Illusions of Public Policies Amidst a Pandemic

## **Chapter 1** The Future of an Illusion

*Federico Novelo y Urdanivia and Jathalia Vega Torres*

#### **Abstract**

The pandemic caused by the SARS-CoV-2 virus brings to the scene a crisis never seen before, highlighting the incompetence of government activities in most countries. The pandemic is not an unexpected or inadvertent event; it is instead an event that we were warned about without paying attention. The neoliberal victory, which converts neoclassical economic theory into ideology; austerity, on the battle horse of those who tried to "starve the beast"; and the economizing of all the components of human sociability, which builds the assumption of the redundancy of democratic sociability and government intervention, coupled with the reduction to a minimum of the State and its powers, were the perfect broth to provide erratic and incomplete answers to the Great Recession, starting in 2007, and completed the ruin in the face of the SARS-CoV-2 emergency that, at the end of 2019, appeared as an emblem of the many things that the government does not solve. This article sheds light on the deliberate institutional anemia in which the pandemic emerges and the lessons that we could do well to consider.

**Keywords:** Covid, neoliberalism, pandemic, uncertainty, state

#### **1. Introduction**

#### **1.1 Presentation**

*"The conclusion that religious doctrines are nothing, but illusions lead us immediately to ask ourselves […] if the premises on which our state institutions are founded are not equally to be qualified as illusions"*

*(Freud, The Future of an Illusion, pp. 87 and 88, cited in [1], p. 194).*

The effects of the pandemic caused by the SARS-CoV-2 virus, which stage "a crisis never seen before", go through the global paralysis of the economy in a series of episodes in which most of the activity's governments, especially in the West, seemed to have entered a contest of incompetence. While China and South Korea showed themselves capable of stopping the spread during March 2020, Europe, the United States, and Latin America, in the same month, were barely preparing to descend into hell.

Contrary to a general belief, the pandemic is not an unforeseen event of profound impact; it is not a "Black Swan", but an event announced by the SARS that made an appearance in 2003 and 2009; it is the "extinction of the gray rhinoceros". We were warned but underestimated the warning, as stated by Adam Tooze, in an extraordinary text on the pandemic ([2], p. 16).

Like climate change, the pandemic has begun to produce a kind of collective resignation, by means of which, rather than imagining the future of an illusion—as Sigmund Freud titled his essay—it would be convenient to think of the illusion of a future for the suffering species.

After the triumph of neoliberalism (and with the conversion into ideology of neoclassical economic theory ([3], p. 71)), austerity became the battle horse of those who wanted to "starve the beast (the State)", not only by way of subordinating fiscal policy to monetary policy and, therefore, reducing collection and spending. The strategy also implied reducing or annulling the institutional powers of the government and building a new institutionality, particularly favorable to the market and reducing the State.

The economizing of all the components of human sociability, which establishes the search for profitability in the different areas of individual action ([4], p. 20), built the assumption of the redundancy of democratic sociability and the intervention of the government more beyond the protection of property rights and an elementary horizon of education and health. This assumption tried to become a self-fulfilling prophecy, through austerity, the high doctrine of fiscal balance, job insecurity, economic and commercial opening, the managerialization of public administration, and, above all, the magic of the market.

For this purpose, and with a veritable cascade of neoliberal reforms that, in obvious terms, privatized what was profitable and socialized and what was not, in the areas of health and education, the welfare state where it existed was disintegrated along with the hopes of having it in underdevelopment. The reduction to a minimum of the State and its powers provided erratic and incomplete responses to the Great Recession, starting in 2007, and completed the ruin in the face of the SARS-CoV-2 emergency that, at the end of 2019, appeared as an emblem of the many things that do not solve the market problems. This chapter deals with that history, with the deliberate institutional anemia in which the pandemic emerges, and with the lessons it offers.

#### **2. Post-WWII mixed economy to neoliberal night**

In the development of the most transcendental stages of capitalism since the 17th century, the second half of the 20th century –since the end of World War II— plays a relevant role in shaping the 30 glorious years of this mode of production with the creation of the mixed economy, indicative planning and the Welfare State. This, in addition to the effects of the nonsensical colonialist inertias among the allied countries against the axis, of the imprint of Stagflation and its devastating effects on the economic theory of the time (the neoclassical-Keynesian synthesis) that opened the door to a return of the neoclassical theory and to the long neoliberal night. The events that trigger the reactionary emergence in the economic, political and social spheres begin with the long-lasting Cold War (a true historical anomaly that takes an ideological course), continue with the Vietnam War and its surprising outcome; they proceed with the Revolution in the name of God in Iran, with reformism –not only economic, in China— with the rise to power of Margaret Thatcher and, a year later, of Ronald Reagan. And they carry onto the SARS-CoV-19 pandemic, global confinement, economic paralysis, ongoing structural inflation and the Russian invasion war in Ukraine.

The methodology used is that of historicism-structuralist, in which history, so to speak, leads the rest of the human sciences by the hand.

#### **3. Neoliberalism on the rise**

The antecedents of the prevailing disorder, not only economic, start—paradoxically—with the beginning of the golden age of capitalism.1

World War II had in its true victors the USA and the USSR, the actors nominally least interested in the preservation of the colonial order, unless that preservation served some Cold War purpose. In the abstract, the Americans would betray their own decolonization by allowing such an order to prevail after the Allied triumph and especially in the Allied world. For its part, the USSR claimed—long ago—that its marshal be the Father of All Peoples, through the socialist and revolutionary liberation of the Third World portion of the planet.

With enormous speed, it became clear that decolonization and liberation were not, and could not be, synonymous, due to the emergence of two events, from which three others derived: the death of President Roosevelt, his substitution by Harry Truman, and the dismissals of Henry Morgenthau II and Harry Dexter White from the defining spaces of the new international order and the presidential animosity toward "the reds". With José Stalin in front, the Cold War was served2 along with its consolidation as State policy derived from the constant disagreements between the powers that defeated Hitler.

With very relevant efforts on the part of the United Kingdom to agree on the peaceful independence of India and the apparent tolerance for the rise to power of Mohammed Mossadegh in Iran, even before supporting his overthrow, the historical champion of colonization adapted to the new times. The ally least willing to exercise a decolonizing policy was France, with different arguments: In Algeria, for many years, French citizens had settled, who coordinated the most dynamic economic activities and had established important population centers; to varying degrees, the situation was replicated in the rest of the areas colonized by France.

Southeast Asia had its peculiarities: it had already set itself apart by enduring military experience against colonization, Japanese occupation, and recovery attempts by declining European nations, now in collusion with the world's leading military power, the United States; the communist militancy of important regional leaders and the defeat of the invaders from the east gave enormous singularity to the independence proposals. The anti-colonial appetite of the subordinate peoples aired within the framework of the historical anomaly of the ideological conflict that was the Cold War and that occupied the entire planet; the cases of Taiwan, South Korea, and Hong Kong, at least, are emblematic of the development that came from abroad, from the United States and the United Kingdom, to guarantee the political alignment of the spaces thus benefited.

The moral problem highlighted by Barbara Tuchman [7], in *The United States Betrays Itself in Vietnam*, is not only the paradox by which the government of a large society forgets its anti-colonial origin; it is also the libertarian anti-communist argument with which it was intended to justify that intervention, the disproportionately adverse cost in lives for the Vietnamese, the political and economic cost of the war adventure, and, in the end, its total redundancy. The hegemon of the world, the

<sup>1</sup> The first three sections of this chapter have been published in a book chapter, entitled Salaries, credit and underconsumption. Chronicle of the crisis to come.

<sup>2</sup> The Morgenthau Plan for Germany ([5], pp. 350–356) and the epistolary relationship between Roosevelt and Stalin ([6], pp. 429), show the trend of international relations established by the US that broke with the Roosevelt's death.

greatest military power in history, the total cultural dominator that internationalized the North American way of life, is participating in a war that is as costly and lasting as it is useless and cannot win it. The ending was misleading.

The Soviet reading of that result sinned optimistic. In a part of the undeveloped world, the dismantling of colonialism was proceeding successfully, and, incidentally, it was adding supporters to the USSR; Portugal's encounter with democracy, through the carnation revolution, favored the independence because of its colonies, new spaces of confrontation (with the Cold War as a backdrop). The limits of Soviet expansion would not be set by an adversary in apparent decline; the real problems came from within an economic system that was dramatically inefficient, corrupt, and, except for the arms industry, mired in the most disturbing technological backwardness [8]. Invading Afghanistan, in December 1979, meant the creation of another source of great problems.

The Soviet conflict with China produced some hitherto unimaginable fruits: ping-pong diplomacy, the successful rapprochement with the US government [9], to cite an example, made the Chinese state the second to recognize the coup government of Augusto Pinochet, supported by the United States. With the death of Mao and the ruin of his supporters, economic easing took the place that had been given to criticism of Soviet revisionism, with results that have radically transformed the international economy. If the cultural revolution failed to satisfy the purposes of its animators, it did clear the political chessboard for the radical reformism of Deng Xiaoping ([10], pp. 791–968).

The return of Islamism to an international scenario subjected to strong disturbances became visible with the advent of the Iranian Revolution of 1979. The world was astonished by the outbreak of this vigorous political-religious movement, with a clear anti-American sentiment, in a space dominated by the interests of the major Anglo-Saxon oil companies, and placed under the control of Shah Mohammed Reza Pahlavi (member of a dynasty that, according to his own words, came from Persian greatness), placed in command since 1953 by the CIA during the Eisenhower administration in response to the nationalization of the oil industry promoted by Prime Minister M. Mossadegh ([11], pp. 417–420).

The coming to power of Ayatollah Ruhollah Khomeini, in January 1979, had the peculiar effect of taking faith to the top, even constitutional, of the Iranian State. The lament of John Stuart Mill, in the 1850s, became extremely topical; "If religious belief were as necessary for humanity as we are told, there is good reason to regret that its intellectual base has to be supported by a moral bribery of the understanding" ([12] [1986], p. 48).

On May 4, 1979, the Conservative Party of the United Kingdom won most seats and, incidentally, the obligation to form a government. In the words of Margaret Thatcher, neoliberalism obtained at the polls the triumph that it had only achieved the hard way in South America; the world watched another conservative revolution that would travel its borders, burying the welfare state, where it had existed, and the hopes of reaching it in underdevelopment. A 180-degree turn happened at the service of the market ([13], pp. 123–171).

"If it's a definition you want, I'll give you one. A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery comes when Jimmy Carter loses his!"3 The overwhelming success achieved by Ronald Reagan's presidential candidacy meant the legitimization of the magic of the market and the

<sup>3</sup> Ronald Reagan's 1980 campaign speech, quoted in [14]: page 103.

#### *The Future of an Illusion DOI: http://dx.doi.org/10.5772/intechopen.110183*

redundancy of the State; Thatcherism and Reaganomics set in motion fiscal dumping, the discrediting of the unions, the global economic opening, and the externalities that, together with the internalities, would end up liquidating the Soviet Union, the deregulation (among which the jewel in the crown was indiscriminate privatization), and the mind-boggling growth of inequality. Neoliberalism has also meant the extensive and profound defeat of the working class throughout the planet.

In the intellectual realm, there were not many efforts to imagine the future of the West and the world. The notable exception (in that order: the West and the world) came from the Collège de France and was personified by Michel Foucault: Birth of Biopolitics is the course he taught during 1979, in 12 classes, which covers the fundamental characteristics of liberalism and describes the emergence and development of neoliberalism, from the Lippmann Colloquium, highlighting the role of homo œconomicus and the generalization of the form "company" in the social field ([15], pp. 401). Despite its undeniable limitations, it is a visionary study of the change of era that neoliberal regulations mean ([4], pp. 57–152).

The next step, after the discreet collapse of the USSR and the worldwide success of state phobia, is that of neoliberal economistic globalization, hyper capitalism, in the words of a brilliant young economist ([16], pp. 753–831). The cascade of conservative reformism that globalized during the 1990s produced the autonomy of central banks, financialization, the managerialization of public administration, governance, the construction of a market society, human capital as a vital destiny, the promotion of Regional Integration Agreements (ARIs) especially between nations with notable economic asymmetries (strategic integration, baptized by the World Bank), the growing density of uncertainty, and the greater recurrence and deepening of crises (not only economic) in which the irresponsible market cicada hands over the baton to the anemic state ant.

#### **4. Technological unemployment and its political impact**

"In a 1993 study by the [United States] Department of Labor, it was exploited that only less than 20% of those who followed federal reeducation programs were able to find new jobs in which they would receive, at most, 80% of their old wages" ([17], p. 218).

J. Rifkin's extraordinary text is a detailed and profound analysis of the dispute between new technologies and workers for jobs, throughout recent history. It has a pioneering character in research that will be continued by Jared Diamond (*Weapons, Germs and Steel*, 2007) and Y. Harari (*From Animals to Gods*, 2017); both books share the subtitle *A Brief History of Humanity*, and especially the second, perceives the combination of artificial intelligence (AI) and biotechnology high-end threats to the same species.

The explanatory variable for the reduction in the demand for human labor is technological change. The constant innovation of products and production processes has become the paradoxical condition of an increasingly imperfect competition, to achieve market power; competition to become a monopoly, as M. Kalecki foresaw and as a handful of transnational companies operate in the globalized world that has built, against the backdrop of economistic neoliberalism: "We will see that the greatest failure of globalization is the attempt to integrate markets on a global scale, without a State. This has produced a life in the market that is more insecure, more criminal, and less legitimate. **Markets without states are mafias**" ([18], p. 350; boldface text

belong to me). The consequence of this search for increases in productivity transcends the strictly economic scenario and powerfully affects the political arena.

The economization of the totality of human existence is the neoliberal reconstruction of the State and the subject, in the qualified opinion of Wendy Brown [4]. It is not the interaction of two clearly differentiated spheres, but the penetration of the market economy in each one of the spheres of sociability, perverting political, social, and personal life, which is subjected to the search for profitability in its daily life in all your actions.

This new economistic determinism, being based on neoclassical theory turned into ideology, strips away the most important Keynesian warnings about the defects of the market economy: Economic storms are part of the normal functioning of the market system; crisis-hit economies cannot solve their situation by themselves, and the search for efficiency is not tolerable at any cost ([19], Preface). The counterpart of rigidities frequently takes the form of devastating criticism and takes its place in the political and ideological alternative.

In his speech on the centenary of Malthus's death, Keynes refers to the way in which Shelley (the poet of spiritual revolution) and Coleridge (the poet of spiritual conservatism) agreed to perceive Malthus as the symbol of sophistries of the economists. He said:

Thus, two different poets, but both possessing the highest quality of intellectual insight, interpreted what was being said to them. Not a single accusation of this kind leveled at nineteenth-century economists is entirely without foundation, nor can we economists today entirely shy away from it. In fact, the work begun by Malthus and completed by Ricardo provided a very solid intellectual basis for justifying the status quo, for stopping experiments, for quelling enthusiasms, for keeping us all in order; and it was a just reward that they gave birth, as illegitimate progeny, to Karl Marx.

Making the analogy with the rigidity contained in the powerful neoliberal message, in the words of Margaret Thatcher, in *There Is Not Alternative* (TINA), the just reward takes the form of populism, in the sense of democratic radicalism, as analyzed by P. Rosanvallon [20]. The perception of populism, not only or fundamentally, as discontent with globalization and its effects, but rather as a vigorous ideology that has historical and theoretical foundations, places the level of discussion in the high place it deserves. For the reference author, and hence the title of the text, populism is the rising ideology of the 21st century. In a twilight time for almost all ideologies, it is no small thing; not enough either:

The populist vision registers the fact that the classes no longer fulfill the structuring role that characterized them, but it does so in terms that exempt themselves from the problem of analyzing the new emerging social world, contenting itself with a people of the 99%, whose contours are necessarily diffuse, protagonist of the emancipation and new figure of the democratic master. While the conflict with the 1% that constitutes it negatively shows nothing more than an impoverished understanding of the tensions, divisions, and solidarities that must be addressed in order to constitute an effective political community and a society of equals ([20], p. 226).

While the Marxist prophecy about the concentration of capital was fully fulfilled, the one that announced the growing proletarianization did not reach its birth.

#### **5. Consumption as a function of income or credit?**

The consolidation of neoliberalism in the Anglo-Saxon world showed, among its first effects, the stagnation and subsequent reduction of real wages, in an

environment of progressive lack of employment protection. The indirect income from public spending plus the effectiveness of the automatic stabilizer represented by unemployment insurance became history and the available resource was the indebtedness that has reached levels of impossibility of payment, at a global level.

The mechanics followed is that the reduction of taxes and public spending in the United States provided a fiscal dumping that became paradigmatic and, thus, globalized. No developed nation tried to maintain an expensive Welfare State, when the most powerful power on the planet made it expendable.

