By Jay Chauhan and Navdeep Dhindsa*
Covid-19 is the biggest tragedy in human history. Canada as a new country and India as an ancient civilization are both afflicted by the virus. Each and every person in every country of the world is affected with risk of life, regardless of colour, nationality, gender or social rank. The world has united to combat the war on this pandemic. The highest number of deaths from this virus were recorded in the United States. US has led the world in the post second world war years but is not immune from this vicious virus. The virus started in China but the entire globe is affected.
During the course of the two World Wars of the 20th Century, humanity lost about 40 million in the first war and about 80 million in the second one. In both the wars Indian soldiers fighting on the British side, including Sikh regimens, lost many lives. The so called ‘Spanish flu’ which did not start in Spain infected about 500 million people and cost about 50 million lives. Covid-19, like the Spanish flu, is made by nature, and not like the war which is made by human beings. No one is immune from this disease. Leaders like Boris Johnson or the wife of the Canadian Prime Minister Sofie were not immune.
International Monetary Fund has announced that the Covid-19 will have the largest impact on world economy since the great depression of 1928 to 1932. Rise of Hitler and the Nazi party during the 1930’s from the hyper-inflation resulting in reparations required to be paid by Germany. During such hyper-inflation, prices go up by the day for everything including food. In the recent years, the African nation, Zimbabwe also suffered this economic tragedy.
Currently many western countries are paying wages to the employees without doing any work. In exchange economy work provides goods and services we need for our daily living. When there are no services or goods in the economy, paper money chases fewer goods and services, and inflation can set in. Deprivation fosters unrest in the society and moral values go down, thus crime rates rise.
Covid-19 will test our thinking of the free enterprise economic model. Western economies have free enterprise and competition, wherein currencies are managed by banks that lubricate the economy and permit members of society to exchange goods and services. Taxation enables the society to redistribute wealth for those who fall between the cracks of economic and social order or provide for those at the bottom of the income ladder. Taxes do not produce wealth, but they support the common services we need such as police, roads and defence.
Currently the government is paying the citizens in Canada and other countries too are following suit for staying at home to stop the spread of virus which is silent and air borne and very infectious from person to person. The tax dollars come from the past tax collected. If the economy is not restarted this money can run out.
Free enterprise does work, however, work ethics and reward system created in this arrangement do not solve the economic disaster that can follow the pandemic and lock down of the economy. We have the experience of communist regimes of Russia and China which had to abandon their controlled economies. They failed, however, the centralized power system continued and the loss of freedom resulted.
In the recent years, free enterprise has favoured top 1% of the populations in both developing and developed economies. China and India did uplift millions out of poverty using the free enterprise model. Therefore, what we now need is an economic model that is fair and provides incentive to those who work and create entrepreneurship, but at the same time does not deprive bottom ladder of the society from its basic needs of life such as food, shelter and medical assistance.
This pandemic is worse than the great depression of 1929 to1932 as well as the two world wars. In both cases, the production of goods and services did not stop. This time, however, the world has come to a complete standstill. Both the business owner and the employees are asked to stay at home. Whilst the technology with computers does enable many to work from home, we have not yet fully embraced the computers to work from home, although we do have ability to do just that.
Industrial revolutions in Britain and United States and many other countries, including India, introduced mechanization of mass production of goods with machines and transportation that relied on oil to keep the production line lubricated, in place of the muscle power of the agricultural age. We are now in the midst of electronic and robotic revolutions which will further continue to diminish the role of human power to manufacture as Tesla does, and provide services including banking which you can now do right now on your mobile phone.
Artificial Intelligence has arrived, and it is now capable of learning human skills and it can go well beyond the capability of human mind, as we witness the defeat of the top chess player and AlphaGo players. We now have the knowledge to teach the robots to do manufacturing and provide many services like banking and accounting and legal research. Driverless trucks and cars are now ready to displace about 15% of the workforce if we allow them to do so.
In reshaping the world culture, with new economic order, we will need to rethink the new social order based on reward for those who invent and work. Beyond work for our identity, human freedom is priceless, and it is very evident from the recent Hong Kong riots. It is only a question of time before Russia and China are forced to recognize that in organizing societies, the freedom of individuals and their happiness and not the production of goods is the ultimate goal.
Major wars created many technological changes. Covid-19 is the war of nature which should help speed up the process of economic and social change. The new order may mean robotic production lines entirely automated and negative income tax to pay everyone for their necessities which we are already experiencing during this pandemic. We have the economic understanding and tools to counteract the inflation and create a new order of society with more equality and time to pursue our individual goals.
* Jay Chauhan is a lawyer in three countries and an economist from London School of Economics and University of Berlin.
*Navdeep Dhindsa, is an lawyer in Brampton and, and holds a LL.M. from University of Punjab.