COVID 19 – How can the world defeat this enemy?

por The Winners
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Milton Luiz de Melo Santos, economist and recently cured of COVID 19

When I was born in April 1951, the world was going through great transfor-mations, after the cataclysm caused by the 2nd World War. All countries, notably those most involved in the conflict, were mobilizing to rebuild their economies and to heal the huge open wounds within their populations.

One of the most significant events, in favor of the recovery of the countries involved in the conflict, was, still during the war (1944), the Bretton Woods Conference (in New Hampshire), which established the rules for commercial and financial relations between the USA , Cana- da, Western European countries, Australia and Japan.As an additional measure, the International Bank for Reconstruction and Development – IBRD (known as the World Bank) and the InterAmerican Development Bank – IDB were created later.

However, the initiative with greatest financial repercussion for allied countries, was the creation of the Marshall Plan (General George C. Marshall, at the time, Secretary of State for President Henry Truman), in April 1948, a US economic aid of US $ 14.0 billion at the time (equivalent to just over $ 100.0 billion today), which was given to help the recovery of European countries that joined the Organization for Economic Cooperation and Development.

The US’s objectives, from an eco-nomic point of view, were to rebuild war-torn regions, remove trade barri-ers and modernize industry, improve European prosperity and prevent the spread of communism. The proposal was based on setting up a structure to offer social services and create jobs.

With investments, industrial and ag-ricultural production grew above the average of the pre-war period.It is a consensus among scho- lars of that period, that the Bretton Woods system, with the creation of international institutions aimed at ensuring the stability of the world economy, including the promotion of free trade and the adoption of the Marshall Plan, with its foundations in the Keynesian economy , were deci-sive institutional factors to lift the battered economies of the countries involved in the great world conflict.

In other words, the so-called Golden Age of capitalism, a period that contemplates the years 1945 to 1970, was a combination of several initiatives, which involved the adop-tion of Keynesian policies, especially government spending (fiscal stimu- lus), in a first phase and in a next phase, the insertion of free market reforms and deregulation, which greatly stimulated the economy and job creation.

It ended, with the collapse of the Bretton Woods agreement in 1971, the 1973 oil crisis and the stock market crash in 1973-1974, which led to the 1970s recession.During this period, there was high economic growth worldwide; in particular, Western Europe and East Asian countries, with unusually high and sustained growth, coupled with full employment.

But, why do I go on this tour, if what interests us, at this moment, is how the world, and especially Brazil, will recover from the terrible consequences caused by the phenomenon COVID 19? We live in times of war, where the enemy has a destructive capacity never imagined by the best military strategists, and the attack on humanity made it clear that the interdependence of countries is real, not political.

The experiences lived by the first countries contaminated by the virus, have been improved by the other nations, as the contamination spreads throughout the planet.The arsenal of measures employed by the USA, during and after the end of the Second World War, produced undeniable positive effects on the economies of the countries devastated by the conflict, generating a new cycle of world growth.

And now? Against this ene-my, what must the government do to reduce the lethality of the pan-demic as much as possible and re-cover economic activities as soon as possible?

Each country, according to its characteristics, such as, for example, the population pyramid (contingent of elderly people very significant, in relation to the total population), demographic density, capacity to care for their health system, etc., has sought to reduce to the maximum, the level of contagion of the virus, to adequately serve those who have to resort to hospital services.Brazil, because it is almost at the end of the line of countries in-fected by the virus, has the benefit of learning from the mistakes and suc-cesses of others.

The population’s adherence to the social distance established by government authori- ties, was and is being decisive to “flatten” the contamination curve, so feared by health authorities. However, what will these savings look like after the first wave of the virus has passed?

The productive and economic system will certainly be dismantled, with some sectors very close to bankruptcy and a significant number of unemployed workers.The threat of economic collapse and social chaos is today the greatest challenge in the world.The engineering of economic policy that was adopted after the Second World War, with the aim of lifting the economies devastated by the War, in this case, “mutatis mutandis”, can be the object of some adaptations to “connect the world, again, in taken by rebooting to a new post-virus reality ”.

This is what the American government is doing, with its plan of more than US $ 2.0 trillion to help the economy, especially the less favored segments, such as micro and small companies, as well as the mass of unemployed people.

The countries of the European Community, each in its own way, have also been making use of the strong presence of the State, with the issuance of money to help its population and its economy.In other words, the concerns that were once justified with the fiscal balance of these economies, at this time of war, make no sense, since what is a priority is to stop the high rate of growth of deaths, resulting from the action of the virus and, then, promote economic and social recovery using all the tools available by the State.

Here, in Brazil, the Federal Government took a while to get out of that initial lethargy, where the magnitude of the pandemic was not yet accurately assessed and, finally, it started to move in the right direction, that is, to give up the parameters of fiscal control and trigger the legal mechanisms that allow the injection of resources into the economy, even with an increase in public debt.

The various Provisional Mea-sures, Laws, Decrees and Resolu-tions of the National Monetary Coun-cil, recently edited, form a set of rules that, with the consent of the National Congress, provide the legal and op-erational support so that these mea-sures are able to produce the desired effects with the population.Financial aid, through subsidized credit for micro, small and medium-sized companies, is vital at this time.

The financing line, with resources from the National Treasury, for companies not to lay off their employees, somewhat mitigates the social pressure on a large number of workers, and the allocation of non-repayable resources to serve a contingent of more than 60 million Brazilians living in the informal economy, comprise, among others, the set of absolutely essential measures to project a light on the future of our economy, after the “debacle” caused by the infamous Chinese virus.

We need, more than ever, a firm and balanced leader-ship, to print a professional management, so that these measures produce their ef-fects for those fragile sec-tions of society, as quickly as possible.

I have no doubt that humanity, once again, will know how to find the best means for its survival because, as the writer Yuval Noah Harari says, the great victory of the virus will occur if we are not able to unite in favor of a society that comes out of this stronger whirlwind.

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