The relevant issue is that this scheme is not sustainable, among other reasons, because around 70% of world's GDP depends on consumption and recoveries from crises, since the Great Depression, are developed in accordance with demand management. The pandemic has been no exception. Under these conditions and when debt is greater than income, solvency disappears; that ability to repay debt and maintain the volume of consumption has left the scene, and the table is set for a near and deep crisis of underconsumption.

#### **6. The Western polycrisis or the six effects of Chen Yixin?**

Pandemic, economy, racial injustice, and climate were the 4 converging or overlapping crises addressed insistently during Joe Biden's presidential campaign. The frivolity, to use an indulgent term, with which his predecessor approached the first months of Covid required a change in the strategy that failed to be radical: The new government decidedly applied itself to the purchase of vaccines and their distribution, but it did in the logic of America first; that is, first for the Americans and, later, to try to become, without the expected success, the "global vaccine arsenal". Regarding the economy, the disagreement with the Republicans has been withering each of the flowers with which the recovery was imagined: neither the minimum wage at 15 dollars an hour nor care for the elderly and children. The external front of the economic problems, China in obvious terms, has begun to be treated as erratically as Trump did and obtaining results as adverse as those achieved by him. The reduction of racial injustice in the United States, the greatest moral problem of that nation, coexists badly and little with a growing white supremacism, which has an old history, and the monumental climate problem requires a body of transcendent understandings on the internal fronts and external. As can be seen, and adding the Russian attack on Ukraine, the West faces daunting problems, old and new, bad and worse.

For its part, in China an attempt was made to shed more light on the combination of risks. In an essay by Chen Yixin, a protégé of Xi Jinping, published during 2019, the author drew attention to the "six crucial points":


come to generate stratified social problems: current problems with historical problems, problems of tangible interest with ideological problems, and political problems with non-political problems. They all mingle and interfere with each other;


There is no doubt that calm and equanimity build the best environment for defining problems and possible solutions, strategies, and tactics, and, in this environment, Chinese reflection shows itself to be far superior to Western pragmatism, which, once again, seems bent on finding new routes to failure.

#### **7. The oracle of inflation**

Inflation is not a monetary phenomenon; it is the result of imbalances of a real nature that manifest themselves in the form of increases in the general level of prices. This real character of the inflationary process is much more noticeable in underdeveloped countries than in industrial countries. ([21], p. 275).

When analyzing the complications faced by the quantitative theory of money (QTM) when attempting to apply it to reality, Keynes found it to be represented by "bottlenecks" in the backward linkage of a productive activity ([22], p. 285); the concrete expression of this complication is the imperfect inelasticity of supply [ez = ΛZ/ ΛDs < 1], which became the focus of Noyola's analysis—an extraordinary (and forgotten) Mexican economist4 —on inflation in Latin America. Milton Friedman's influential statement—inflation is always and at any time a monetary phenomenon—derived from the old quantitative theory of currency, intuited by Fray Tomás de Mercado during the 16th century, based on the effect that the plundering of precious metals of México and Perú and especially its transfer, first to Spain and later to all of Western Europe, had on prices in that continent and finally formalized by Irving Fischer faced an alternative, structural analysis, in which productive inefficiency becomes the explanatory variable for inflation [23–25].

In reality, both explanations are complementary, depending on the origin of the inflationary spiral that is intended to be analyzed. Unfortunately, for the followers of TQM (all autonomous central banks), the inflation that is ongoing in the wake of the

<sup>4</sup> Juan F. Noyola Vásquez [21], Inflation and economic development in Chile and Mexico, in Fifty years of thought at ECLAC. Selected texts (1998), CEPAL-FCE, Chile, pp. 273–286. Noyola died on November 27, 1962, in an air attack in Peru, organized by the CIA, while he was Director of Programming, Investments and Balances of the Cuban government. He was declared "Martyr of the Revolution" and he was honored as a commander who died in the campaign.

#### *The Future of an Illusion DOI: http://dx.doi.org/10.5772/intechopen.110183*

pandemic is structural and represents the great stumble of globalization. The unique degree of interdependence achieved by the world economy, relocating production processes with the compass of lower labor, fiscal, social, and environmental costs that resulted in abundant and cheap production, at the time of the pandemic ran into the paralysis of supply chains, supplies, with new "bottlenecks" and with new in elasticities of countless offers that are expressed in the sustained rise in prices, when meeting with a demand that was deferred during the imprint of the virus and that is fully expressed after the pandemic.

If the cause of inflation is not monetary, the way to deal with it should not be either. The way in which the most important central banks on the planet contravened their creed, during the pandemic, by financing the public spending of their respective governments through the purchase of official bonds, meant violating the strongest prohibition established in the declaration of their autonomies; the field of action of the monetary authority is restricted to fighting the type of inflation that has no structural roots.

The increase in the interest rate, which is reflected in the immediate increase in the cost of credit, may be plausible when facing an inflation originated in the demand; when the predominant factor in an inflationary spiral is placed on the supply side, as is the case, an increase in interest rates becomes the invocation of the double misfortune known as stagflation and suffered strongly during the 1970s. Stagnation with inflation was an experience impossible to conceive, much less overcome, in the dominant scheme of the neoclassical-Keynesian synthesis, the well-known (and fortunately retired) IS-LM model, in whose graphic expression there is no possibility of locating in a single point to both economic tares.

The eventual solution, although structural, lies in the possibility of making supply elastic, of increasing production and providing the appropriate incentives to the different links in the production chains. It is, or should be, evident that such a boost to supply requires abundant and cheap credit, and not the rise in the cost of money. The rationality of our species seems to find limits closer each day.

It is convenient to place the inflationary problem in its true dimension. Historically, the oracle of inflation has been the favorite argument of liberal and neoliberal economic thought against the distortions that, according to that lofty doctrine, markets suffer from government interference (**Table 1**):

With Fray Tomás de Mercado (Salamanca school), the role of money in determining prices begins to be examined; *The Quantity Theory of Currency* has stated that, when the money supply increases and the production of goods grows less than proportionally to the demand thus increased, the economic system will undergo an inflationary spiral. The arrival in Europe of the gold plundered from the colonies of Spain led to an increase in purchasing power in an Old World in which the supply of goods could not respond with elasticity; the visible result was the increase in prices. The matter refers us to the scholastics, and, from there, this story begins.

Going to the 16th century and recovering the contributions of a priest who died at sea, traveling (back, where he did his university studies) to Mexico, is something that only makes sense in the light of the causal relationships between money and prices, privileged—at present—as the only explanation of the inflationary process.

"[W]e will remember for future reference that some of the doctors—the most important in this sense is Mercado—guessed more or less clearly what could be called the quantity theory of money, at least in the sense in which it can be affirmed that Bodin he has been a proponent of it" ([29], p. 140). The term "guessed", to a certain extent, corresponds to the importance that Keynes would give to intuition, as the


*Source: Authors' own elaboration with support in Blyth [26], Tamames [27], Schumpeter [28], and Skidelsky [19].*

#### **Table 1.**

*Authors and schools of economic thought opposed to state intervention.*

greatest quality an economist could have. In the case of the Salamanca school, this intuition was put at the service of understanding the effects that the arrival of large volumes of precious metals would have on the prices of primary and manufactured goods that were produced in a notably more rigid structure than that shown by the increase in the money supply. As for Juan Bodino, he explains the rise in prices for five reasons, in the order of priority:


#### *The Future of an Illusion DOI: http://dx.doi.org/10.5772/intechopen.110183*

John Locke actively participated in the debates regarding the relationship between low interest rates and prosperity, stating that it is the latter that causes the former. Another issue that he addressed in his elaborations is that of private property, which he perceives as a natural right of man and not instituted contractually: "In private property he no longer sees something static, but something dynamic, no longer something given once for all, or established by men in common agreement, but rather something that is the fruit of the effort and economic activity of man. This is an opinion that is very well adapted to the new bourgeois, landowners and mercantile sectors that were experiencing a rapid ascent in English society in the 17th century" ([31]: 50 et seq., cited in [32], p. 120) (**Figure 1**).

"A premise of the theory is that the speed of circulation of money is a fairly stable parameter. Consequently, any increase in the quantity of money should translate into a corresponding increase in the general level of prices, if in the short run the quantity of available goods also remains constant. In other words, given the availability of goods, the level of their prices would come to depend exclusively on the amount of money in circulation. If the general level of prices rises (inflation), the cause would be attributable to the increase in monetary circulation; on the contrary, deflation would occur as a consequence of a contraction in the money supply, and for nothing else. The standard-bearer of the neo quantitative school or Chicago school, M. Friedman, has been able to write: 'Perhaps no other empirical relationship in economics has been seen to reappear so uniformly, under such a wide variety of circumstances, as the relationship between substantial changes in the short-term money stock and price changes; One and the other are infallibly linked and go in the same direction: I would say that this uniformity is of the same order as those that form the basis of the physical sciences'. The mechanism through which monetary circulation influences".5

In the middle of 2022, we found ourselves on the verge of a new world economic recession; today, when we continue to suffer the effects of the one that, to begin with, buried Lehman Brothers, the propensity of capitalism to fall into critical situations constitutes a kind of normality that it has acquired greater prominence since the 1970s; after the modest euphoria provided by the so-called Great Moderation (*Bernanke, dixit*), the magnitude, depth, and lasting ravages of the Great Recession have made any discussion of the recurrence of crises redundant. The relevant issue lies elsewhere: in the system's ability to turn its cycles into useful lessons for a future full of uncertainty.

The calm waters in which the dreams of Luigi Eunaudi and Milton Friedman came true, with the independence of central banks as an emblem that aligned these banks twice (in the sole purpose of fighting inflation and in the high doctrine) that perceives it always and at any time as a monetary phenomenon (M. Friedman, 1970, *The Counter-Revolution in Monetary Theory*, London, Institute of Economic Affairs, p. 24). They were also the years of radical deregulation and privatization, those of the emerging dominance of shadow banking and financialization. The backdrop, the evidence of the success of neoclassical theory and its ideological expression, neoliberalism, is globalization with its slim line of winners and its huge list of those who have not been so great.

These days, the announcements of economic stagnation have a new order and rhythm. Before, they began with investment, production, employment, income, consumption, and savings, with a later reflection on trade. The redundancy of bulky inventories, the notable role of sales and purchases in the global market, the levity of

<sup>5</sup> Sergio Ricossa, Diccionario de ecnomía, Siglo XXI, México, 1990, pp. 217–218.

domestic markets, and the international adoption of austerity measures—as a morethan-deserved self-administered punishment by governments that spent excessively to save the bankers and banks that caused the Great Recession—are circumstances that favor the simultaneous appearance of all the unemployed males who, moreover, move fast.

The most dreadful lesson delivered to believers in market self-adjustment, the Great Depression, resulted in the first death of neoclassical theory and the emergence of Keynesian theory and policy; stagflation (inflation and unemployment at the same time) resulted in the first death of Keynesianism and the first resurrection of neoclassical theory. Harsh experiences are capable of retiring and enabling paradigms. The Great Recession, whose severity moved more than one ruler to propose the refounding of capitalism, resulted in austerity, a very convenient and interesting change of subject, just when the recovery of investment, employment, and income levels should be the global priority. In those, we are at the moment of arrival of a new and very threatening crisis.

The reencounter with the recession grabs us without visible learning from the previous shock: owners of the purity and joy that only full ignorance of recent and ongoing events can provide. If austerity has any merit, it is time to start looking for it. Otherwise, let us look for the action of the State, the greatest of public goods. Active taxation is not a luxury today, nothing less than an emergency.

The first myth on which austerity is based perceives debt and public finance as strictly domestic matters; the second, presented by the horny heads of Kenneth Rogoff and Carmen Reinhart, establishes the maximum threshold of the debt and the deficit, with respect to the National Product (90 and 3%), after which it hinders

#### *The Future of an Illusion DOI: http://dx.doi.org/10.5772/intechopen.110183*

growth; the third myth suggests the convenience of competing internationally through lower taxes, to attract FDI; the fourth states that privatization reduces the fiscal burden, while the fifth states that spending cuts solve fiscal problems and encourage investment. The sixth myth establishes the priority of reducing the deficit through fiscal consolidation; the seventh affirms that excessive sovereign debt produced the euro crisis (another scratch on the Greek tiger). The eighth myth affirms the benefits of the private and the harm of the public, while the ninth suggests that the State rely only on its own means; the tenth makes the apologetic generalization of the benefits of domestic savings in the German style, while the eleventh builds the world that produces austerity: activation and economic incentives (the best possible). Finally, the twelfth myth perceives austerity as a mechanism for strengthening democracy ([33], p. 85). Since it was threatened, due to its visible complicity in the outbreak of the Great Recession, the dominant economic thought proposed to change the subject. The issue should not focus on a paradigm shift, which would lead neoliberal policy to a well-deserved retirement, but on the huge deficit that resulted from the government bailout of the financial system; a little history about it:

In the decades prior to the crisis, the idea of the pre-eminence of the market and the reduction of state interventionism had prevailed. Naturally, government and regulation continued, but they were delegated to "independent" bodies, symbolically to "central banks", whose function was to guarantee discipline, stability, and security. Discretionary policies and measures were the enemies of good governance. The balance of power was incorporated into the normality of the new regime of deflationary globalization, which Ben Bernanke euphemistically called "the great moderation". The question that he planned about the management of neoliberalism was whether the same rules were applied to everyone or if in reality there were rules for some and discretion for others. The events of 2008 substantially confirmed the suspicion raised by selective US interventions in the emerging market crises of the 1990s and following the dot-com crash of the early 2000s. Neoliberalism worked with one caveat. Faced with a serious financial crisis that threatened "systemic" interests, it was discovered that we lived in an era of large unrestricted governments, of large-scale executive action, of interventionism that had more in common with military operations or urgencies than with governance subject to law. This revealed an essential but puzzling truth, the denial of which had determined all economic policy development since the 1970s. The foundations of the modern monetary system are irreducibly political. ([34], p. 22).

As a result of the Great Recession, which began in 2007, the convergence of crisis, bank bailout, and increase in sovereign debt, just to finance that bailout, produced an explosive formula that derailed the recovery and gave birth to a devastating figure: austerity.

The unlimited capacity of the human species to produce cures that are more painful than the disease itself is fully demonstrated by the austerity imprint which, among other things, showcases the relevance of considering the cyclical nature of the economic system during the construction and implementation of economic policy measures; if austerity can take a place in the functioning of the economy, it must be implemented during the expansionary phase and never in the depressive one of the economic cycle.

Bad management of the Great Recession, austerity, pandemic, and war are the new faces of the four horsemen of the Apocalypse, those that force us to ask ourselves if a future, any future for humanity, is not an illusion.

#### **8. Conclusion**

*"The universe and human stupidity are infinite. Of the universe, I am not sure"*

*Albert Einstein.*

The recurring blunders that the leaders of the species have perpetrated, against both the host space and the species itself, causing an alarming environmental change with consequences that are already shown, also reache the stormy waters of the economy, of politics, and of social relations.

The economic paralysis that accompanied the pandemic during its first 4 waves, coupled with the decision of the Chinese Communist Party to reach the goal of zero covid, produced the unfortunate progeny of inflation due to bottlenecks in the provision structure that rests on global distribution of the different links of the most dynamic production chains.

The overflowing optimism with a globalization centered on neoliberal economism, with a financialization that separates the productive economy from the nominal, and with a deregulation of economic systems as contagious as SARS-CoV-2, are circumstances that prevented the construction of forecasts in the face of a pandemic that had already announced its appearance since the threats experienced during 2003 and 2009. The geographical separation of inputs and production factors made it difficult for the most diverse manufactures to link backward when there was a failure in any supply center.

The fact that inflation is defined as an imbalance in which demand exceeds supply, D > Z, tends to produce confusion that reaches the institutional design. The confusion consists in supposing that this imbalance always originates in the growth of demand, which is attempted to be reduced by making credit more expensive, by raising interest rates; the inelasticity of supply, characteristic of backward economies, is not part of the conventional conceptualization of inflation, much less of the policy to overcome it.

During the most intense period of neoliberal reformism, in the 1990s, most central banks were given autonomy and, in addition to many prohibitions, a single mandate: to maintain price stability. It is obvious that by assigning this task to the monetary authority, the executive and legislative branches subscribed to a single, monetarist perception of inflation and ignored the possibility of finding the origin of these spirals of rising prices in the productive economy.

If the ongoing inflationary process is carefully analyzed, the explanation that rests on the growth of the monetary stock is irrelevant, and the conventional measures of making money more expensive are ineffective. By trying to give visibility to their efforts to comply with the anti-inflationary mandate, the monetary authorities have decided to raise interest rates, hindering the post-pandemic economic recovery.

