharmaceutical companies in advanced economies.”
International aid organizations, philanthropists and rich countries have united around a pledge to ensure that all countries have the tools they need to fight the pandemic, such as protective gear for medical teams as well as tests, therapies and vaccines. But they failed to back up their insurance policies with enough money.
The flagship initiative, the Act-Accelerator partnership – a venture of the World Health Organization and the Bill and Melinda Gates Foundation, among others – got less than $ 5 billion of a goal of $ 38 billion.
A group of developing countries led by India and South Africa have sought to increase the supply of vaccines by making their own, ideally in partnership with the pharmaceutical companies that produced the major versions. In an effort to gain leverage, the group proposed that the World Trade Organization waive traditional protections on intellectual property, allowing poor countries to make affordable versions of vaccines.
The W.TO. works on consensus. The proposal has been blocked by the United States, Britain and the European Union, where pharmaceutical companies wield political influence. The industry argues that patent protections and the benefits they derive from them are a prerequisite for innovation that produces life-saving medicines.
Supporters of patent suspension note that many successful drugs are brought to market through government-funded research, arguing that this creates an imperative to put social good at the heart of policy.
“The question really is, ‘Is this the time to make a profit? Said Mustaqeem De Gama, advisor to the South African mission to the WTO in Geneva. “We have seen governments shutting down economies, limiting freedoms, but intellectual property is seen as so sacrosanct it cannot be touched.”
In the wealthy countries that have gained access to vaccines, relief from the economic disaster caused by the public health emergency is underway. The restrictions that led to the closure of businesses could be lifted, bringing significant economic benefits as early as March or April.
For the moment, the situation is grim. The United States, the world’s largest economy, suffered a death toll equivalent to September 11 every day, making a return to normalcy seem far away. Major economies like Britain, France and Germany are under new lockdowns as the virus maintains its momentum.
But after falling 4.2% this year, the global economy looks set to grow 5.2% next year, according to Oxford Economics.
Europe will remain behind, given the prevalence of the virus, according to IHS Markit, with the continent’s economy not returning to its pre-crisis size for two years. But a trade deal between Britain and the European Union, preserving much of their post-Brexit trade relationship, has allayed worst fears of a regional trade slowdown.
But by 2025, the long-term economic damage from the pandemic will be twice as severe in so-called emerging markets than in rich countries.
Such forecasts are notoriously inaccurate. A year ago, no one foresaw a calamitous pandemic. The variables currently facing the global economy are particularly huge.
Vaccine production presents many challenges that could limit supply, while their endurance and efficacy are not fully understood. The economic recovery will be shaped by questions of psychology. After the deepest shock of memory, how will societies exercise their freedom of movement once the virus has been tamed? Will people released from lockdowns congregate in cinemas and on planes?
Any lingering reluctance towards the human congregation is likely to limit the growth of the leisure and hospitality industries, which are large employers.
The pandemic has accelerated the advance of e-commerce, leaving traditional brick-and-mortar retailers in a particularly weakened state. If a lasting sense of anxiety causes shoppers to avoid malls, it could limit job growth. Online retailers like Amazon have aggressively embraced automation, which means that an increase in business doesn’t necessarily translate into quality jobs.
Many economists speculate that as vaccines allay fear, people will turn to experiences that have been banned, restaurants, sporting events, and vacation destinations. Households saved because they canceled vacations and had fun at home.
“If spirits improve and some restrictions are lifted, you could see spending madness,” said Ben May, global economist at Oxford Economics in London. “Much will depend on how quickly and how well people revert to more normal behaviors. It is very difficult to know.
But many developing countries will indeed find themselves on a different planet.
The United States has secured claims for up to 1.5 billion doses of the vaccine, while the European Union has locked down nearly two billion doses – enough to immunize all of its citizens, then some. Many poor countries could wait until 2024 to fully immunize their populations.
The high debt burden limits the ability of many poor countries to pay for vaccines. Private creditors have refused to participate in a debt suspension initiative championed by the Group of 20.
The aid promised by the World Bank and the International Monetary Fund has proved disappointing. At the IMF, the Trump administration has opposed an extension of so-called special drawing rights – the institution’s base currency – depriving poor countries of additional resources.
“The international response to the pandemic has been essentially pitiful,” Kozul-Wright told the United Nations trade body. “We are concerned that as we go into vaccine distribution, we will see the same thing again.”
One element of the Act-Accelerator partnership known as Covax aims to enable poor countries to purchase vaccines at affordable prices, but it comes up against the reality that production is both limited and controlled by companies. for-profit who are accountable to shareholders.
“Most people around the world live in countries where they depend on Covax for access to vaccines,” said Mark Eccleston-Turner, an international law and infectious disease expert at Keele University in England. “It’s an extraordinary market failure. Access to vaccines is not based on need. It is based on the ability to pay, and Covax does not solve this problem. “
On December 18, Covax executives announced an agreement with pharmaceutical companies to provide low- and middle-income countries with nearly two billion doses of vaccine. The arrangement, which focuses on candidate vaccines that have not yet been approved, would provide doses sufficient to immunize a fifth of the populations of 190 participating countries by the end of next year.
India is home to pharmaceutical manufacturers that produce vaccines for multinational companies, including AstraZeneca, but its population is unlikely to be fully vaccinated until 2024, according to TS Lombard, an investment research firm in London. Its economy will likely remain vulnerable.
Even if masses of people in poor countries do not have access to vaccines, their economies are likely to benefit from the positive spillover effects of richer countries returning to normal. In a world shaped by inequality, growth can coincide with inequality.
With the resumption of consumer power in North America, Europe and East Asia, this will stimulate demand for raw materials, rejuvenate copper mines in Chile and Zambia, and increase exports of soybeans harvested in Brazil and in Argentina. Tourists will eventually return to Thailand, Indonesia and Turkey.
But some argue that the ravages of the pandemic in poor countries, largely uncontrolled by vaccines, could limit economic fortunes globally. If the poorest countries do not acquire vaccines, the world economy would forgo $ 153 billion a year in production, according to a recent study by the RAND Corporation.
“You need to immunize healthcare workers around the world so that you can reopen global markets,” said Clare Wenham, health policy specialist at the London School of Economics. “If every country in the world can say, ‘We know that all of our vulnerable people are vaccinated,’ then we can get back to the global capitalist trading system much faster. ‘
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