Dr. Anil Jasinghe, the Director of Health, has informed that the corona crisis would be turned into a prolonged one as a result of the careless behavior of some people. Some people refused not only to inform that they would have been potential virus carriers but also to maintain social distancing so that they would not put lives of others including their loved ones in danger. Of course, this situation may be successfully controlled by adopting the proposal by the Government Medical Officers Association (GMOA) not to lift curfew and strictly imposing curfew and related regulations. However, doing so would create problems in another front.

The Government of Sri Lanka (GoSL) should have developed a proper mechanism to ensure a constant flow of goods and services to affected population. Only an aggressive and comprehensive policy response can stop present crisis morphing into a major crisis. I propose a contagion economy for a six month period to address the second group of issues while adopting GMOA’s drastic measures to contain and restrict peoples’ movement with the help of the armed forces.

What is a Contagion Economy?

Although it had been less drastic, somewhat similar measures as far as the consequences and orientation are concerned were put into practice in the past in multiple crisis situations. New Deal in the use under President Roosevelt is an example for crisis economy (1929-33). An important point that I bracket for the moment was that the salient elements of New Deal policies had been incorporated into the general economic model in the post-World War 2 period. Hence, it would not be totally incorrect to see similarities between war economy, crisis The IMF has recently recognized the need of taking “intrusive actions” in facing the Covib-19 crisis. It observes: “In a war, massive spending on armaments stimulates economic activity and special provisions ensure essential services. In this crisis, things are more complicated, but a common feature is an increased role for the public sector.”

The Elements of the Contagion Economy

Contagion has also demonstrated the poverty of economics. The focus of many economists is how the contagion would be impacted on the economy. How would it take its toll on the markets, Raghuram Rajan, a former Indian central bank governor, said the depth of any economic hit would depend on the authorities’ success in containing the pandemic, which he hoped would be decisive and rapid. “Anything prolonged obviously creates more stress for the system,” he said. A long outbreak could also lead to a second round of consequences, where workers were let go and there was another fall in demand, eroding long-term confidence, he further warned. The extreme example for orthodox reading may be found in Casey Mulligan of University of Chicago. He told the New York Times [1] that shutting down economic activity to slow the virus would be more damaging than doing nothing at all. He added: “It’s a little bit like, when you discover sex can be dangerous, you don’t come out and say: there should be no more sex,” Mulligan said. “You should give people guidance on how to have sex less dangerously.” While I see the value of this kind of analysis, I believe it is equally important to take the path from the economy to a contagion since some of these dangerous viruses are man-made.

One of the main flaws of the measures announced so far by the Sri Lankan government is that its main concern has been to minimize the contagion effects on the economy and to stimulate it. One newspaper reported: the Monetary Board met at emergency session to assess and respond to the coronavirus (COVID-19) pandemic globally and locally, taking key decisions to cushion impact and stimulate economic activity.

What I suggest here is rather different. I emphasize the need of building an economy to face the contagion and when the crisis comes to an end to reorganize the economy on the basis of some of the principles advanced in the period of contagion economy as we have experienced after New Deal policies. Hence, contagion economy is not based on ad hoc decisions. It is a conscious direction of the economy to face, contain, and defeat the contagion. Some of the critical elements of the contagion model can be listed.

1. Focus not on GDP or its rate of growth in general, but on specific production that are essential to the defeat of the contagion: Production needs are basically three-fold. First the economy should maintain basic amenities like water supply, fuel and electricity without major collapse. Secondly, in a situation that imports are restrictive due to the breakdown of international transport system, the direct needs associated with the contagion should be produced internally. This in the present case includes production of masks, ventilators, machines facilitating breathing, hospital beds and many others. To meet this challenge, the government may takeover private companies and ensure production of those items in sufficient quantity. Thirdly, production oriented towards achieving food autonomy. Hence, what is necessary is not an increase in production in general but specific production associated with the contagion.

2. Intrusive actions by the state: The orientation of production for contagion specific areas definitely need direct centralized state action and intrusive actions by the government towards private institutions that refuse to obey the orders.

3. Not general concessions, but sector-based concessions: The package announced by the government at the initial stage of the crisis included general concessions. However, since most of these concessions were aimed at stimulating the economy as a whole, these actions had a class-bias towards corporate sector. For, an example, it is not clear if the concession on loans is extended to micro-credit debtors who are primarily engaged in agricultural production that are directly associated with the fight against the contagion. Similarly, no concessions were extended towards plantation workers. In case of Sri Lanka, more than 50% of the value creation is by households and household-linked sectors that engage in the production of basic needs. Hence special attention of the contagion economy should be given to these sectors.

4. Village- based distribution mechanism: As I argue above, the provision of public utilities should be in the hands of centralized authorities. Nonetheless, I would agree with my friend Prof. Nalin de Silva that the distribution of goods and services should be decentralized to village level. The villages already possess structures and those structure with minor adjustment may be used for distribution of goods and services on more equal basis. It is said there about 30,000 villages and around 15000 Grama Sevaka divisions. I prefer for a village-based structure in which temples, churches and Kovils represent the center of the activities, in varying degrees. I would suggest that this task may be organized using 50000 new graduate recruits. It will be a chand good in-house training.

5. Center- Village nexus: The basic element of this nexus is that central authorities at Macro level relates not with individual citizens but only with the village unit. Villages and the facilitators especially attached to villages should have the full responsibility to allocate products inside the village. It has been reported that in Kerala the community kitchen idea was put into practice. However, it may work in war and crisis economy but not in a contagion economy in which hygienic distancing is imperative.

Sumanasiri Liyanage