The lessons are varied and begin by showing us the enormous vulnerability of the human species and the degree of irrationality that accompanies not a few decisions, today evident in the discipline that—charged with arrogance—perceives itself as a science. The concern produced by this first lesson is magnified by the fundamental nature of uncertainty, which has been trickily identified with risk, actuarially measurable and preventable. In the heart of the Great Recession, which started in 2007, this deception took center stage, and they do not want to expel it from the stage. Knowing that we do not know and cannot know what the future will be like is a useful guide to acting with more intellectual humility and much greater prudence.

#### *The Future of an Illusion DOI: http://dx.doi.org/10.5772/intechopen.110183*

The pandemic (and the war) gave us a structural and lasting inflationary spiral; our own clumsiness is working hard to gift us with a new recession. It is worth asking, who benefits?

Through public policies, mainly through education, it is essential to become aware of the fallibility of our perceptions, the irrationality of many of our decisions, and the inescapable presence of a dense uncertainty. On the threshold of a hell that will be expressed in the struggle for natural resources, history will take its course again, although the species faces new, complicated, and great problems. You will have to do it with a talent that you have not shown and with a reflection about your own limitations.

#### **Author details**

Federico Novelo y Urdanivia1 \* and Jathalia Vega Torres2

1 Autonomous Metropolitan University (UAM), México

2 Ciudad de México, México

\*Address all correspondence to: fjnovelo@correo.xoc.uam.mx

© 2023 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Prosperity and Inequality in the world. Spain: Ariel; 2020

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[32] Roncaglia A. The Richness of Ideas. A History of Economic Thought. Zaragoza: University of Zaragoza; 2018

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[34] Tooze A. Crash. How a Decade of Financial Crises Changed the World. Barcelona: Criticism; 2018

#### **Chapter 2**

## The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress

*Yan Vaslavskiy, Irina Vaslavskaya and Albina Bilyalova*

#### **Abstract**

The unique feature of the problem field studied is linked to the fact that during the COVID-19 pandemic representatives of almost all societies witnessed failures of the state. These failures included lockdowns and social distancing in the first stage of the pandemic as well as the fast growth of the number of infected and lethal cases in the second stage. This chapter shows that waves of the pandemic which followed each other accompanied by the inability of the countries to prevent them aggravated the problems of economic growth and social instability. The chapter proves that the coronavirus pandemic unveiled the state's failures both in economic and social policies. The deepening societal crisis caused by citizens' impoverishment, unemployment growth and absence of a clear perspective of when the pandemic would end and the new post-COVID reality would take shape, made theorists and practitioners return to the phenomenon of the modern state which seemed unexplored by the early 2020s. The author proposed a theoretical basis for prioritizing the functions of the state, which assumes that two of the three groups of state functions related to the distribution of resources and economic stabilization mutually determine each other, albeit with a certain amount of contradictions.

**Keywords:** state, economic and social system, epinomics, pandemic economics, societal crisis, post-COVID reality

#### **1. Introduction**

The peculiarity of the issues related to the modern state is due to the fact that in the conditions of the COVID-19 pandemic, almost all representatives of national communities became aware of the "failures of the state", which included lockdown and social distancing regimes at the first stages of the spread of coronavirus infection, and the rapid increase in the number of infected citizens and deaths at the second stage of the pandemic. Successive waves of pandemics and the inability of States to prevent them have exacerbated the problems of economic growth and social instability. The worsening societal crisis caused by the fall in the material security of citizens, rising unemployment and the lack of a clear prospect of the end of the pandemic

and the forming the post-crisis reality forced theorists and practitioners to return to the phenomenon of the modern state, which turned out to be unknown by the early 2020s. The point is that the coronavirus pandemic made obvious, overnight, failures in both economic and social policies of the state. However, it also became clear that the conditions for generating economic and social crises in the countries of the world had been maturing for more than a century [1].

The rapid spread of a life-threatening coronavirus infection has served as a test case to assess the adequacy of nation-states in their function of protecting the lives and health of their citizens, testing the quality of interaction between society and the state, the individual and society, citizens and the state. The extraordinary nature of the pandemic's ordeal on national communities was also evident in the behavior of states around the world that were not familiar with best practices for responding to circumstances of force majeure. This affected the promptness with which states introduced emergency lockdown and social distancing regimes in their countries and individual regions, the strictness of their compliance, the optimal conditions for their removal, not to mention the timing of the deployment of the necessary additional health system capacities and providing them with the necessary medical personnel and technical means of combating COVID-19 [2].

In early 2021, new circumstances emerged that tested the adequacy of states' behavior in a pandemic. We are talking about recurring waves of coronavirus epidemics, which permanently preserved the threat to life and health and made states responsible for minimizing these risks. All these upheavals were objectively accompanied by a decline in economic activity, an increase in unemployment, a decrease in the level of citizens' material security, and an increase in citizens' mistrust of the actions of nation-states. The mutual intensification of economic and societal crises predetermined asocial reactions of citizens, who deliberately violated self-isolation regimes, refused to use masks in public places, and ignored calls by governments to vaccinate for the purpose of achieving collective immunity. In this context, citizens' compliance with the norms of social behavior imposed by the state in the context of the coronavirus pandemic can be assessed as a manifestation of consensus in society in the fight against the pandemic [3]. The asocial behavior of citizens as a response to national lockdown and social distancing regimes, it exposes many social problems that divide society and destroy its integrity, making any state action ineffective under extraordinary circumstances.

The rising societal problems of national communities are forcing the ever-present questions as new pandemic waves and new strains of coronavirus reappear: "who is to blame?" and "what to do?" On the one hand, citizens direct their main grievances to the state. But, on the other hand, their main aspirations to regain their former material position, and often their social status, are also connected with the state. Boston Consulting Group (BCG) experts write the following on this subject: "Citizens want to see the way to a brighter future. Ultimately, this matters because it is a manifestation of the desire to change. Private business represented by top managers will gladly support long-term growth caused by such desire. And investors will finance it" [4]. Virtually all experts admit that the world will be different after the COVID-19 pandemic. But citizens, society, societal crises, and economic recession will remain, and they must be dealt with. In addition, an overwhelming obstacle stands in the way - the non-recognition of the phenomenon of the state, which has existed for more than 2000 years and without which all the problems exposed by the coronavirus cannot be solved.

*The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

#### **2. COVID-19 and epinomic policy of the state**

In addition to the extraordinary consequences that the COVID-19 pandemic has caused, perhaps the most important are the actions of national governments and the ability to monitor them to assess their effectiveness. It should be emphasized that virtually all national governments had to make extreme efforts to deal with the pandemic. The specifics of these actions were manifested in the fact that states acted in defiance of all their previous aspirations to ensure financial stability and economic equilibrium by all available means. Indeed, by introducing emergency regimes of lockdowns and self-isolation for citizens, the state destroys, first of all, the structural links in the economy and finance, and as a result, the stability of these systems as a whole. As for the self-isolation of citizens, under such conditions, society had the opportunity to test the strength of their families and professional communities at the level of households. All these circumstances led IMF chief economist Gita Gopinath to define the global economic crisis of 2020 as a "global lockdown," caused by a "great self-isolation" or "great quarantine. [5]. According to the British philosopher and politician Jonathan Sachs, this situation can be associated with a self-generated ("selfinflicted") economic catastrophe, which was caused by government policies aimed at keeping rapid expansion in check [6].

In this situation, certain summaries must be made of the actions of national governments in the extreme conditions of the coronavirus pandemic. This allowed BCG experts to structure the process of combating the pandemic coronavirus into three phases. The initial phase is characterized by government actions to flatten the exponential growth curve of the number of cases and deaths. In the second stage, states took active action to fight the COVID-19 pandemic. The last stage, as BCG experts imagined the future (future) in mid-2020, involved state action to build collective immunity. This vision of government action was based on the assumption that coronavirus infection would be ended once a vaccine or effective treatment for the coronavirus was available. However, the third and fourth waves of the spread of more aggressive strains of COVID-19 around the world make it necessary to assume that the last stage according to BCG experts is not the last one at all.

Such structuring of the process of confrontation between the state and the coronavirus allowed to unify the actions of national governments. If in the first phase of this process, states introduced emergency lockdown regimes in order to smooth out the exponential growth curve of the infected, in the second phase the main action of national governments was to choose the moment to restart the economy while keeping the infection circulation low and exposing the national economy and society to the risk of introducing new lockdowns. The future in combating the coronavirus pandemic has been linked to the development and replication of a reliable vaccine or highly effective treatments for coronavirus infection [7]. In the middle of 2021, it became evident that the confrontation with COVID-19, which was already mutating and spreading in waves through more aggressive strains, more dangerous for humans than the "ukhan" variant, was continuing.

Nevertheless, it is unlikely that the BCG experts were wrong in their conclusions that the COVID-19 pandemic reduced the main functions of states to two main ones at once: (1) stabilizing the epidemiological situation in the country and (2) resuming the functioning of the national economic system. It was the combination of these two goals in public policy that provided the basis for the introduction of the term "epinomics" [8]. It was this policy that highlighted its three main strategies in controlling coronavirus

infection and rebuilding the national economy: (1) crush and contain the infection, (2) flatten the exponential growth of infected and actively fight the pandemic, and (3) sustain and support the positive results achieved in fighting the pandemic.

The material above demonstrates the way in which the non-traditional policy goals of the state, triggered by the extraordinary event of the COVID-19 pandemic, are instantly actualized. As the spread of coronavirus infection and the number of deaths accelerate, the health care system becomes the number 1 priority. However, in repeated pandemic waves of new strains of coronavirus, the importance of government action to control unemployment and economic activity increases. As a result, the longer the coronavirus pandemic continues, the more important it becomes to optimize government actions to address societal and economic crises [9].

The theory of public finance analyzed the activities of the state through the prism of optimizing the choice of priorities in the financing of budgetary expenditures. They were structured according to their assignment to one of the three main groups of state functions related to the production of public goods. The Italian economist Vito Tanzi [9] called this problem the Musgrave Triangle [10]. In this case, each corner is associated with the main functions of the state: (1) to allocate resources, (2) to redistribute income (to ensure equality in the distribution of income), and (3) to stabilize the economy (economic efficiency itself). The problem of choice or priorities in budget expenditures was related to the limitations of state revenues, which did not allow the state to finance all groups of functions equally. As a result, the objective dilemma of justifying fiscal preferences for two groups of public goods out of the three available ones arose. This choice took on the contours of the most important fiscal problem, which was objectively predetermined by the contradictory (or rather, unknowable) phenomenon of the state itself.

On the one hand, the state has no interests of its own other than serving society, i.e. to optimally dispose of society's resources for the purpose of optimizing the satisfaction of its needs through the production of public goods. But, on the other hand, modern society does not have adequate means of assessing the effectiveness of the rapid actions of the state. And, taking into account the significant financial resources reallocated by society to the state budget for the effective production of public goods, and the representatives of the authorities who oversee them, conditions are formed for corruption schemes and a self-sustaining mechanism for their implementation. In fact, this is where the contradictory nature of the phenomenon of the state, which, in fact, acts simultaneously in the status of the subject of regulation, and the status of its object [11].

In fact, all these theoretical arguments for the inefficiency of the state have received practical confirmation in connection with the growth of already enormous expenditures of the state aimed at eliminating the consequences of its inadequate behavior in the emergency conditions of the exponential spread of the dangerous for humans' coronavirus infection. The logic of reasoning is traditional: the state disposes of part of the national income, which is created in society and redistributed by all members of society in the form of taxes and other payments into its budget revenues. Consequently, all state actions are paid for by society, including all emergency expenses of nation-states caused by the COVID-19 pandemic. As of June 2020 alone, total spending by national governments and international organizations on actions aimed at preventing extreme human and economic losses approached \$9 trillion [12]. Moreover, since the beginning of the COVID-19 pandemic, G20 countries have announced budgetary packages that exceed \$10 trillion in real terms, these amounts

*The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

#### **Figure 1.**

*The economic recession of all countries of the world in 2020 in comparison with the global financial crisis of 2008–2009. Source: IMF. World Economic Outlook [5].*

are roughly three times the amount of fiscal support measures during the 2008 financial crisis and 30 times the amount of the Marshall Plan budget that secured Europe's recovery after World War II.

But despite these efforts, total global GDP losses in 2020–2021 are tentatively estimated at \$9 trillion, equal to the combined GDP of Japan and Germany combined. For the first time since the Great Depression, the economic downturn has affected all countries in the world: advanced economies, emerging markets, and developing economies (**Figure 1**).

All this has affected the jobs and livelihoods of millions of people living on the planet. As a result, the risks caused by infectious cataclysms have become associated with the Great Deceleration, with structural and societal crises. Against the background of negative GDP growth rates and increased budgetary expenditures to support households and national private businesses, the state itself has become a grandiose problem for society. On the one hand, ambitious fiscal measures aimed at empowering national health systems, recovering lost household income, and preventing large-scale bankruptcies were objectively justified. States have been forced to undertake unprecedented fiscal measures, which could exceed \$11 trillion worldwide [13]. On the other hand, the sharp decline in GDP of the countries of the world generates a fall in the budget revenues of national governments. The excess of budget expenditures over revenues increases budget deficits and the size of public debts. And both present and future generations will have to respond to the enormous obligations of their governments. In June 2020 the IMF experts revised their forecasts, published in January 2020 [5]. According to these data, budget deficits in the advanced economies (AEs) increased fivefold in 2020, while in emerging market economies they doubled. This has caused an unprecedented jump in public debt in these countries - by 26% and 7% of GDP, respectively.

According to a rough estimate by G. Gopinath and W. Gaspar [10], in 2020 the public debt of the world's countries reached its highest level ever, amounting to 101.5% of global GDP, compared with the highest figure recorded since World War II.

Under these conditions, the unresolved problems to date of national health systems in the fight against coronavirus infection, the fall of GDP, and the braking of its growth after the removal of lockdown regimes on the national borders have only deepened the societal crisis. This means that the traditional dominance of economic priorities in the policies of nation-states has largely undermined the social unity of society. It only exacerbates the problems of rebuilding national economies, which can be effectively solved only if the goals of ensuring societal integrity of society prevail [14].

In this environment, it has become clear that policies that reduce public health risks go a long way toward restoring confidence and trust in the state, thereby stimulating economic activity, increasing employment, and reducing the burden on public finances. Otherwise, as citizens grow increasingly distrustful of their governments, all of their announced pandemic control regimes will have very limited economic and financial results in the face of the cancelation of lockdown regimes. Thus the dialectical gap between state and society, fixed by economic priorities in the policies of national governments, is actually capable of putting a brake on all state actions in any sphere of their activities, significantly reducing the effectiveness of specific measures of impact.

It is no coincidence that all the events actualized by the coronavirus pandemic make the nation-state itself a huge problem for society, the complexity of which is exacerbated by the fact that, from a theoretical perspective, the state and society are always a dialectical unity. This means that both the state and society as participants in dialectical interaction exist today and will exist in the future. But in the post-covision reality, the dialectics of these relations must objectively change for the benefit of social progress with the direct participation of both society and the state.

Thus, the state in the post-covision reality will retain its essence, but the forms of its interaction with society are likely to change dramatically. First and foremost, we are talking about the replacement of economic priorities in state policy with social ones. These changes today can only be judged theoretically since in practice there is little evidence of emerging changes in the ratio of economic and social priorities in the policies of national governments.

#### **2.1 The societal crisis of 2020–2021: the result of the dominance of economic priorities in the policies of nation-states**

The societal crisis of 2020–2021 is a recent phenomenon that needs to be understood not only in relation to the state of society in the context of the coronavirus pandemic but also in relation to the policies of nation-states. The COVID-19 pandemic only pushed the societal crisis, the conditions for its maturation were formed long before the emergence of the Wuhan strain of coronavirus in December 2019. In other words, this crisis was preceded by a rather long period of functioning of modern national communities, during which the success of the state was usually evaluated by its ability to ensure the material (economically) social status of its citizens. We are talking about the level of wages, the comfort of living conditions, access to quality services of education, health care, and social system, about the technological level of life support of households as their material well-being grows. It should be especially noted that the individual values of citizens and their compliance/non-compliance with social norms, introduced by the state on behalf of society, were not discussed. According to national governments, material well-being was and still is the main measure of their performance and the main condition for ensuring societal integrity of societies. With this in mind, states have structured their economic policy priorities accordingly until the end of 2019 [15].

