Reflections on the financing of Covid-19? Introducing MACRO-Equity and opening Pandora’s Box

Abstract

There seems to be a certain gusto to the speed at which presidents and prime ministers all over the world have responded to COVID-19. This speed and the magnitude of the action has not been witnessed for any other major killer virus or disease. Along with the lock down of people, the real economy has taken a direct hit. This in turn briefly impacted financial markets which often seem to have a runaway path of their own. Certainly, the fact the American and European lives are being lost (certainly more valuable lives if we use discounted values of expected future cash flows) must have caused a faster reaction in developed countries. Watching the pains taken to save lives in this part of the world, perhaps developing countries have responded with like measures. Whatever the reasons for the mimetics, the availability of global information systems, backed by media solidarity, seems to have its effect. The question we are asking is rather mundane and does not lower our sympathies for those whose loved ones have succumbed to this or any other disease. This mundane question is “Who pays”? The question of who pays is important because millions of people have been out of work during the last few months and have been promised social security benefits. Without this, and perhaps despite this, thousands of enterprises would or will close. Many of these enterprises were already under-provisioned in 2019 since they are forever trying to match short term financial market expectations. Alongside, we have been told, time and again, that social security regimes in most developed country are in severe deficits and are to blame for our low competitiveness. Therefore, neither the State nor the social security regimes have the funds to finance the stimulus and pay for all the doctors and nurses who have heroically worked overtime. All the material for hospitals and for transferring the ill from one part of the country to another must be paid for. While statistics on the daily number of infections and deaths caused by Covid-19 are available from many sources (for example, https://www.worldometers.info/coronavirus/), there is absolute silence on the bill that is being prepared to finance all the emergency action. Even a developing country like India announced that it would spend 266 billion dollars (10% of its GDP) on stimulus measures without indicating where the money is going to come from. In this essay we provide our thoughts on seven established options (developed from Ashta 2020) that are usually considered before thinking of four innovative ways.