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Economics

Europe’s Ambitious Parochialism

Feb 15, 2021 Jayati Ghosh

The idea that the European Union can save itself and emerge from the COVID-19 crisis while the rest of the world flounders will quickly be proved wrong. Even for wealthy regions like Europe, any plausible vision of a sustainable post-pandemic future necessarily requires international solidarity.

NEW DELHI – The European Union has changed its economic policy for the better by agreeing on a €1.8 trillion ($2.2 trillion) post-pandemic stimulus plan to be financed directly through the EU budget. In particular, more than half of the package – which comprises the EU’s long-term budget and the €750 billion Next Generation EU recovery fund – is earmarked for forward-looking public spending.

The plan is bold and impressive. There will be support for research and innovation via the Horizon Europe program, and for climate and digital transitions through the Just Transition Fund and the Digital Europe Program, respectively. The package will also establish a new health program, EU4Health, and a Recovery and Resilience Facility to disburse most of the Next Generation EU funds. And a hefty sum will be allocated to social protection, including income support for workers and the unemployed.

Such a policy shift is surely to be welcomed, because it lays the foundations for a more viable economic union. But in a fundamental sense, European leaders – much like their US counterparts – still don’t get it. Just as the stimulus measures announced by US President Joe Biden’s new administration are predominantly aimed at the US economy, the EU package expresses solidarity within Europe, with little concern for the rest of the world.

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Jayati Ghosh condemns the hypocrisy of rich countries that are hoarding doses before they are even produced.

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0 Comments on this paragraph, 2 Comments on this article

j. von Hettlingen Feb 16, 2021

According to Jayati Ghosh the world must address the Covid-19 induced debt crises in poorer countries. He says it is wrong to believe that the EU could “emerge from the Covid-19 crisis while the rest of the world flounders… Even for wealthy regions like Europe, any plausible vision of a sustainable post-pandemic future necessarily requires international solidarity.” The global response to the crises facing low-income countries has fallen far short, due to a lack of ambition and deep divisions between the leading economies.
The author says the EU and the US should put aside “just a small fraction of their large stimulus packages to eliminate bilateral debt owed by poorer countries, and actively pursue sovereign-debt resolution for private creditors.” While the EU’s €1.8 trillion ($2.2 trillion) post-pandemic stimulus plan, and the $1.9 trillion stimulus measures announced by the Biden administration are big and “bold,” they are “predominantly aimed” at boosting economic growth at home, “with little concern for the rest of the world.”
While it was a “significant achievement” that the 27 “fractious” member states approved the stimulus package, it was unfortunate that this “greater unity has also reinforced Europe’s belief that it can go it alone in charting a path out of the crisis. With its own house in order, the thinking goes, the EU can ignore or not worry too much about how the rest of the world is faring.” The author accuses the EU of “parochialism” - adopting an inward-looking policy, with a limited or narrow outlook, especially focused on a local area.
This “highlights the starkly unequal nature of Covid-19 policy responses more generally. Advanced economies introduce massive fiscal packages generously underwritten by central banks, while depriving most developing countries of the conditions that would enable similar macroeconomic responses.” The author joins the UN calling for renewed global partnership, international cooperation and solidarity to face the pandemic and its consequences.
While parochialism is widespread in a time of national crisis. But “such a stance is short-sighted and counterproductive." The “immediate and serious challenges of the pandemic” and the rise of unemployment “cannot be resolved or even properly addressed unless they are dealt with globally.” The author urges the EU and the US to end “the horrifically unequal access to Covid-19 vaccines.” She accuses the EU of bypassing the “fair distribution system” set up by the… Vaccine Global Access Facility (COVAX), buying vaccines directly from pharmaceutical firms, thus denying supplies to the rest of the world. Backing COVAX would “dramatically increase global supply and reduce the risk of dangerous coronavirus mutations, thus ensuring a much quicker end to the pandemic.”
In recent months wealthy countries insist on “preserving pharmaceutical companies’ patent rights for vaccines developed with government subsidies and on the back of public research." Hence the EU is helping “to prevent the expansion of vaccine production to levels that would enable the entire world to be rapidly immunized. It would be far better to suspend patent rights or even allocate compulsory licenses to producers in countries like India with proven vaccine-manufacturing capacity.”
The author, an Indian scholar, backs India and South Africa that have called for the World Trade Organization to suspend intellectual property rights related to Covid-19 to ensure that not only the wealthiest countries will be able to access and afford the vaccines, medicines, and other new technologies needed to control the pandemic. The pharmaceutical industry and many high-income countries staunchly oppose the move, which they say will stifle innovation when it is needed most.
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