#### *The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

The COVID-19 pandemic disrupted this perception by changing the position of households on the social ladder for the objective reasons of coronavirus infection, job loss, mounting financial problems, lowered social status, poor quality health care, distant education, and a highly uncertain future. All the negative consequences of the pandemic have affected the living conditions of large segments of the population, which have linked them to the ineffectiveness of the state, which proved totally unprepared to maintain social order in the face of growing threats to the lives of citizens and the development of various complex crises.

In practice, the rapid spread of COVID-19, which is deadly to humans, served as a basis for testing the strength of the established foundations of society, as well as the quality of interaction between individuals and society, citizens and the state, and even family members among themselves. It is hard to deny the fact that the crises caused by the COVID-19 pandemic were provoked by national governments that failed to promptly identify "zero carriers of the coronavirus infection" and isolate them from society. And the imposed lockdown regimes already ex-post the COVID-19 pandemic objectively destroyed the structural integrity of the economy and societal unity of society [16].

The severity of the hardship endured by individuals, as their well-being and established ways of life were destroyed, led to a reassessment of the role of the state and the material criteria for the effectiveness of its policies. A vivid demonstration of the substitution of economic priorities for social ones as factors of citizens' confidence in their state is the expansion of their asocial behavior due to the deliberate violation of the emergency regimes of self-isolation imposed by national governments. In this way, citizens opposed themselves to the state, implementing their demarche as a protest against the state's devaluation of individual values and a desire to revise the priorities of the social choice (contract) that the state implements on behalf of society.

Theoretically, this conflict between state and society, state and individual means an accumulation of qualitative changes in the structure of society, which predetermines the need to replace economic priorities with social ones. Otherwise, a societal crisis can lead to the loss of the state's most important intangible asset - the "trust" in it on the part of society and a critical mass of citizens. This, in turn, destroys societal unity of society, and no efficient economy and successful recovery of economic activity after the pandemic become simply impossible [12]. Moreover, even with an effective vaccine, successful government response to a coronavirus pandemic seems problematic, since it can be accompanied by a mass reluctance of citizens to comply with social order. This violation of the dialectic of state-society interaction condemns to "failure" any reasonable state policy measures aimed at protecting citizens from the coronavirus pandemic.

The coronavirus has revealed the main "spring" of today's societal crisis, which has not allowed to dampen the consequences of an unexpected infection dangerous to human life and has worsened the structural disunity of national societies. In this regard, one cannot but agree with the BCG experts, who have begun to link the effects of COVID-19, first and foremost and to a greater extent, with the societal crisis [17]. The objectivity of this assessment is quite understandable. Experts' calculations have shown that social isolation and economic lockdown aimed at stopping the exponential spread of coronavirus infection in countries around the world have caused unprecedented losses in both human lives and national well-being. At the same time COVID-19 proved the priority of social problems, which, moreover, were worsened by the colossal drop in the volume of material production in the world, determining the co-subordination of state functions: first to stabilize the epidemiological situation

in the country, and only then not to lose time and timely restart the economic activity after the lifting of the lockdown [8]. Epinomic policy emphasizes the paramount importance of ensuring the health and life of citizens, the achievement of which is an indisputable factor in the ability to successfully revive the economy. And the specificity of the first problem is related to the fact that along with the physical health of citizens in the context of equalizing the epidemiological situation in the country, perhaps, the most important for the states is the elimination of the negative consequences of societal crisis.

Thus, the reduction of the uncertainty of the post-COVID future is largely related to the development of a more inclusive social environment, which is predetermined by the change in the functions of the state in the socio-economic system. Moreover, this issue has both theoretical implications and many applied problems since there are no "best practices" of state behavior in similar situations to COVID-19 in the past. And in terms of strategic goals for the progress of social communities in the post-coronavirus future, the most important thing has become the reconstruction of their societal integrity as an objective condition for rapid economic recovery after the lockdown and the guarantee of an adequate choice of an acceptable scenario in case of subsequent waves of the coronavirus pandemic. In essence, it is about expanding the intersection between the individual values of citizens integrated into society and the value conceptions of norms of behavior institutionalized by the state on behalf of society.

#### **2.2 The interpretation of the policy of economic priorities of the state**

The main failure of the state in the fight against the pandemic coronavirus is the dominant policy of economic priorities until 2019, which replaced social justice measures due to a lack of budgetary resources. It is to this period that quite a wide discussion of the "triangle dilemma" paradox, which was posed by the American economist Arthur Okun [18], meaningfully revealed by his colleague Richard Musgrave and highlighted as a paradox by W. Tanzi. It is essentially a generalization of all state functions into three main groups: (A) *allocative efficiency* in resource allocation, (B) *social justice* in income redistribution in society, and (C) *macroeconomic stability* (to achieve economic efficiency). This triad does not specifically include state functions of economic development and economic growth, although many modern governments increasingly declare them on their list of policy goals. Considering all of the above, the author proposes an interpretation of the priority of state functions, using the "triangle dilemma" proposed by R. Musgrave. For these purposes, a certain constant was introduced by analogy with Planck's constant in physics to estimate Werner Heisenberg's uncertainty, which resolves the dialectical contradiction of the wave-particle duality in physics.

The assumptions are based on the fact that among the three groups of state functions, the two related to resource allocation and economic stabilization mutually imply each other, although with a certain degree of inconsistency. In other words, they can be performed by the state more or less effectively at the same time at any stage of economic dynamics. Consequently, Musgrave's uncertainty can be minimized with respect to them. But the third group of functions related to the development of human capital, which are associated with social expenditures in the state budget, cannot be performed simultaneously with the two above-mentioned functions. In this case, Musgrave's uncertainty tends toward infinity. If the development of human capital is associated with the implementation by the state of the principle of fair income distribution in society, and this, in turn, implies the need to increase budget

*The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

expenditures on the social needs of society, then their underfunding (inhibition) may allow the potential for economic growth to be quantified through the human capital development factor [10].

Musgrave's uncertainty is manifested in a variety of ways. First, social expenditures in the official interpretation are always paramount, but social expenditures act as balancing items, i.e., those that can be frozen or even reduced if the risks of economic dynamics slowdown increase. Secondly, the specific nature of the budgeting process is such that, as a rule, the planned and executed parameters of the state budget expenditures do not coincide. All this is the result of the contradictory nature of the state itself, the contradictory nature of its functions contained in the magic triangle, and the state finances themselves.

In this context, up until the coronavirus pandemic, there were discussions about the role of the state and increasing the effectiveness of its economic policy. In particular, the vectors of changes in the income elasticity of GDP and expenditures were compared for the purpose of identifying those specific areas of budget expenditures that produce a real macroeconomic effect. In this case, the fiscal multiplier should demonstrate a value greater than zero. If the budget expenditure item is estimated by the fiscal multiplier much higher than zero, then this direction of budget expenditures was assessed as effective and recommended to increase. This growth was to be carried out at the expense of the reduction of inefficient, in terms of macroeconomic returns, budget expenditures. Based on the assessment of fiscal multipliers and the selection of factors determining them, such approaches make it possible to adequately assess the degree of efficiency of the state in terms of the main groups of its functions, which makes it possible to ensure the stability of public finances, as well as the growth of the national economy. In this context, the solution of R. Musgrave's "triangle dilemma" allows us to approach the development of the optimal economic policy of the state.

In general, the overall effect of fiscal policy of the states of the world can provide up to 0.81% of the growth of the world economy, providing different contributions to it by tax and expenditure instruments. Thus, the fiscal multipliers used by the IMF for this assessment were 0.30 for government income, 0.51 for government investment, and 0.31 for another government spending [19].

All of the above proves the fact that until the end of 2019 (the time when the Wuhan strain of the coronavirus appeared), economic goals remained primary in government activities, and social justice measures played a subordinate role. COVID-19, in the extreme conditions of a deadly coronavirus pandemic, changed priorities, making spending on public health the primary goal of government economic policy and the priority of fiscal spending. Moreover, the growing number of coronavirus cases and deaths, the economic lockdown, social distancing, and the transition to remote work predetermined complete uncertainty about the future welfare of citizens, drastically changed the habitual way of households, and exacerbated the factors of societal crisis development. According to OECD experts, most governments were not prepared for such a scale of crisis and had to restructure their economic policies "on the march" [20].

As a result, not all government economic policies were adequately prepared and equally effective, and this became evident to all citizens. In this context, the phenomenon of loss of trust in the state by citizens, exacerbated by irritation over ineffective government responses to the pandemic, began to emerge in national communities. Citizens began to deliberately oppose the pandemic emergency regimes imposed by national governments. In this way, social opposition between citizens and the state began to mature, which is undoubtedly becoming a major obstacle to the state's implementation of an effective strategy for resuming economic activity after the lockdowns.

The above makes it clear that fiscal support measures for growing employment and subsidies for private business in an economic lockdown are costing the nationstates exceptionally high costs of multiple crises accelerated by the coronavirus pandemic and the growing deficit in national budgets during the period of coronavirus infection is clearly a loss to society, in particular, because governments have failed to establish national health systems capable of functioning in anticipation of the enormous human and economic losses that COVID-19 has caused [21]. On the surface of the phenomena, global fiscal deficits and huge public debt can be interpreted as the price of inadequate policies of national governments before the pandemic with their priorities of ensuring high GDP growth rates at the expense of ignoring the social preferences of citizens that ensure societal cohesion and prevent the societal crisis. And the poor quality of health care has become evident to all citizens in the context of an exponential increase in the number of people infected with coronavirus and fatal outcomes. Thus, according to the World Health Organization (WHO) on July 14, 2021, the total number of people infected with coronavirus on the planet reached 188.3 million, with an estimated 4.06 million deaths. On June 17, 2021, alone, there were 599,949 more people sick and 8727 more deaths.

If we compare the implementation of the social functions of the state at least in the context of ensuring the health and material well-being of citizens and the measures of governments to accelerate economic growth at all costs, the inefficiency of the modern state in the face of the COVID-19 pandemic becomes evident. However, the essential reason for the rapid deepening of the societal crisis in 2020–2021 is the divergence of citizens' value perceptions and the social order implemented by states, which predetermined the gradual slowdown of the global economy in the early 21st century and its catastrophic collapse in 2020 [22].

In particular, three areas of state-society interaction are crucial for increasing citizen trust, transparency, and combating the societal crisis. First, it is very important to eliminate misinformation about the current situation of the coronavirus pandemic, even when citizens have a high degree of trust in government. In 2020, for example, only 51% of people in OECD countries trusted their governments. At the same time, the social strata of the population that refused to participate in traditional democratic processes were increasing, which only worsened the societal crisis.

Second, it is essential to strengthening the consolidation of society around the state, which should be facilitated by the adoption of economic policies in a fair and transparent manner. For this purpose, governments must strive to promote the inclusion of all citizens in actions related to the fight against the COVID-19 pandemic. Most important in this regard is to consolidate the efforts of public servants and proactive citizens, to involve young people in this process, activate social ties, and to broaden the circle of participants in political consultations. Governments should increase the involvement of members of society in the political decision-making process, which would have a positive effect on leveling the playing field in lobbying. The latter is a serious problem for almost all countries of the world since most actors more or less regularly engage in lobbying [8]. The state's lack of foresight and long-term forecasting capacity is also a significant problem, which is becoming increasingly important in the context of the growing likelihood of man-made disasters.

All of the above proves the presence of cardinal changes in the interaction of the state with economic and social systems, which are manifested in the fact that the factor of individual values and their coincidence/non-coincidence with the social norms institutionalized by the state become key in the resolution of societal and economic crises. Societal integrity of society becomes the foundation of its stability because it

#### *The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

is conditioned by the dominance of socially significant norms of behavior in comparison with individual values, as well as loyalty (trust) of citizens to the state and its actions, especially in such extreme situations as COVID-19. If the integrity of society is destroyed, the state is forced to use formal institutions to cope with the societal crisis as a mechanism of punishment for the opportunism of citizens who do not agree with the government's actions aimed at combating the COVID-19 pandemic. As a result, trust between citizens, society, and the state, acting on its behalf, is further eroded, which negatively affects the effectiveness of state actions.

#### **2.3 State policy and missed opportunities for socio-economic progress**

The emergencies caused by the coronavirus pandemic in 2020 made nation-states the last resort to bear all the financial costs associated with isolation in the national economy, social support for the population, fiscal and financial support for private firms, and diverse forms of business whose activities were effectively blocked. As a result, the budgetary expenditures of national governments have reached a ceiling, and budget revenues have fallen to a minimum. As for the entrepreneurs whose businesses declined or closed completely, they lost revenues and profits, the ability to pay salaries to employees, repay loans and pay taxes, and build strategic prospects for long-term development.

Leaving aside the fiscal aspect of providing states with high-quality public health systems, it is useful to assess their status on the eve of the COVID-19 pandemic. At the very end of October 2019, experts from the British think tank Economist Intelligence Unit and the Center for Health Security at Johns Hopkins University (USA) released a seminal paper titled "Global Health Security Index [23] Building Collective Action and Accountability". This was actually a month before the first cases of coronavirus infection appeared in China's Hubei Province. They assessed national health systems in 195 countries and created Global Health Security Index. The results were very negative. The experts described the situation in national health systems as follows: "National health security is fundamentally weak worldwide. No country is fully prepared for epidemics or pandemics, and every country has important gaps that need to be filled. Altogether, international preparedness for infectious pandemics is weak. Many countries lack evidence of the health security capacities and capabilities needed to prevent, detect, and respond to serious infectious disease outbreaks" [23].

Six categories of indicators were included in the GIPH Index: (1) Prevention of the emergence or release of pathogens; (2) Early detection and notification of epidemics of potential international concern; (3) Rapid response to and mitigation of the epidemic; (4) A strong health system to treat patients and protect health workers; (5) Meeting national capacity building requirements, funding plans to close gaps and meeting obligations in accordance with international standards; (6) The overall risk and vulnerabilities of the country to biological threats. The average overall GIBS score for all 195 countries was 40.2 out of a possible 100 points. Among the 60 high-income countries, the average GIIBH score was 51.9. Meanwhile, 116 high- and middle-income countries did not score higher than 50 out of a possible 100. In total, the GHSI score revealed serious shortcomings in the world's ability to prevent, detect, and respond to health emergencies:

1.In terms of the ability to prevent the emergence or release of pathogens, less than 7% of countries had the highest level of ability to prevent the emergence or release of pathogens.


Judging by these data, no state was prepared to promptly prevent the exponential increase in the incidence of coronavirus infection both within the country and between countries. At the same time, the imbalance of socio-economic systems exacerbated the inadequate state of national health systems. This, incidentally, explains the paradox that the top-ranked countries in the 2019 GIBOH Index were the most vulnerable to a coronavirus pandemic. In any case, the COVID-19 pandemic proved the experts' conclusions right, demonstrating in a living demonstration that biological threats occurring in nature, accidental or deliberate, can kill millions of people, cause economic losses estimated in billions of dollars, and create political and economic chaos and instability on the planet. Despite significant progress in health care in the twentieth century, the year 2020 has proven that humanity is still far from a quality health protection system on a global scale [24].

In 2019, public sector spending in OECD member countries averaged 40.8% of GDP. In 2020, budget spending in all 26 OECD countries rose as a share of GDP due to additional spending due to COVID-19 and falling GDP. Thus, about 16.4% of GDP was spent additionally to support households and companies in OECD countries and to compensate for their lost revenues. And at the expense of fiscal support to the private business through financial injections, loan coverage, acquisition of assets, or delays in the payment or cancelation of debts, contingent liabilities of the public administration sector amounted to another 10.5% of GDP.

At the same time, government sector revenues in OECD countries averaged 37.7% of GDP in 2019. In 2020, real per capita income in 24 out of 26 OECD countries decreased due to a decline in economic activity. And in 13 countries, per capita income declined by more than 5% [25].

To increase social and economic resilience during the recovery and adaptation phases of COVID-19 shocks, national governments must demonstrate their ability to act quickly and extensively to protect citizens and thereby build confidence in the effectiveness of fiscal protection measures. Only by restoring public confidence in its actions, the government will create a kind of buffer that allows it to successfully withstand likely shocks in the future. There are two critical components of the success of government action that have been demonstrated in the fight against the pandemic coronavirus. The first is the ability of national governments to withstand shocks by taking immediate, large-scale actions aimed at minimizing negative consequences (**Figure 2**). The second essential condition is related to strengthening the trust of citizens and increasing transparency in the actions of governments. It is essentially a revision of state behavior, focusing on strengthening the interaction between government and society as a whole, as this is the only way to strengthen the integrity of society.

