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COVID-19 pandemic and the way out: food for thought with Ricardo Hausmann

13/06/2021 - 21:22
From the blog

13/06/2021 - HR/VP Blog - Last Monday we asked Ricardo Hausmann, Professor at the Harvard Kennedy School, to give a presentation to several hundred EEAS staff members about the global dynamics of the COVID-19 pandemic and the way out. We need indeed to draw inspiration from the most advanced thinking from academia and think tanks.

 

I have known and appreciated Ricardo Hausmann for a long time. At the beginning of the 1990s, he was Minister of Planning in Venezuela and board member of the Central Bank of that country before becoming Chief Economist of the Inter-American Development Bank and then joining Harvard in 2000.

A person of reference on world affairs

These professional experiences, at the crossroads of the North and the South of the planet, has given him a truly global vision. He has become a person of reference in debates on world affairs. In recent months, he has worked extensively on the COVID-19 pandemic and its consequences for the world, and has been a regular contributor to public debate on the subject.

Ricardo Hausmann began by drawing our attention to the many unknowns associated with the evolution of the pandemic. In particular, it is necessary to remain very vigilant in countries where the pandemic has been successfully contained so far: because if the disease has not spread, this means that the population is not yet immune.

 

“It is necessary to remain very vigilant where the pandemic has been successfully contained so far: as long as people are not vaccinated, the pandemic can wreak havoc.”

 

As long as people are not vaccinated, the pandemic can wreak havoc. India, for example, had a relatively well-controlled first wave of infections before suffering a new, very violent wave in recent months. The same is true of Uruguay, a model for successfully managing the pandemic in 2020 before falling victim to a spectacular rise in infections this year. In this context, Ricardo Hausmann emphasised the risks faced by Africa, which so far has been less affected than other continents. However, because it remains poorly vaccinated, Africa is also very fragile - and the same applies to large parts of Asia.

On vaccination, Ricardo Hausmann highlighted the huge gap between the North and South and stressed that this poses high risks to the entire world. Both economically and socially, with the disruption of supply chains, the return of poverty and a halt to the reduction of global inequalities, and in terms of health, with the risk of the virus mutating and rendering existing vaccines ineffective.

 

“There is no doubt that the issue of the global vaccination gap will be crucial to the future of Europe and the world in the coming months.”

 

As EU, we are aware of these risks and we have begun to address them. The issue was also at the centre of the last G7 meeting in Cornwall. There is no doubt that this issue will be crucial to the future of Europe and the world in the coming months. Ricardo Hausmann has recommended that we must accelerate the approval processes for vaccines and increase global production capacity, if necessary by sharing patents on vaccines. The issue is currently being discussed at the WTO and the EU has made a proposal to facilitate compulsory licensing by states.

On the economic impact of the crisis, Ricardo Hausmann highlighted the gap between developed countries plus China, which economies have been less affected by the crisis (although the EU has been more affected than the US so far) than the ones of many low and median income countries. These countries have suffered heavily because they have often experienced hard lock downs, without being able to resort to monetary and fiscal policies of the same magnitude as developed countries. Now they face the risk that the economic recovery lead to a rise in interest rates, which would further aggravate the difficulties of many developing countries to have access to global finance.

 

“With Next Generation EU, Europe has mutualised part of the debts generated by this crisis to help its own South, but the world had not yet done a similar move in solidarity with low and median income countries in need.”

 

Ricardo Hausmann pointed out that, with Next Generation EU, Europe has decided to mutualise part of the debts generated by this crisis to help its own South, but that the world had not yet done a similar move in solidarity with low and median income countries in need. For him, it would be necessary to massively increase the public financing available globally, far beyond what the International Monetary Fund currently provides, associated with rules that give the necessary fiscal space for developing and emerging economies to recover. This is morally the right thing to do. But economically too as this could support and sustain more effectively the global economic recovery.

Enriching food for thoughts

In short, Ricardo Hausmann provided me and our colleagues at the EEAS with very enriching food for thought and I would like to warmly thank him for his insights and wisdom. Such analyses from academics provide further evidence and perspectives that can inform the decisions made by policy leaders, even if their recommendations are not always easy to implement in real life. 

 

“Despite all our difficulties, we are coming out of this ordeal in a better shape than many countries in the world. And if we are not able to show solidarity with these countries, we risk increasing global inequalities and exacerbating major geopolitical tensions.”

 

With others, like Michael Spence, Joseph Stiglitz and Jayati Ghosh, Ricardo Hausmann underlined a key point that all Europeans must keep in mind: despite all our difficulties and the fact that our continent has seen comparatively more deaths than many others, we are coming out of this ordeal in a better shape than many countries in the world. And if we are not able to show solidarity with these countries, both on vaccines and on financing the recovery, we risk increasing global inequalities and exacerbating major geopolitical tensions.

More blog posts by EU High Representative Josep Borrell