West’s weak policies may hurt lower income people

By Zhou Qing Source:Global Times Published: 2020/3/19 23:14:32

Illustration: Luo Xuan/GT

Inefficient responses from Western countries to the coronavirus pandemic will eventually cost their middle and lower classes. Many Western media that used to side with biased politicians attacking China now admit the incompetence of their own governments. 

One article published in The New York Times (NYT) accused the world's wealthiest countries, namely the G7, of refraining from concrete action in response to the coronavirus pandemic and its resultant economic impacts. Should they even want to respond effectively, their policymakers' toolkits are nearly empty.

Instead of promptly implementing measures to contain the spread of the virus, Western countries have pinned their hopes on monetary policy. As the NYT article pointed out, central banks in Western countries do not have magical powers to cut through this perilous state of affairs, but can wield their one remaining useful tool - their influence over short-term interest rates. 

US and European monetary authorities have cut interest rates, launched quantitative easing programs and founded money market mutual funds to ensure adequate liquidity amid the pandemic. However, those measures do not address the plight facing the middle and lower classes. As the NYT article stated, "easier loan terms will not restart production at factories whose workers are being kept home to avoid getting or spreading the illness."

Take the US as an example. With low saving preferences and a culture of consumption, a large proportion of the middle and lower classes in the US live paycheck to paycheck. Moreover, many US workers like housekeepers, janitors and landscapers work on a freelance basis or under short-term contracts. They will be the first to become jobless, bearing the brunt of business closures and city lockdowns as the government finally takes action following a month of dragging its feet. 

In the situation that a large proportion of the US' middle class and lower classes lose income but continue to generate living expenses, monetary easing will for them prove futile. And fiscal retrenchment policies like tax cuts, cuts to the public health budget, and the Trump administration's abolishment of Obamacare have already been depriving the poor and compensating the rich. 

A lack of affordable health insurance and expensive medical care have already left many low-income US citizens uninsured. As their government failed to act on the coronavirus outbreak in a timely manner, their risk of expose to the virus is high. That can only aggravate the already difficult situation the middle and lower classes find themselves in. 

Slow responses to the pandemic, single-minded monetary easing, and long-term fiscal restrictions are examples of the misleading policies adopted by many Western governments, policies that will only throw the middle and lower classes under the bus as coronavirus cases mount. As the backbone of economy, the middle and lower classes in straitened circumstances will inevitably drag countries into poverty and create spillover effects for the world. 

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn


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