Recently, there has been a growing consensus among theorists and practitioners that a lack of trust in government undermines the legitimacy of state institutions,

*The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

#### **Figure 2.**

*The two main components of a program to build the resilience of national governments in the extreme conditions of a crisis like the COVID-19 pandemic. Source: OECD [20].*

contributes to political polarization, and favors populist movements. Public trust in government has suffered significant damage since the global financial crisis of 2008–2009, and only in some countries has it recovered to pre-crisis levels [26]. In other words, the COVID-19 crisis was preceded by an accumulation of citizen discontent with growing social inequality and injustice, both economically and socially, as well as politically and representationally.

Year 2020 created even more problems for public trust in the actions of governments, as well as for civil liberties and democratic systems in general. After an initial "rally-around-the-state" effect in the early stages of the fight against COVID-19, by the end of 2020 distrust in government and public institutions was deepening in most OECD countries [27]. Corruption and fraud scandals have overshadowed the response of governments in many countries. Some experts have suggested that the unprecedented restrictions on civil liberties in 2020 (curfews, travel restrictions, restrictions, or bans on meetings) have gone beyond what international law allows for limiting rights during public health emergencies [28].

Thus, society is in great need of a profound socio-economic restructuring based on clearly expressed individual values. The social and economic crisis of COVID-19 brings destruction, but it also provides an opportunity to reassess what kind of society should be created for future generations. We are talking about a human-centered system and a state with health priorities over economic benefits. With the COVID-19 pandemic not yet over, it is up to the state to evaluate its actions in connection with the stabilization of the epidemiological situation in the country as a serious step toward its rehabilitation in the eyes of society and the return of public confidence. The positive consequences of the successful epidemic policy of states in the categories of missed benefits can be assessed using the results obtained by the experts of the McKinsey Global Institute [16].

Better health contributes to economic growth by increasing the labor force and productivity, as well as by providing significant social benefits as a basis for addressing the negative effects of the societal crisis and restoring the integrity of society.

And in recent years, the emphasis on rising health care costs, especially in advanced economies, has dominated political discourse. But the understanding of health as an investment in the development of society has been largely ignored.

The COVID-19 pandemic, which caused the societal crisis, put the health system in the context of its priority for people, society, and economy, as well as for global socio-economic progress. This approach makes it possible to assess the lost benefits to individuals, societies, and economies, with adequate state behavior that could have avoided serious human and economic losses, as occurred in the coronavirus pandemic. According to preliminary estimates by experts of the McKinsey Global Institute, the pandemic and its consequences could cause global GDP to fall by 3–8% in 2020. And each year, poor public health reduces global GDP by 15%. A wellfunctioning public health system means that more than 70% of economic gains can be achieved through prevention by creating a cleaner and safer environment, encouraging healthier lifestyles and addressing underlying social factors, and increasing access to vaccines and preventive medicine. As a result, an additional 230 million people could be alive in the world by 2040, and the welfare benefits of good health could then reach \$100 trillion. In sum, this is a rough estimate of the failures of a state that has failed to develop a highly effective national health system capable of preventing severe pandemic conditions and consequences, as well as a societal crisis as a manifestation of citizens' distrust of the state [29].

Improvements in all of the categories that define the Global Health Security Index could result in impressive results. For example, by 2040, 245 million more people could be added to the world's labor force just by improving health outcomes. About 60 million of them would be due to reductions in early mortality through successful treatment of heart disease, various forms of cancer, malaria, and other common diseases. This alone could increase global GDP by \$1.4 trillion by 2040. It could add \$1.4 trillion to global GDP by 2040. Successful treatments for mental disorders and diabetes would increase the workforce by 120 million full-time workers. This could increase global GDP by another \$4.2 trillion by 2040. An additional \$4.1 billion could come from increased labor force participation by three groups of workers: people of retirement age who because of good health can continue to work, informal caregivers who no longer need to take care of loved ones, and people with disabilities who can go to work because jobs are adapted to their abilities [30].

The McKinsey Global Institute estimates that better health could add \$12 trillion to global GDP by 2040, or an increase of 0.4% in annual growth, 8% more than currently projected. About half of that annual economic output would come from an expanding and healthier workforce. The remainder will come from expanding opportunities for seniors, people with disabilities, and those who have transitioned from informal to formal employment, as well as from productivity gains from reducing the negative impact of chronic disease (**Figure 3**).

So, the economic effect could be between \$2 and \$4 for every dollar invested in health improvement. In higher-income countries, the costs of implementation can be more than compensated by increases in health productivity (**Figure 4**). This does not mean that obtaining health and economic benefits will be easy. It requires reorienting thinking and investing in citizens' health and health care delivery, and promoting healthier living conditions and behavioral change for both individuals and the state. It also requires changes in the workplace and economic policies to, among other things, ensures greater participation of older people in the workforce.

As tragic and devastating as coronavirus has been, it has also given society a unique opportunity to think about making health a priority. **Figure 4** presents a scenario of

*The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

#### **Figure 3.**

*Nearly \$12 trillion global GDP growth in 2040, representing an 8% increase mainly due to better health and more healthy workers. Source: McKinsey Global Institute [16].*

#### **Figure 4.**

*For every \$1 invested in improving the health of citizens, there can be an economic return of \$2 to \$4. Source: McKinsey Global Institute [16].*

economic growth due to improved public health in 2040. Incremental health spending, impact on GDP, and wealth growth are only directly related to health gains (excluding increased participation). Realizing the opportunity for healthy growth will require a turn toward prevention both inside and outside the health care system [31]. This will not be easy and will require all stakeholders to work together on four imperatives: make health a social and economic priority, keep health on everyone's agenda; transform health systems, and double the amount of innovation in therapy and beyond.

Thus, as countries emerge from the crisis caused by the pandemic, they have a unique opportunity to rethink the role of human health in a future post-consumer

#### **Figure 5.**

*Comparative analysis of investment in health and the resulting economic return (every US dollar invested in health improvement/economic return in US dollars) in different groups of countries in 2040. Source: McKinsey Global Institute [16].*

reality, as well as the quality of governance that would fulfill this historic mission. Making health care a priority and shifting the focus to areas of greatest return can increase sustainability, reduce health and health disparities, and promote individual, social, and economic well-being. Preventing disease usually costs less than treating it and reduces the need for costly treatments later on, which contributes to high economic returns (**Figure 5**). Obtaining these benefits will require dramatic changes beyond what the state normally considers health care. It means major changes in where and how health care is delivered, as well as in the communities that will help people develop, work and grow old while staying healthy. It means big changes in the policies of governments and regional governments. As for companies, innovators, and communities, they must understand the need to shape the environment and society in ways that promote healthy lifestyles and reap societal and economic benefits. Could there be a better time to invest in global health in order to promote well-being and prosperity in a post-consensus reality? In this context, restoring and maintaining citizen trust is a priority for national governments, and to do so, they must understand its main determinants and act on them [32].

The OECD identifies five main factors that can increase trust in government: 1) responsiveness in providing public services; 2) reliability in anticipating new needs and protecting people; 3) honesty; 4) openness; and 5) fairness [33]. Across countries and across a variety of government functions, major differences in these drivers were found. For example, before the pandemic, only 23% of Italians were confident that their government would be reliable in dealing with shocks such as natural disasters or the spread of contagious diseases, while in Finland the figure was 54% in 2020

*The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

#### **Figure 6.**

*Government confidence factors, according to recent OECD surveys. (Percentage of people who answer yes, by dimension and country). Source: OECD [20].*

(**Figure 6**). Improved responsiveness and reliability will help countries achieve sustainable economic recovery and build people's trust. According to the OECD, it is the responsiveness and reliability of governments in South Korea and Finland that are the main factors of trust [34].

The reliability of public services is also linked to the actual or perceived long-term sustainability of policies, which, in turn, increases people's trust and support for the changes underway. For example, recent data from South Korea, Spain, and Sweden show that most people believe that climate change mitigation will make people's lives better in the future, and public debt can be increased for this purpose. At the same time, they are unwilling to support future-oriented policies because they have little faith that governments will actually follow such climate policies [34, 35].

Country experiences during the COVID-19 crisis demonstrate the adequacy of the OECD's Trust Policy Framework in identifying specific measures to maintain trust during a pandemic, as well as areas that governments should address to make systems more resilient. Governments need to restructure their activities with a focus on restoring citizen confidence by informing and engaging the public and by anticipating and discussing fiscal measures and the structure of GDP redistribution, taking into account the effects on different groups of people. In particular, as the economy recovers and adapts to the pandemic, governments should build resilience by socially adapting their practices in three key areas: 1) ensuring openness and responsiveness in how interests are represented and integrated into public policy; 2) ensuring that all stakeholders are integrated into the social justice sphere when designing policies, and 3) confronting distortions and inaccurate information.

#### **3. Conclusions**

The pandemic has revealed the virtual inability of the vast majority of the world's nations to effectively confront emergencies that threaten the lives of millions of citizens. By imposing regimes of social and economic isolation in the combat against

the coronavirus, the state was faced with a societal crisis. Its consequences are hard to overestimate, especially as the economy recovers. Experts' assessments have shown that social and economic restrictions aimed at stopping the exponential growth of coronavirus cases in countries around the world have resulted in unprecedented losses to both human lives and national well-being. At the same time, COVID-19 proved the priority of social problems, which in addition were worsened by the absolute decline of material production in the world. The pandemic has dictated an absolute subordination of government functions: first to stabilize the epidemiological situation in the country and then to "restart" the economy in time. BCG experts called this latest dualism in government actions "epinomics". Epinomic policy emphasizes the primary importance of ensuring the health and lives of citizens, which is an obvious factor in the ability to successfully restart the economy. Moreover, the specificity of the first problem is related to the fact that along with the physical health of citizens in the context of leveling the epidemiological situation in the country, perhaps the most important thing for the state becomes the elimination of the consequences of the social crisis.

However, the growing distrust of households toward the state, caused by the disruption of their habitual way of life, rising unemployment, and worsening prosperity, became a serious obstacle along the way. Thus, people began to perceive significant differences between their individual values and the social norms institutionalized by the state. Consequently, the priority for the state should be to restore citizens' trust by creating a more inclusive social environment that minimizes the negative effects of the societal crisis. Nearly all experts recognize that the world will be a different place after the pandemic, but it will retain both citizens and society and crisis, which the state must address as a necessary condition for further socio-economic progress.

The urgent need to create a more inclusive social environment, necessary for restoring the social integrity of society and accelerating economic progress, predetermines the growing demand for a theoretical justification of the new functions of the state, and factors for increasing the effectiveness of formal institutions in its hands. In fact, the coronavirus pandemic has revealed the fundamental problem of modern socio-economic systems, which is the state's neglect of the need to ensure the dialectic of interaction between society and the economy. For this purpose, the author proposed to use the model of R. Musgrave's triangle dilemma, which allows the state to solve the priority problems of societal crisis and ensure universal prosperity in the post-coronavirus future.

The rapid spread of the deadly COVID-19 has served to test the stability of existing social foundations, as well as the depth of mutual trust between people and society, citizens, and the state. The test that fell on people's shoulders and destroyed their well-being and established way of life turned into a reevaluation of the role of the state and society in ensuring the stability of households. The most striking demonstration of these individual reevaluations was the observance or non-observance of self-isolation regimes by citizens, as they became a function of their degree of trust in the actions of their state and their individual desire to follow the extraordinary norms of self-isolation imposed on society by the state in connection with the pandemic. Thus, the coronavirus exposed the main "spring" of modern societies, which failed to mitigate the consequences of the unexpected emergence and spread of an infection dangerous to human life and contributed to the development of a social crisis as a demonstration of the structural fragmentation of national communities. It is in this context that the BSG experts regarded the COVID-19 outbreak as primarily a societal crisis. Experts' assessments showed that the social and economic isolation aimed at

*The State and the Coronavirus Pandemic: Missed Opportunities for Social and Economic Progress DOI: http://dx.doi.org/10.5772/intechopen.107546*

stopping the exponential growth of coronavirus cases in countries around the world resulted in unprecedented losses to both human lives and national well-being.

For reducing the scale of uncertainty in the post-coronavirus reality, it is largely related to the creation of a more inclusive social environment, which is predetermined by the change in the functions of the state in the socio-economic system. Moreover, this issue has both a theoretical basis and many applied problems, since in the past there were no "best practices" of state behavior in situations similar to the COVID-19 pandemic. In terms of strategic goals for the progress of social communities in the post-coronavirus future, the most important thing is to restore their social integrity as an objective condition for a quick economic launch after the forced downtime and an adequate acceptable scenario in case of repeated pandemic waves and emergence of new strains of coronavirus. In fact, this is evidenced by the following conclusion of the World Health Organization's April 14, 2020 updated strategy: "Governments must reposition and harness the full available potential of the state, public, and private sectors to rapidly expand the public health system. It is about restoring the intersection of societal values as the integrity of citizens and public choice, aggregated by the state in the social norms of citizens' behavior in society.

#### **Author details**

Yan Vaslavskiy1 \*, Irina Vaslavskaya2 and Albina Bilyalova<sup>2</sup>

1 Moscow State Institute of International Relations (MGIMO University), Russia

2 Kazan Federal University, Kazan, Russia

\*Address all correspondence to: vaslavsky@yandex.ru

© 2022 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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#### **Chapter 3**

## Effects of the Pandemic on Academic Women in Latin America

*Julianna Ramirez Lozano*

#### **Abstract**

The pandemic caused by COVID-19 has brought us a serious global economic, health and social crisis. In this context, there has been an increase in the inequality between men and women around the world. In this situation of home confinement, uncertainty, stress and fear, women have been the most affected, regardless of their level of education. In the case of women academics, they have experienced an overload of remote work, but also an increase in the household chores and other activities such as the care of older adults and school teaching of their minor children. The greatest impacts on the perception were the lack of gender equity (SDG 5) and, therefore, the increase of the gender inequality gap (SDG 10) during the pandemic in Latin America (LA).

**Keywords:** women academic, pandemic, gender equality, reduced inequalities, SDG 5, SDG 10

#### **1. Introduction**

The World Health Organization (WHO) officially declared, on March 11, 2020, the beginning of the COVID-19 pandemic due to the worldwide evolution and spread of the virus [1]. Since then, the lifestyle (work, studies and social relations, among others) of millions of people has changed, in many cases drastically. This pandemic has made evident the worldwide problems of inequity, inequality and lack of opportunities, especially among women in Latin America, as evidenced by many studies to date. The results of the United Nations Development Programme (UNDP) Gender Inequality Index for Latin America as of 2019, prior to the pandemic, indicated that there was inequality between women and men in three dimensions of interest: reproductive health, empowerment and labour market. It also indicated significant levels of discrimination in the laws, traditions and social norms of the countries.

In education, studies have focused mainly on the impact of learning methodologies on students, without considering other aspects such as the experience of women academics in Latin America [2]. Regardless of their level of studies, economic situation or position within the institutions, they have to deal with the remote workrelated tasks, but also with other tasks such as the care of children, the sick, the elderly and domestic work, among others [3].

This qualitative study analyses the perception of women academics from three universities in Ecuador, Peru and Chile. It identifies the different types of work they performed throughout their working days during the pandemic. It analysed the difficulties and repercussions that virtual teaching has had on their personal lives; the implications of the training, the material support received from their universities, as well as the policies and actions taken by these institutions during the pandemic.

#### **2. Gender equality and women's empowerment**

Gender equality and women's empowerment are fundamental rights protected by the Human Rights promoted by the United Nations [4]. They also represent a basic pillar to build a peaceful, prosperous and sustainable world. There has been some progress in Latin America during the last decades: there are more girls in schools; more women have reached executive and leadership positions in organizations and companies and there are more laws that promote gender equality in the Latin American countries [5, 6]. However, the increase of women in economic activities has not reduced women's unpaid domestic activities.

Workplace gender discrimination [7] deals with sexism or discrimination based on sex, where people face situations of denial or blindness, which do not appear in other types of discrimination. For example, racial discrimination in the workplace is evident despite it being absurd to take into account the skin colour for job performance. On the other hand, there are cultural assumptions with deep historical roots about women's physical weakness, their vulnerability during pregnancy or their special and irreplaceable role for a certain family model. According to these concepts, it is fully justified to protect women, even if said treatment covers discrimination. The structure of society itself is founded on these assumptions, which, over time, have proven to be prejudiced. These prejudices turn certain jobs into niches, within which women are supposedly protected and truly trapped, with lower wages than men and few possibilities for promotion. There is a scarce presence of women in the highest positions, a phenomenon called "glass ceiling", a metaphor used to refer to the set of invisible, bounded and solid barriers and obstacles that women must overcome to access high positions and positions of responsibility in the organizational pyramid, affecting women as a group [8].

