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July 2020, Volume 26, Number 3

Global: Covid-19 Impacts

The number of Covid-19 cases surpassed 10 million at the end of June 2020, and 500,000 people died from the virus. A high share of those who die are over 60, and men are more likely to die from Covid-19 than women.

The UN divides countries into more and less developed, and puts Russia, Middle Eastern oil exporters, and Singapore in the less developed category. Some 22 percent of the world?s total deaths each year are in the more developed countries that that have 16 percent of the world?s population, largely due to their higher share of elderly residents.

Almost 80 percent of the deaths from Covid-19 were in more developed Europe and North America during the first four months of the pandemic. The reasons for the high share of Covid-19 deaths in more developed countries include higher shares of older residents and people who travel internationally and contract and spread Covid-19.

Covid-19 reduced international mobility, including labor migration and remittances. Many migrants who lost jobs in higher wage countries returned to their countries of citizenship in spring 2020, including Haitians in the Dominican Republic who lost their jobs and had no access to Dominican Republic social safety net programs.

The ILO estimated that almost 200 million workers are employed outside their country of birth, and UNDP says that over 760 million people cross a significant internal border to work, as with Chinese workers who are employed away from the place where they are registered with the government.

Fears that returning international and internal migrants would spread the virus to rural and poor areas with few health care facilities led to border closings that often backfired as migrants rushed home before lockdowns went into effect, as with Burmese in Thailand who rushed home before borders closed. Some returned migrants were shunned at home for fear that they were carrying the virus.

Impacts. Migrants sent $554 billion to their developing countries of origin in 2019, but remittances are projected to decline 20 percent to $443 billion in 2020 due to Covid-19 shutdowns. India was the top recipient in 2019, receiving $85 billion; followed by China, $69 billion; and Mexico, $39 billion. Within Mexico, Michoac?n was the top recipient, receiving $3.4 billion in 2018 or more than 11 percent of the state?s GDP.

The Philippines received $35 billion in remittances in 2019, and was especially hard hit by Covid-19 because so many Filipinos are employed in services that involve personal contact. The US is the top source of remittances, accounting for 40 percent of the total in 2019 from mostly immigrants with permanent residence rights, followed by a quarter from Saudi Arabia and the UAE, where most Filipinos are migrant workers on two- or three-year contracts.

Filipinos are a quarter of the 1.6 million workers employed on the world?s ships, and remittances from Filipinos employed on ships surged 70 percent over the past decade. The shutdown of the cruise industry sent many jobless Filipino cruise ship workers home.

However, many seafarers were stranded on ships when countries closed their borders to non-essential travel. In July 2020, the International Maritime Organization brokered an agreement among 13 nations including the US to consider seafarers essential so that they can disembark and be replaced. The IMO estimates that 150,000 seafarers end their contracts each month; some of those who were stranded since March have been on ships over a year.

Lower-middle and low-income countries borrowed over $2 trillion over the past decade to fuel growth. With currencies weak and recessions looming, many are unable to repay these foreign loans. Argentina defaulted in May 2020, prompting so-called vulture funds to buy the bonds of Argentina and other indebted countries as they decline in price and then seek full repayment. Private investors who bought Argentina?s bonds cheaply before and after the country?s default in 2001 earned very high returns when Argentina finally settled with them in 2016.

The World Bank and IMF in March 2020 agreed to suspend debt and principal repayments for 76 developing countries in the International Development Association. However, many private investors say that the regulations under which they operate do not allow them to forgive debt repayments because they must protect the clients on whose behalf they invest.

The economic downturn associated with Covid-19 is likely to increase the number of poor people. In 1990, the World Bank estimated there were 1.9 billion poor people; by 2016, the number of poor fell to 734 million, meaning that 10 percent of the world?s people lived on less than $1.90 a day. Many families that were able to climb into the middle class in developing countries may be pushed down into the ranks of the poor.

The World Food Program in April 2020 predicted that up to 265 million people in 30 countries could face starvation without food relief due to Covid-19. The WFP provided assistance to 100 million people in 2019 with a budget of $7.5 billion. The WFP appealed for government contributions to double its budget for 2020.

As governments relaxed stay-at-home orders, pundits drew lessons. Most expect more pandemics, noting that Covid-19 follows SARS, MERS, H1N1, and Ebola as 21st century disease outbreaks that spread quickly from person to person. Will more pandemics increase or decrease international cooperation?

The argument for more global governance emphasizes that maintaining health is a public good that only larger national governments and more international cooperation can achieve. Those who are skeptical of national and global governance emphasized the failures of the WHO and national governments to contain Covid-19.

In the short term, the prospect of more pandemics is strengthening anti-globalists and nationalists, making it harder for migrants to cross borders for work or asylum. Migrants who once went to the richest countries may instead seek jobs in richer developing countries, where they may have fewer rights and little prospect of long-term residence.

The economic globalization symbolized by free-trade agreements may retreat in a world of pandemic threats. The 2008-09 recession resulted in public and private policies to reduce financial integration, and Covid-19 may slow supply-chain integration after closed factories and borders prevented factories in other countries from operating. If there is a trade off between the efficiency and resilience of supply chains, firms may favor more resilience in the form of in-country or near-country suppliers even if their costs rise.

For example, there are expectations that garment manufacturers may move sewing jobs from southeast Asia to Turkey for European markets and Latin America for US markets. Bangladesh, Cambodia, Indonesia and other countries that depend on exports of garments, footwear, and other items to create jobs for women are searching for a new source of jobs.

Walls. Most international migrants move from poorer to richer nations. The 30 richest countries have a sixth of the world?s people and two-thirds of the world?s $90 trillion GDP. The Walls of Migrants project argues that removing all barriers to migration would double world GDP to $180 trillion as workers moved to higher wage countries and earned higher incomes.

Proponents of more migration point to Australia, which has almost 30 percent foreign-born residents. Australia uses a point system to assess foreigners seeking immigrant visas, and allows many of the foreigners who earn degrees at Australian universities or arrive as guest workers to become immigrants. Selecting for skills and treating students and guest workers as probationary immigrants means that Australia gets mostly well-educated immigrants who easily find jobs.

Immigrants earn more in Australia than they would in their countries of origin, raising global GDP. They also have harder-to-measure effects that could spur economic growth, such as introducing new perspectives into business or starting businesses to fill gaps.

Most international migrants are low-skilled, and the effects of low-skilled migrants are more controversial. Economic theory predicts that increasing the supply of low-skilled migrants depresses the wages of similar native workers, but economists find it hard to detect wage depression in the dynamic labor markets of migrant-receiving countries. Low-skilled migrants may benefit high-skilled natives, as when the availability of nannies and gardeners encourages more high-skilled natives to work.

People who move are the major winners from international migration, absorbing 80 percent or more of the estimated global gains from migration. Many migrants share some of their higher foreign earnings with families at home through remittances.

Advocates for more migration say that restrictionist governments leave trillion dollar bills on the sidewalk, suggesting that if governments lowered barriers to migration, GDP would rise by trillions and most citizens would be better off. Restrictionists argue that too much migration can fray the social fabric, exacerbating social tensions and undermining institutions that facilitate economic growth and social trust.