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Published on March 22, 2020 / Leer en español

Center for a New Economy

Since Hurricane Maria pummeled the island, it is common to hear people say that the ravages caused by hurricanes, earthquakes and now a pandemic are the product of “force majeure.” But that is a simplistic description. We propose that policymakers and those in power in Puerto Rico adopt the concept of “living with risk.” A key element of this conceptual framework is that the risks and impacts of natural disasters be analyzed through the lens of vulnerability. In other words, natural events present risks to the entire population, but it is our level of vulnerability that makes us more or less prone to experience hardship during a disaster.

Defining vulnerability requires an analysis of complicated issues that are beyond the scope of this column, but suffice it to say that how vulnerable we are depends on our economic, political and social standing. In simple terms, not all of us have the same capacity to mitigate different types of risks and damages. Therefore, when developing public policies to deal with the consequences of natural disasters, it is necessary to consider that while we are all affected by various threats, not all of us are vulnerable in the same way. This is a basic principle of living with risk.

Using this conceptual framework as a starting point, it is obvious that our efforts must focus on tackling the pandemic that affects us. Unfortunately, the authorities’ response has been deficient. The government of Puerto Rico isn’t allowing the necessary testing to be performed that would help us determine how widespread the new coronavirus is in the country. Experts, such as Professor Daniel Colón Ramos, confirm that Puerto Rico has the capacity in terms of personnel, scientific equipment, and laboratories to perform these tests.

Without sufficient evidence, it is impossible to run epidemiological models that would help us project the development of the epidemic in Puerto Rico, which in turn is the basis for making decisions about where to locate resources and determining the extent of the quarantine period. The government is trying to do the right thing by ordering the social distancing of the population, but by doing it without enough evidence, it is – to paraphrase a World Health Organization official – trying to put out a fire while blindfolded.

Testing should be available to everyone who needs it and the data accessible to all. It is not enough to state that they will be available, since not all socioeconomic groups have the same access to the health system or the resources to pay for the tests, much less the necessary treatment. Here is a concrete example of living with risk: we are all vulnerable to COVID-19, but we are not all vulnerable in the same way.

Having said that, we cannot ignore or underestimate the economic impact of the pandemic. In the real economy we are seeing simultaneous shocks on the supply and demand side. Although we still do not know with certainty the duration and severity of the pandemic, the economic effect is going to be huge. According to an estimate by Goldman Sachs, economic growth in the United States could slow down to 0% in the first quarter and contract at an annualized rate of 5% in the second. If that projection holds, we would be seeing a huge increase in unemployment and poverty.

On the other hand, the financial markets are experiencing a strong and strange turbulence. The Federal Reserve has cut short-term interest rates basically to zero and has decisively intervened to provide short-term liquidity. There appears to be an excessive demand for short-term cash flow that may be a function of current uncertainty, but could also be an indication of a more complex imbalance in the plumbing of the financial system.

These actions are necessary, but insufficient. Congress has already enacted two laws to address the economic and public health impacts of the crisis. The first allocates a little more than $8 billion to finance the purchase of testing kits and other prevention and preparedness measures. The second includes allowances for the Small Business Administration, increases unemployment insurance payments, provides sick leave for certain employees, and expands the portion of Medicaid expenses paid by the federal government, among other things.

All these measures are welcome. But let’s remember the principle of living with risk: we are all vulnerable to an economic recession, but we are not all vulnerable in the same way. What do we do with those employees who are ordered to take a leave without pay for the duration of the quarantine? Those who do not qualify for unemployment payments or paid sick leave. What about the small businesses that for some reason don’t qualify for SBA loans? And how do we protect people who don’t have health insurance or qualify for Medicaid? How do we mitigate damages to nonprofit organizations?

Congress is working on a third bill to address some of these issues. But there are also measures that the government of Puerto Rico and the private sector can implement to lessen the economic and social impact of the pandemic. The government has the authority to order or legislate a moratorium on foreclosures and disconnections of water, electricity, and telecommunications services; to stop all evictions; to freeze lease rents throughout the island and the prices of essential goods and services, as well as to suspend the collection of the SUT on those essential items; and to eliminate the inventory tax. To be fair, the government and some private entities have already started some of these efforts, but there is still a long way to go to protect the most vulnerable.

Historians, sociologists, and other scholars have extensively documented that a society’s response to a threat such as a pandemic, for example, is a function of power relations in that society, which are usually not evident or fully recognizable until the time of a natural event. This is why, when determining priorities, it is important to understand that we cannot eliminate risk, but in a poor and severely unequal country, not all of us experience vulnerability in the same way.

This column was originally published on March 22, 2020 in El Nuevo Día.