In the countries studied, women invest more time than men on unpaid domestic and care work, such as caring for children under 6 and 15 years and people over 60 years, which can have a negative impact on their availability of hours for paid work. This is because these members of the nuclear family require more attention and care, which is normally provided by women, according to traditions. This reduces their possibilities of increasing their incomes and limits their incorporation into the formal labour market [9]. These gender gaps also exist in the labour sector, where the current women's labour force participation rate is nearly 49%, while that of men is 75%, a difference of almost 26%. Therefore, women find it more difficult to be employed, compared to men, in Latin American societies, according to the International Labour Organization (ILO) [10] report. As for the time use, the indicator 5.4.1 follows up the SDG No. 5. The time invested on household chores and unpaid care, by sex, for Chile (2015) is 10.8% for men and 24.7% for women; in Ecuador (2012) 4.7% for men and 19.8% for women and in Peru (2010) 7.3% for men and 21% for women. Although time use measurement methodologies respond to the specific objectives of each country, they show trends of unequal time distribution [11].

### **3. Gender equity (SDG 5) and reduced inequalities (SDG 10)**

The pandemic has highlighted the gaps that exist between men and women (SDG 5) and the increase in inequality between men and women (SDG 10), as well as the lack of access to training opportunities and formal and decent work for women. Informal work in Latin American countries accounts for more than 70% of the national economy and its main protagonists are women.

According to António Guterres [12], Secretary-General of the United Nations, "the threat to women's rights and freedoms posed by the COVID-19 goes far beyond physical violence. The deep economic downturn accompanying the pandemic is likely to have a distinctly female face." This indicates a profound impact of the pandemic on the work and family lives of women. Moreover, according to ILO/ECLAC [13], remote work can have a significant impact on the psychological balance of the worker, and, in several countries, there have been reports of an increase in cases of gender-based violence during the quarantine and, therefore, to the workplace, when a home is the workplace. This occurred because the pandemic forced to implement remote work in universities without prior planning for training, reorganization of processes, technological infrastructure or even a regulatory framework specifying the new rules of the game. This generated latent concerns for both the directors and professors, especially for women professors, who became the most vulnerable group [14].

Gender equity includes women's working conditions that have been significantly affected by the COVID-19 crisis. According to ECLAC [11] in its special report on COVID-19 No. 9, women's economic autonomy in sustainable recovery and equality mentions that the labour participation rate of women maintained at 46% in 2020, while that of men at 69% (in 2019 they reached 52% and 73.6%, respectively). The unemployment rate for women in 2020 reached 22.2%, a higher percentage than the rate originated in 2019.

In 2020, there was an overwhelming outflow of women from the labour force, who did not resume their job search because they had to meet the demands of caring for their homes. The United Nations estimates that nearly 118 million Latin American women would be in poverty, 23 million more than in 2019. Ibero-America experienced a complicated year in 2019. Some examples are the political issues in Spain, demonstrations and strikes in Chile, zero economic growth in Mexico, radical change of government (again) in Argentina, accumulated socio-political tension in Brazil and Colombia and violence and migration from Central America. Therefore, the pre-pandemic scenario was ideal for all those issues to occur, characterized by a weak institutional environment and state fragility [15]. As Farrell [16] points out "poverty, income inequality and the subjugation of women undermine capabilities and deprive people of their effective freedoms to engage in worthwhile activities", making it increasingly relevant. (p. 1002).

The relationship between gender inequality and time use has changed over the last 40 years. There seems to be a gradual evolution towards symmetry in women's and men's time and a substantial change in the relationship between unpaid work and gender [17]. However, it is unlikely that there will be a greater movement of men into unpaid work and women into paid work, particularly in the case of fathers and mothers [18]. The truth is that without changes in the institutional and normative context, timely decisions and cultural changes in institutional constraints could not be made, such as an employment model that prioritizes paid work over family and a culture that values a fast and efficient work ethic [19]. However, confinement during the COVID-19 pandemic meant an immediate increase in unpaid care work,

particularly for families with young children, often combined with remote work from home. A nationwide study of UK adults [20, 21] revealed that the gender division of unpaid care work at both an individual and couple level before and after confinement produced psychological distress in men and women. The study also noted that women spent significantly more time doing housework and childcare than men. Women were more likely than men to reduce work hours and adjust employment schedules due to increased unpaid care time [22]. In addition, increased time spent doing housework and childcare was associated with higher levels of psychological distress for women only.

#### **4. Gender inequality of opportunities at the university level**

It has also led to the emergence of the first gender asymmetry produced by COVID-19 and related to the reproductive dimension of care and housework. This reproductive gap also affects all groups of women workers at the university level, as well as another series of asymmetries associated with the productive dimension, derived from their gender condition that varies according to the functions they perform in the university and the contractual relationship that each one has with the institution [23–25]. A report by the U.S. National Bureau of Economic Research confirms the fact that women academics are losing research time. The results of the survey revealed that women professors with children are the most affected; however, in general, it is considered that both parents have been affected [26].

According to the 2013 "She Figures" report, women accounted for 20.9% of the teaching and research staff at the highest level of the academic career in the 28 EU countries in 2013. Probert [27] pointed out that marriage and having a family, along with other cultural barriers, negatively affect the role of women. In Spain, the literature concludes that the problems to balance personal work and social life for women academics is complicated due to a university power system that does not offer the possibilities for a happy exercise of a good personal and professional coexistence of men and women academics, professors and researchers [28–31]. In addition, there is an implication that educational agents and decision-makers have an impact from a gender perspective on both the explicit study plan and the hidden study plan. Therefore, it is necessary for academic decision-makers involved in the creation of the study plan and the training of university students to be aware of some fundamentals of gender theory [32, 33]. For example, the fact that women and men do not have essences derived from biology, but that those are symbolic constructions regarding the order of language and representations [7]. Moreover, they should consider that in societies and in the academic environment, the androcentric ideology persists. In this context, the definition that Scott [34] raises is very useful: "*gender is a constitutive element of social relationships based on perceived differences between the sexes, but it is also a primary way of signifying relationships of power*".

#### **5. Methodology**

This qualitative, exploratory-descriptive study has a nonexperimental field and cross-sectional design that used the field technique of focus groups [35–38]. This study considered three countries, Peru, Chile and Ecuador because they had profiles of universities with different characteristics. This allowed us to make a

comparison between different realities [39]. In the case of Peru, we analysed a private, Catholic and nonprofit university. In the case of Chile, we analysed a public and secular university; and in the case of Ecuador, a public (free) and secular university.

The study involved the participation of 33 undergraduate and graduate women academics. In the case of Peru, part-time and full-time professors, who participated in the study, worked at CENTRUM PUCP Business School of the Pontificia Universidad Católica del Perú. In the case of Chile, full-time professors worked at Universidad de Valparaíso. And, in the case of Ecuador, full-time professors were from the Universidad de Guayaquil. In all cases, women academics had regular contracts and others had tenure (i.e. they obtained job stability after winning a public competition).

The study had three objectives: Identify the different types of work performed by women professors during their workday during the pandemic, Identify the main difficulties and consequences that virtual teaching has had on their personal lives during the pandemic and analyse the context and institutional support where women professors have worked during the pandemic.

**Table 1** shows the relationship between the three research objectives, the seven factors of the study and the 39 variables used to develop the focus group questions.

#### **6. Research results**

The main relevant factors perceived by women professors on their work and family lives during the pandemic included time use, the perception of the impact of the pandemic and the institutional support to do remote work. These factors are related to two very important SDGs linked to our study: Lack of gender equity (SDG 5 - Gender equity) and the lack of equal roles between men and women (SDG 10 - Reduced Inequalities).

Research results are presented below based on seven factors that explain the impact of the pandemic on the work and family/personal lives of women professors:



#### **Table 1.**

*Factors and variables in the study on the impact of the pandemic on women academics in LA.*

a.Sociodemographic factors: The women professors who participated in the study were between 25 and 60 years old. Most of them were married and had young children (who had virtual classes during 2020 and 2021) and others with older children. A minority group were women who live alone. Half of them were full-time professors and the others had tenure. All of them were part of the undergraduate and graduate teaching staff of various faculties of economic and administrative sciences. In **Table 2** we can find the 4 profiles of the academic women found in the study. The types of women academics derived from the reality observed in this research.


#### **Table 2.**

*Research has helped us to identify four types of women academics.*

b.Time use factors during remote work: According to women academics in the three countries, the new virtual work method has created 24/7 jobs due to an increase in their academic responsibilities. But also, an increase in their household chores and the care and accompaniment of older adults and minor children. The results have reflected that women assumed the greatest burden in their households, mainly type 1 and 2 women.

"I thought I was going to have more time to study certain topics. Now I feel like I have less free time than before. I can't move from the office to home." (Woman type 4 - Peru). "My husband helps me. He knows how to do everything a woman does. However, we have to help the girls with their homework. We live in a house here in Brazil and we have to clean. It is very challenging. My husband is my support. (Woman type 1 - Peru). "I don't leave my house and I have to take care of my daughters. They tell me: Mom, tell your boss that you have to play with us. It is difficult." (Woman type 1- Peru), "…" If someone would help me, my life would be much easier and I would say, you know, that I have time, but now I feel like I don't have time at all" (Woman type 2- Chile).

c.Time use factors at home: three sub-variables were included in this factor: *machismo* (superiority of men over women), unequal distribution of household chores and the increase in the workload. Women academics recognized their role as women, compared to that of men. However, generally speaking, in the three countries, women professors showed a sexist attitude because they naturally assumed at all times that unpaid care work at home has to be done by women. It should be noted that the majority of them lost the support of the maid/domestic worker or nanny.

According to the SIGI study (2019), women invest more than 4.5 hours a day on housework or caring for children and elders, 3 times more time than men do,

prior to the pandemic. The time invested on housework has replaced research time [41]. This is why gender differences persist between academics equally capable and motivated. Many women academics stated that they have no time for their research activities.

"We have to do the housework because we don't like the way men do things at home" (Women, type 2- Chile). "The strategic position of women is alarming to me because I get the impression that now we are working more but it is an instrumentalized work. We are in charge, we are the visible faces, because of the accreditations and certifications, but if the result is negative, the prestige of women, not men, might be affected (Woman type 3, Chile). "I don't get the idea that because we are women, we have to cook or take care of everyone. No sir, I ask respect before anything. Nobody should interrupt me" (Woman, type 2, Ecuador). "Even though the caring role is not the priority, women's responsibilities cannot be abandoned, we women must show that we are good and can do things well" (Woman, type 1, Ecuador).

d.Factors of the perception of the pandemic's impact on the personal and family lives of women professors. The participants from the three countries indicated that the pandemic and subsequent quarantine had caused them feelings of anguish, uncertainty and permanent stress due to the home confinement. In the case of Ecuador, the pandemic was directly linked to the word "death". This is because unfortunately in this country, the media showed tragic "deaths in the streets" because of the pandemic.

The pandemic has also had a socio-economic impact on families. This means an increase in economic expenses, new members in the family nucleus and changes in local and international residences. The economic impact in Ecuador was complicated because the women professors of the University of Guayaquil experienced a two-month delay in the payment of their salaries, once the pandemic began, between April and May 2020. This caused labour uncertainty. "During the first months we faced the economic problem that the government owed us 2 months of salary, but we joined with other family members and children to help us" (Woman type 3, Ecuador). In Peru and Chile, the women professors did not have economic problems, and some of them even pointed out that they are saving money on transportation due to remote work.

All the participants stated that they had not been direct victims of violence by their partners, but all of them mentioned that they knew women who had been abused during the pandemic, and some of them had even been direct witnesses of the physical violence that their friends, neighbours and colleagues had suffered. Chilean professors reported labour discrimination and mobbing due to gender, whereas Ecuadorian and Peruvian women professors indicated that they had not been victims. Violence is often physical and sexual, but also, sometimes psychological. This violence is mostly silent and has a tremendous impact on the mental health of thousands of women who may be victims of their partners or the people they live with at home [42, 43]. In fact, during the pandemic, cases of violence have increased due to home confinement, and to this date, there are still no public programs or policies in force to address the effects of this public health problem [44].

"If you are a woman, you have everything to lose. One day the police came and said to the woman, who was assaulted; if you want, you can report it and I will take the guy". I said to the police officer "Sir, I reported the assault." The police officer told me that it had to be reported by the victim, but my neighbour did not want to do it". After witnessing this event, seeing a woman being abused, I got sick for a month, but well, we had to move on and continue with my work. It was very painful". (Woman, type 4- Peru). "The University psychologist deals with many complaints of domestic violence. There is evidence of many students who live with uncertainty, mistreatment and sexual abuse. The situation within the households is complicated. I think we have gone back 20 years" (Woman, type 1 - Chile), "I associate violence and domestic and child abuse spaces with imprisonment situations because the aggressor's condition is that of a delinquent. People around the aggressor are disturbed by the space in which he lives and that is the biggest problem. He considers himself the king of the house, he has no borders or limits". (Woman, type 3- Ecuador), "Distancing from authorities and peers because of the quarantine has been beneficial, it has been some kind of escape from work" (Woman, type 2- Chile).

e.Factors of the perception of the pandemic's impact on the work lives of women professors. In the three countries, the women professors indicated that remote work has produced greater workload, stress and fatigue, especially for type 1 and 2 women professors. However, those of types 3 and 4 also associated the pandemic with the words: home confinement, death, infection, pain, fear, loneliness, sadness, fear of death, anguish, nervousness, tension and nightmares. The women academics analysed the negative aspects in the two subcategories: personal and work. In general, participants felt that they were in a situation of job uncertainty, especially those women professors who were working under contracts. In Ecuador, some professors dropped out and others retired because they preferred to take this path rather than take on the challenge of virtual teaching. This situation has increased the fear of instability and work overload since many of them have doubled the number of classes. There is also uncertainty about the time remaining to resume the "normality" and in-person classes. In this regard, according to ECLAC [11] in its special report on COVID-19 No. 9, women's economic autonomy in sustainable recovery and equality mentions that the labour participation rate of women maintained at 46% in 2020, while that of men at 69% (in 2019 they reached 52% and 73.6%, respectively). The unemployment rate for women in 2020 reached 22.2%, a higher percentage than the rate originated in 2019. In 2020, there was an overwhelming outflow of women from the labour force, who did not resume their job search because they had to meet the demands of caring for their homes.

"I'm afraid we're dehumanizing ourselves. We are losing touch. That worries me". (Woman, type 4- Peru), "I feel fear because of the lack of socialization and not having a limit at work". (Woman, type 2- Peru), "I am a problem for the university because sometimes I am not that available, but I need to work, I wonder what will happen at the end of the year, will they hire me again? The institutionality has been based on the mental health of women; it worries me because if this scenario does not change, it will be very difficult for me". (Woman, type 1- Chile), "Now my life is my work, and it overwhelms me that my work is in my house". (Woman, type 2, Chile), "I experience states of sadness and depression caused by home confinement and routine". (Woman, type 3- Chile), "It is a constant challenge to balance work and family life while attending family needs" (Woman, type 1- Ecuador).

The women academics also analysed the positive aspects in the two subcategories: personal and work. As for employment, in the three countries, the women professors pointed out that the positive aspects have been the opportunity to use ICT platforms and improve the use of technological tools, work reinvestment, the possibility of being in many places and working remotely, as well as the access to international networks. "For me, (the benefit is) the group work and connection through technological platforms" (Woman, type 2- Chile).

The positive impacts reported by the women professors included the possibility of being with their children, raising the young children and in general spending more time with the family. "Being closer to my daughters and my husband" (Woman, type 2-Peru). "Enjoy each day because there are certain variables that we do not control, today everything is ok, but tomorrow we will see. I feel like a guilty mother, I missed my daughter's growth and now I am living it" (Woman, type 1-Chile). "Family time has been wonderful and watching my 1-year-old daughter grow up" (Woman, type 2-Ecuador).

f. Factors of institutional support (resources) for remote work. The participants said that they needed resources to carry out their work activities from home. The participants from the three countries indicated that they had received training for the new virtual teaching method. However, the women professors had to create a space in their homes for teaching classes and in many cases buy chairs, lamps and internet access to improve their connectivity.

"My laptop crashed and died. The computer I use now was given to me immediately. They brought the laptop to my house" (Woman, type 3- Peru). "I bought a gamer chair because I had severe lower back pain, I was on medical rest" (Woman, type 3, Ecuador). "At the beginning, I had to adapt my office in a common space at home, later I managed to set it up in an exclusive space for me" (Woman, type 3, Chile). "I was overwhelmed by all the trainings. Eventually, it became too much. We never had so much knowledge at hand" (Woman, type 2, Peru).

g.Factors of institutional coexistence during remote work. The study revealed that women academics have carried out their virtual teaching tasks facing two challenges: the management of the virtual classroom and the relationship with students during virtual classes. It is evident that the relationship and experience with students have improved with the use of applications, social networks and virtual classroom resources. In Peru and Chile, women professors were trained right after the quarantine started, so they felt more confident. Whereas in Ecuador, the training process took place more slowly, which is why they have had greater difficulties with virtual teaching.

"We see very often that students turn off their cameras during the classes. This creates distance." (Woman, type 3 - Chile). "There are no conditions for practice, we cannot have contact in the field and do experiments" (Woman, type 3- Ecuador). "The fact that the cameras are on has allowed us to know the realities of the students. However, the management of the virtual classroom does not replace personal contact and access to more human realities that could help us to transform and influence students so they can overcome their difficulties" (Woman, type 2- Chile).

In terms of their relationship with the institution (academic and administrative staff) and their relationship with their colleagues, Peruvian women professors reported having received support from their authorities. Meanwhile, in Ecuador, there were two types of responses: some women professors felt supported by their authorities and others expressed there is favouritism for other colleagues. In Chile, women professors did not mention direct authorities but emphasized there was a lack of empathy with them. Nevertheless, none of the cases showed that the authorities were particularly concerned about the situation of type 1 women professors who have to deal with the care of their young children, unpaid domestic activities and work overload. It is clear that there is no public policy in this regard or internal policies for universities to address this issue. As for the relationship with colleagues, all of them said they missed their professor friends. Likewise, when it comes to the relationship with students, women professors pointed out that this new virtual teaching method exposes the inequalities of access and opportunities for students, since not all of them have the same conditions.

*"I have two female bosses. I felt supported. When I got sick, she told me to get well, be fine and not to worry. I think the managerial area works very well" (Woman, type 4- Peru). "I have a negative perception regarding the lack of empathy for the situation of single women with children because of their condition of caregivers" (Woman, type 1, Chile). "There is an overload of work for women in leadership positions, there is over-exploitation, and I feel impotent about it. It is evident that some miss their colleagues, especially those with whom they have built good relationships" (Woman, type 2, Chile)."Yes, there is recognition at work. They respect the condition of women and their human position. They are honest authorities, who have been awarded two times" (Woman, type 3, Ecuador). "There is no recognition, there is favoritism for the professors with tenure, and nothing for those with regular contracts" (Woman, type 2, Ecuador). "We miss interacting with colleagues; we miss the meetings and the coffees in the morning and afternoon" (Woman, type 3, Ecuador).*

In general, with regard to the seven factors analysed, we can conclude that women type 1 - Mothers and wives with young children - have been the most affected. The most important differences observed between the focus groups were that these women with children and adolescents were affected by the decrease in physical space in their homes, raising children and accompanying them in their virtual classes; lack of support; and the increase in hours of unpaid work in an inequitable manner compared to other adults in the house. In addition, we observed feelings of generalized anxiety and stress in women academics who were mothers, as well as feelings of guilt for the absence during parenting before the pandemic; and the lack of time and space in parenting during the pandemic. Some participants mentioned, "I am a guilty mother, I missed out on my daughter's growth and now I am living it" (Woman, type 3, Chile); "I have sacrificed everything for my mother's health" (Woman, type 2, Chile). The differences between the focus groups differ more according to the possibility of having family support and/or services to which they have access for unpaid work, rather than cultural differences between countries. **Table 3** shows the result of the analysis of the four types of women.



### **Table 3.**

*Analysis of results for the seven variables in the four types of women.*

#### *Effects of the Pandemic on Academic Women in Latin America DOI: http://dx.doi.org/10.5772/intechopen.106815*

All types of women academics increased their workload and were affected by an increase in their responsibilities, household chores, care and support to the family group (children and older adults) during confinement. The lockdown restrictions especially affected women with young children because they had to adapt their work patterns to childcare/homeschooling [45]. They had to work late at night, early in the morning or on weekends. They also had poor sleep quality, lack of time to do physical exercises and feelings of loneliness, overwhelm, anguish and great fatigue. Distress levels were particularly high in the cases of single-parent women who were heads of households with young children. They had to adapt their work patterns exclusively, with a greater sense of abandonment and injustice. The adaptation of work patterns due to childcare/homeschooling appears to be more detrimental for single mothers than for cohabiting mothers. Women academics mentioned their partners provided great support but still, they felt the working patterns were unequal. The greatest distress was caused by the care and school accompaniment of young children, but also for the care of older and/or sick adults because the uncertainty and fear of COVID-19 contagion of the latter increased dependence and an impact on their psychological health [46].

In the other factors analysed, no substantive differences were observed. There was a general consensus on the inequitable distribution of domestic and care work among the members of the household; on the perception of a greater workload for women; the existence of sexist labour relations among colleagues and authorities; and in several cases, knowledge and intervention in situations of sexist violence among students and their families. Gender inequality in the division of unpaid care work during confinement increased. Among the three countries analysed, Ecuador was the country that faced the greatest health crisis due to COVID-19, which was reflected in the statements of women academics who reported greater stress due to traumatic situations experienced (**Table 4**).

#### **7. Conclusions and recommendations**

The COVID 19 pandemic has significantly affected women due to their human condition and other cultural characteristics of Latin American countries. Women academics are proof of this. Despite their academic studies and good quality of work, they have become women affected by inequity and inequality in their own homes. During the pandemic, the vast majority of them lost the external support they used to have at home and assumed more household chores. Their workload also increased because virtuality increased the demand for students. This impact has been reflected in an increased gender inequality (SDG 5) and an increased inequality (SDG 10).

According to the results of this research, it is evident that the pandemic has affected the quality of life of women academics. Many of them stated that virtual work from home has meant working 24/7, with no breaks and on weekends. In all cases, high levels of physical and emotional stress were observed due to an increased labour demand in the universities, regardless of the gender. This is mainly because they have had to invest hours to learn how to use new virtual environments and the high demand from students for digital media such as email, WhatsApp and text messaging. According to their statements, women academics have experienced feelings of frustration, anger, nerves and even guilt, which were heightened by the prolonged home confinement in Latin America and the excessive fatigue generated by it. Women academics type 1 were the most affected since they had to add to their virtual working day, household chores and support to their young children during their virtual classes.


**Table 4.** *Proposals for the fight for equality and reduction of inequality of academic women with regard to SDG 5 and SDG 10.*

#### *Effects of the Pandemic on Academic Women in Latin America DOI: http://dx.doi.org/10.5772/intechopen.106815*

Despite the greater burden of work, care and household chores, many of the women's stories have shown the normalization of the sex-gender binarism, which leads them to assume these greater burdens as a condition and with guilt. This is particularly evidenced in the naturalization of the unequal distribution of domestic work and the care of the elderly at home, as well as the attendance to virtual classes with their children during the pandemic.

The results of the study show that the perception of women academics from universities in Ecuador, Peru and Chile about gender inequity and inequality gaps has increased during the pandemic, regardless of their socio-demographic characteristics, level of studies (with master's and doctoral degrees) and type of work activity. There is no consensus about the role they play in their private spaces because some of them consider that their family members "have helped them" with unpaid work and that in the workplace, despite not having material support and being demanded without a gender perspective, they have been able to respond motivated, although stressed, to the new challenges.

In this context, women academics had to maintain a balance between their personal and work lives. Despite the high levels of stress and anxiety, they remained the pillars of their households and offered stability to their members. However, the greatest impact has been the little or no time they have had for applied research, development of publications and attendance at conferences. These activities have been totally relegated for 2 years now since the second anniversary of the pandemic will be in March 2022. Said activities were put on hold because they had to prioritize teaching and student care.

In terms of the response of the universities to the impact of the COVID-19 pandemic, the academics stated that, in general terms, the university authorities responded by offering technical support in terms of resources such as computers, internet and, in some cases, training. However, they mentioned that they did not receive special consideration or special treatment for being women with small children or in charge of elderly adults. In fact, several academics even reported having lost direct family members due to COVID-19.

In this regard, the great challenge for the universities is to know the reality that women academics are currently living. It should be noted that to date the pandemic has not ended, classes are still virtual, and we are still living in a state of confinement almost two years after the beginning of the pandemic. Therefore, universities should implement some actions such as research groups where they can include women academics who wish to continue researching and who, due to the situation described above, have not had time to invest in research. The challenge of reducing inequalities within the academic sphere has become a challenging social responsibility program that can help reduce inequalities.

This study about the perception of women academics in the area of administration and trainers of leading professionals in three Latin American universities has revealed the need to propose policies within the universities to promote a culture with a gender focus. There is a need to include the gender perspective in the study plan; an inclusive STEM training (in the fields of science, technology, engineering and mathematics); the creation of gender units or departments with effective power to sanction; promotion of research, creation of networks; alliances with the community; encouragement of leadership and female empowerment; and generation of spaces for women's entrepreneurship.

Women academics, who are mostly found in pedagogical and administrative spaces and less often in research and power positions, are subordinated to

#### *Effects of the Pandemic on Academic Women in Latin America DOI: http://dx.doi.org/10.5772/intechopen.106815*

male-dominated institutional decisions. Therefore, it is necessary to work on the gender approach considering the work of women academics so that they are aware of their transformative role to move towards an equity and inclusion revolution. Therefore, universities should propose internal institutional policies that, besides the current laws, aim to understand the reality of women academics working in Latin American universities. The need to work on the promotion of gender equity and the elimination of inequality in the academic environment are great challenges for universities. If they succeed, women academics will promote in the classrooms a culture of respect and appreciation of women's work, in all social, economic and political contexts and spheres.

#### **Author details**

Julianna Ramirez Lozano CENTRUM Católica Graduate Business School, Pontificia Universidad Católica del Peru, Lima, Peru

\*Address all correspondence to: Julianna.ramirez@pucp.edu.pe

© 2022 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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#### **Chapter 4**

## The Challenges of Assessing Government Economic Restrictions to Control the COVID-19 Pandemic

*Juan Dempere*

#### **Abstract**

Since the beginning of the COVID-19 crisis, most regimes worldwide adopted restrictive policies intended to minimize the adverse effects of the pandemic but also decreased most liberties enjoyed by their citizens. Such restrictive policies affected several freedom-related dimensions like business, labor, monetary, trade, investment, financial, and press freedoms. The time-inconsistency problem arises when achieving short-term goals jeopardize attaining long-term strategic objectives. In the case of the COVID-19 crisis, the time-inconsistency problem may describe how and why policymakers engage in right and wrong decisions when trying to control the pandemic. Electoral accountability is a powerful political motivation for effectively managing the pandemic in democracies. However, once the initial public support for social restrictions disappeared, the electoral accountability logic worked in the opposite direction: most political leaders perceived that lifting pandemic restrictions early would increase their electoral chances. Democracies should struggle for an institutional and regulatory framework that insolate policymakers from political pressures when the time-inconsistency problem can result in a biased decision-making process. National government institutions with political insulation like that enjoyed by central banks should constitute an effective national crisis management system for western democracies.

**Keywords:** COVID-19, outbreak, pandemic, economic freedom, political system, government effectiveness, democracy, autocracy, authoritarian regimen

#### **1. Introduction**

This chapter analyzes some challenges national governments worldwide face when implementing policies to control COVID-19. These government policies affected several freedom-related dimensions in all countries asymmetrically. The analysis of these government policies may provide some clues about national differences in the success of controlling the pandemic. Like Dempere [1], we categorize these policies based on economic freedom dimensions related to national regulatory efficiency and market openness, including business, labor, monetary, trade, investment, financial, and press freedoms. The analysis also includes institutional and social perspectives comprising some factors studied by Dempere [2] like the national political system,

the impact of fake news, and the health institutional framework. The chapter will also expose the most relevant institutional deficiencies that hindered some governments' effectiveness at controlling the pandemic.

#### **2. COVID-19 and business freedom restrictions**

The notion that only democratic regimes can provide superior business freedom than less democratic ones is fallacious. Like Dempere [1–2], we used the classification of the 2021 Economist's Intelligence Unit's [3] democracy index (full democracy, flawed democracy, hybrid regime, and authoritarian regime) and calculated the average index of business freedom compiled by the Heritage Foundation [4] for 161 countries from 2014 to 2021. This index quantifies the government restrictions on domestic business activities. **Figure 1** below shows the top ten authoritarian regimes with the highest average degree of business freedom and the democracies with lower business freedom.

The figure shows that citizens of these ten so-called "authoritarian" regimes like the UAE, Bahrain, Saudi Arabia, Qatar, etcetera, have enjoyed superior average business freedom from 2014 to 2021 compared to 108 countries, including 30 democracies like Spain, Luxemburg, India, Brazil, Philippines, etcetera, during the same period. Dempere [1] finds that countries enjoying a high degree of the Heritage Foundation's (HF's) business freedom index imposed the softest government restriction and experienced higher averages of COVID-19 cases and deaths per million. He explains that nations with a tradition of business freedom experienced significant challenges when trying to impose business restrictions to control the pandemic. The resistance of business owners to accept business and social limitations like lockdowns and curfews magnified the negative impact of the outbreak. Indeed, Spiegel and Tookes [5] find that implementing government policies related to the mandatory use of masks, restaurant and bar closures, gym closures, and other high-risk business closures have predictive power on new COVID-19 deaths.

Business actors' resistance to adopting the government restrictions was primarily explained by the economic costs associated with such business constraints. Indeed, Fairlie [6] studies the pandemic impact on US small business owners and finds that small business activities decreased by 22% in the two months between February and April 2020, or the closure of 3.3 million small businesses. The impact was more severe among minorities, including African-Americans (41% drop), Latins (32% drop), Asians (26% drop), and female business owners (25% drop). Government restrictions also had a disproportionately negative impact in some industry sectors, while others experienced an economic benefit from such constraints. Indeed, Fairlie and Foseen [7] analyze data from the California Department of Tax and Fee Administration and find that some industry sectors were negatively affected by lockdowns

**Figure 1.** *2014–2021 average of Heritage Foundation's index of business freedom per country.*

*The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

(accommodations experienced sales losses of 91%). At the same time, other industry sectors flourished (online sales grew 180%).

#### **3. COVID-19 and labor freedom restrictions**

The perception that people living in democratic regimes enjoy higher labor freedom than less democratic nations is incorrect. We classified countries again like in **Figure 1** and determined the average HF's index of labor freedom for 161 countries from 2014 to 2021. This index estimates the degree to which national governments allow labor to work and move freely without unnecessary restrictions except those intended to protect and maintain the freedom itself. **Figure 2** below shows the top ten less democratic countries' averages of labor freedom and the democracies with lower values of this freedom.

The figure above shows that people living in autocracies like the UAE, Bahrain, Belarus, Qatar, Saudi Arabia, etcetera enjoy more labor freedom than 117 countries, including 43 democracies like Belgium, Spain, Italy, Germany, France, Netherlands, etcetera, over the same period. Dempere [1] finds a significant relationship between the national labor freedom and the daily average of COVID-19 cases per million. He suggests that regimes with low labor freedom experienced high unemployment rates requiring state intervention and controls. These actions minimize the negative impact of the pandemic on labor markets but also reduce domestic labor freedom.

Indeed, Bell and Blanchflower [8] study the pandemic effects on the labor market and find that a third of the Canadian and US workers lost about 50% of their income due to the COVID-19 crisis, compared with 25% in the UK and 45% in China. Similarly, Chi-Wei et al. [9] find a significant association between COVID-19 cases and unemployment in Italy, Germany, and the UK. Equally, Mekonnen and Kassegn [10] find that the working hour loss during 2020 was more than 10% in Eritrea, Cape Verde, and Uganda. They inform that pandemic-driven lockdowns caused a 10.6% decrease in Ethiopia's agricultural output and 19.8% in Ghana. They also find increases in food insecurity of 6–15% in Nigeria, 38% in Kenya, and 44% in Uganda.

According to the Organization for Economic Co-operation and Development [11], many regimes adopted policies to safeguard existing jobs, like job retention arrangements and administrative suspensions of dismissals. They inform that nations with comprehensive restrictive labor regulations and resources experienced the lowest increases in unemployment rates during the early stages of the pandemic. Alternatively, those countries that experienced high unemployment rates due to low government interference in the labor market (high labor freedom) faced substantial challenges in encouraging people to stay at home. Otherwise, regimes with strict regulations aimed at protecting the domestic labor market (low

labor freedom) enjoyed the enhanced public acceptance of government restrictions to control the pandemic.

#### **4. COVID-19 and monetary freedom restrictions**

The view that only democratic countries have better monetary freedom than less democratic ones is misleading. We classified nations again like in **Figures 1** and **2** and determined the average HF's index of monetary freedom for 161 countries from 2014 to 2021. This index measures domestic inflation and government policies that may result in biased prices of goods and services. **Figure 3** below shows the top ten authoritarian regimes' averages of monetary freedom and the democracies with lower averages of monetary freedom.

The figure shows that people living in less democratic regimes like Jordan, Burkina Faso, UAE, Mali, Niger, etcetera, have enjoyed greater monetary freedom than 105 countries, including 31 democracies like the United States, Greece, France, Canada, Norway, etcetera, during the same period. Dempere [1] finds a significant negative relationship between a country's degree of monetary freedom and the pandemic response time, but a positive association between monetary freedom and the daily average of COVID-19 cases per million. He explains that during the first wave of the outbreak, nations worldwide endured shortages and price spikes of many goods due to frozen manufacture, crops rotting due to lack of harvesting, global supply-chain interruptions, etcetera. As a result, the World Health Organization [12] requested businesses and governments to coordinate efforts to minimize the increased demand for products due to panic purchases, speculation, and hoarding, especially for medical materials. Those regimes with high monetary freedom before the pandemic experienced significant challenges when enforcing regulations to control market distortions created by the COVID-19 crisis. Those nations with low monetary freedom could implement controls more quickly and effectively, resulting in faster pandemic response time and lower coronavirus cases. Such regulation intended to reduce the harmful impact of the pandemic on the domestic market of goods and services also reduced the national monetary freedom.

Indeed, Ahn [13] finds that South Korea imposed a fixed price on 80% of the medical masks sold to the public to ensure the public health and reduce the pandemic spread. Similarly, Chakraborti and Gavin [14] study the impact of current anti-gouging laws in several US states banning price increments during the COVID-19 crisis. Using the number of Google searches as a proxy metric for depletion of sensitive goods like toilet paper and hand sanitizer, they find a positive relationship between states prohibiting price gouging and shortages of these goods. Likewise, Islam et al. [15] study the buying behaviors during the COVIDID-19 crisis in the U.S., China, India, and Pakistan. The perceived limited quantity and time scarcity dimensions

*The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

increased impulsive and obsessive consumer buying in these countries. Equally, Hall et al. [16] find evidence of stockpiling consumer behaviors during the pandemic from increased spending in some consumer goods categories.

#### **5. COVID-19 and trade freedom restrictions**

The perception that only democratic nations have superior trade freedom than no democratic ones is deceptive. We again classified governments like in **Figures 1**–**3** and found the average HF's trade freedom index for 161 countries from 2014 to 2021. This metric includes tariff and non-tariff barriers to the international trade of goods and services. **Figure 4** below shows the top ten authoritarian regimes' averages of trade freedom and the democracies with lower averages of trade freedom.

The figure shows that citizens of less democratic regimes like Eswatini, the UAE, Qatar, Oman, Bahrain, etcetera, have experienced superior trade freedom than 86 nations, including 18 democracies like South Korea, Philippines, South Africa, Brazil, Argentina, etcetera, over the same period. Dempere [1] finds a significant association between trade freedom and the daily average of COVID-19 deaths per million. Indeed, the World Trade Organization [17] informs that during the first wave of the pandemic, several nations engaged in trade restrictions to alleviate dangerous food and health materials scarcities. Similarly, Carreño et al. [18] list some countries imposing trade restrictions during the COVID-19 crisis, including Indonesia's temporary ban on face masks, sanitizers, and some medical equipment, and India banning similar exports, including ventilators and anti-malaria medicines. They also listed Kazakhstan banning all product exports, Serbia banning exports of sunflower oil, Vietnam suspending exports of rice, El Salvador and Honduras banning exports of vegetables temporarily, Kyrgyzstan prohibiting the export of some food products, and Romania banning exports of wheat, corn, rice, and other grains.

In the same way, Hoekman et al. [19] inform of 75 governments, including the US, China, the EU, India, Turkey, and the UK, implementing trade restrictions on medical supplies and medicines during the pandemic. Likewise, Pauwelyn [20] reports 69 governments banning or limiting personal protective equipment, pharmaceuticals, and other medical supplies exports. A landmark incident reported by Willsher et al. [21] was about the US government (emblematic democratic regime) being accused of "modern piracy" after outbidding the German government (another democracy) and diverting a shipment of N95 masks intended for the German police. They informed that Andreas Geisel, the interior minister for Berlin State in 2020, described the incident in the following terms: "This is no way to treat trans-Atlantic partners," Geisel said. "Even in times of global crisis, there should be no wild west methods" [21]. All the trade restrictions mentioned above

were intended to minimize the negative impact of the pandemic on international trade but also diminished domestic trade freedom.

#### **6. COVID-19 and investment freedom restrictions**

The erroneous belief that only democracies can provide superior investment freedom to their citizens than no democratic regimes is widespread. We classified nations again as in **Figures 1**–**4** and calculated the average HF's index of investment freedom for 161 countries from 2014 to 2021. This index assesses the quality and quantity of national limitations to the flow of investment capital, such as limits on access to capital transactions, transfers, payments, and foreign exchange. **Figure 5** below shows the top ten authoritarian regimes' averages of investment freedom and the democracies with lower averages of this freedom.

The figure shows that people in less democratic regimes like Bahrain, Djibouti, Jordan, Oman, Burkina Faso, etcetera, have experienced better investment freedom than 83 nations, including 17 democracies like Philippines, Malaysia, Greece, Brazil, Thailand, etcetera, over the same period. Dempere [1] finds a significant association between investment freedom and the daily average of COVID-19 cases and deaths per million. Equally, Liu et al. [22] verify negative abnormal returns among 21 leading stock market indices after the virus outbreak. Likewise, Chang et al. [23] study data from 20 countries and find that government response to the pandemic significantly positively impacts stock market returns. Similarly, Phan and Paresh [24] analyze the government control of COVID-19 among 25 countries and find that the stock market reacted negatively to news on coronavirus infections and deaths in most countries. They also find a positive stock market reaction in seven countries (Switzerland, Germany, Peru, India, Russia, Israel, the US, and Chile) to the announcement of lockdowns and another positive stock market reaction in nine countries (Peru, South Korea, Italy, Chile, Spain, Japan, Russia, Israel, and Poland) to the announcement of some measures of government stimulus.

Another significant impact of the COVID-19 crisis on capital markets worldwide was the result of national monetary policies implemented by central banks. Indeed, Fischer [25] compares the government economic interventions during the pandemic and finds that most central banks in developed nations could minimize the impact of COVID-19 through central banks unprecedented interventions in terms of scope, speed, and magnitude of asset purchase and emergency lending programs. Milstein and Wessel [26] list the US Federal Reserve (FED) responses to minimize the economic impact of the pandemic, including the FED's Primary Market Corporate Credit Facility and the Secondary Market Corporate Credit Facility aimed to buy directly new and existing corporate bonds and provide loans to corporations. They also report about the FED's Commercial Paper Funding Facility, allowing the FED to buy

#### *The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

corporate commercial papers for up 3 months as a short-term lending tool for corporations. Similarly, Fischer [25] informs about the Bank of England's (BoE's) Term Funding Scheme program to reduce the bank borrowing costs for small and medium enterprises. He also reports the BoE's COVID Corporate Financing Facility intended to buy commercial papers from large companies and the BoE's quantitative easing monetary policy to allow the purchase of government and corporate bonds. He also informs about the expansion of the European Central Bank's Asset Purchase Program and the new Pandemic Emergency Purchase Program to buy national, regional, and local government bonds, corporate bonds, and asset-backed securities, including commercial paper of non-financial corporations. These monetary policies implemented by central banks reduced the pandemic's adverse effect on national capital markets and decreased domestic investment freedom.

#### **7. COVID-19 and financial freedom restrictions**

The belief that people living in democratic regimes can enjoy superior financial freedom is inaccurate. We classified countries again like in **Figures 1**–**5** and determined the average HF's index of financial freedom for 161 countries from 2014 to 2021. This index evaluates each country's banking efficiency and independence from government influence and interference in the financial sector. **Figure 6** below shows the top ten authoritarian regimes' averages of financial freedom and the democracies with lower values of this freedom.

The figure shows that those living in less democratic regimes like Bahrain, Jordan, Oman, Qatar, the UAE, etcetera enjoy superior financial freedom than 87 countries, including 19 democracies like Costa Rica, Argentina, Greece, India, Uruguay, etcetera, over the same period. Dempere [1] finds a significant positive relationship between financial freedom and the daily average of cases and fatalities per million but a negative and significant association with the outbreak response time.

Indeed, Long et al. [27] study the monetary policies' impact on 38 countries and find that central bank interventions had an initial positive influence on reducing the pandemic-caused inflation but limited effect on minimizing the impact of COVID-19 on unemployment rates. Alternatively, Fernández et al. [28] anticipated the current spike in inflation exacerbated by the war in Ukraine when studying the long-term effects of central banks' stimulus policies aimed at minimizing the economic impact of the pandemic through low-interest rates and purchases of large quantities of public and private debt. In the same way, Milstein and Wessel [26] inform about the FED monetary policies to minimize the impact of the pandemic on the banking sector, including the reduction of the Federal funds rate by 1.5% and the Primary Dealer Credit Facility to provide low rate short-term loans to 24 large financial institutions. They also report the FED's Money Market Mutual Fund Liquidity Facility to give the

banks with loans collateralized by prime money market funds and its international swap lines to provide US dollars to foreign central banks in exchange for foreign currencies and charged interest on the swaps. They also inform of the FED's reduced rate (0.25%) loans to banks from its discount window and temporary relaxed regulatory bank liquidity and capital requirements to increase bank lending during the outbreak.

Similarly, Fischer [25] informs that the BoE reduced its Bank Rate to 0.1% in response to the pandemic, which constituted a historic all-time low record. He also reports a further reduction of the ECB deposit rate to a −0.5% in response to COVID-19 and the expansion of its targeted long-term refinancing operations to provide banks with low-rate & long-term loans as an incentive to promote bank lending operations. He finds that most major central banks temporarily relaxed regulatory restrictions on bank lending practices during 2020. These monetary policies adopted by many central banks were intended to minimize the harmful effects of the pandemic on the domestic banking sector but also decreased national financial freedom.

#### **8. Is press freedom a blessing or a course during pandemic times?**

The notion that only democratic regimes can provide superior press freedom is correct. No country without press freedom is compatible with any classification of democracy, so no figure was included in this category. However, significant evidence suggests that press freedom may be a disadvantage for most democracies trying to control the pandemic.

Dempere [29] finds that the daily average of coronavirus infections and deaths per million has a positive and significant relationship with a country's information and communication technology (ICT) readiness. His results are consistent with the challenges that fake news posed to governments worldwide during the early stages of the pandemic. He suggests that regimes with superior ICT reediness experienced significant challenges from pandemic fake news and deception in social media. The World Health Organization [30] has warned that spreading COVID-19 misinformation through media and similar digital platforms constitutes a worse threat to public health than the coronavirus itself.

In the same way, Arafat et al. [31] suggest that media is critical in explaining panic buying since public perceptions drive this collective behavior. They indicate that reporting fake news to appropriate government authorities will help to prevent panic buying. Similarly, Arafat et al. [32] analyze content media reports during the COVID-19 pandemic and find that 46% of news highlighted scarce products and around 82% informed drivers of panic buying. Equally, about 80% covered the impact of panic purchases, and approximately 25.7% highlighted rumors explaining some panic consumer behavior. They conclude that the media has significant responsibility when reporting panic buying.

The strategies to mitigate the effects of fake news during the pandemic by less democratic regimes constitute a sharp contrast with most democracies. Indeed, Arab News [33] informs about the fines and jail time awaiting people spreading pandemic-related fake news in the Middle East. Specifically, the news outlet reports that Egypt would impose imprisonment of up to 3 years and fines of up to \$1200, and Saudi Arabia would enforce up to 5 years of jail time and fines up to \$800,000. Equally, Oman would levy up to 3 years of jail term and fines up to \$7700; the UAE would impose up to 3 years of imprisonment and fines up to \$816,000. Correspondingly, Jordan, Kuwait, and Lebanon would take the necessary legal actions *The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

(including possible arrests) against people causing panic by spreading COVID-19 misinformation.

The spread of fake news in some democracies started with their leaders. Indeed, the most prominent was former President Donald Trump's recommendation to his health officials to study the injection of bleach into the human body to fight the coronavirus [34] or his alleged daily doses of hydroxychloroquine to prevent COVID-19 [35]. Similarly, Brazilian president Jair Bolsonaro characterized the pandemic as a "little flu" and abused his constitutional powers to distort clinical protocols, data disclosure, and vaccine procurements [36]. He also recommended hydroxychloroquine to treat COVID-19 patients [36]. Likewise, Indian Prime Minister Neranda Modi declared at a global forum in January 2021 that India "saved humanity... by containing corona effectively." [36]. On April 17, 2021, Modi held a massive political gathering with thousands of participants in West Bengal, a state where Modi was trying to win local elections and where no pandemic restrictions had been imposed. That same day India reported 234,692 new COVID-19 cases, more than 20 times the daily figures from late January to early February 2021 [37]. Four weeks later, Modi's government allowed the massive Kumbh Mela pilgrimage, where millions of pilgrims gathered to bathe in the Ganges River throughout April. From January 1, 2020, to December 2021, India (the largest democracy on Earth) reported 481,000 COVID-19 deaths, but the World Health Organization estimates this number at about ten times as many [38]. In the same way, Mexican President Andrés Manuel López Obrador resisted imposing social restrictions in the early stages of the pandemic and continued holding political rallies nationwide, frequently refusing to wear a mask [36]. A comprehensive list of leaders mishandling the coronavirus crisis cannot be provided due to the chapter's length restrictions.

Burki [39] studies the online anti-vaccine movement during the COVID-19 crisis and informs that the British Centre for Countering Digital Hate (CCDH) has reported "...*31 million people follow anti-vaccine groups on Facebook, with 17 million people subscribing to similar accounts on YouTube. The CCDH calculated that the anti-vaccine movement could realize US\$1 billion in annual revenues for social media firms. As much as \$989 million could accrue to Facebook and Instagram alone, largely from advertising targeting the 38·7 million followers of anti-vaccine accounts. Huge sums indeed, but it is worth noting that, in 2019, Facebook generated revenue of \$70·7 billion*..." [39].

McDonald et al. [40] identified 34 Facebook pages considered super-spreaders of false information about COVID-19, with more than 100,000 likes each and 14,139,288 likes total. They mention the WorldTruth.TV channel with 1,683,036 Facebook page likes and posts claiming that the COVID-19 vaccine would use "microchips" used for a "global tracking system" [40] and that COVID-19 vaccines would "alter" human DNA. Another example was The Truth About Cancer cannel, with 1,140,726 Facebook page likes and posts stating that social restrictions to control COVID-19 were "obedience training" [40] and that Bill Gates will use the COVID-19 vaccine to monitor people. Another example was the EnVolve channel, with 684,972 Facebook page likes and posts informing that Dr. Anthony Fauci, the director of the U.S. National Institute of Allergy and Infectious Diseases, was personally profiting from a COVID-19 vaccine. Again, a comprehensive list of social media accounts spreading fake news cannot be provided due to the chapter's length restrictions.

Like in "Ripley's Believe It or Not!" (the American franchise founded by Robert Ripley reporting bizarre facts or items so strange and unusual that readers would mistrust such claims), the United Nations Office on Drugs and Crime [41] informs about the Joint Declaration on Freedom of Expression and "Fake News,"

Disinformation and Propaganda of 2017 in the following terms: "...*Standards on Disinformation and Propaganda.*

*a. General prohibitions on the dissemination of information based on vague and ambiguous ideas, including 'false news' or 'non-objective information,' are incompatible with international standards for restrictions on freedom of expression, as set out in paragraph 1(a), and should be abolished.*..." [41].

Not surprisingly, the 2021 Nobel Peace laureate Maria Ressa said that "…social media companies have a responsibility to fight disinformation and its corrosive effects on public discourse and democracy…" and that "…'If you're working in tech, I'm talking to you,' said Ressa, addressing dignitaries in Oslo's cavernous city hall. 'How can you have election integrity if you don't have integrity of facts?'…" [42].

Equally and not surprisingly, Fischer [43] informs about The Edelman Trust Barometer's 2022 global survey of 35,000 respondents across 28 countries, showing a collapse of trust in democracies. The survey also found that most respondents considered journalists (67%), government leaders (66%), and business executives (63%) as the social actors who intentionally mislead people with false or wrong information. Similarly, Mark [44] informs that the same survey ranks institutions in Germany (down 7 to 46%), Australia (−6 to 53%), the Netherlands (−6 to 57%), South Korea (−5 to 42%), and the US (−5 to 43%) as the top losers of public trust during 2021. Alternatively, the survey found that public confidence in institutions in China (+11 to 83%), the United Arab Emirates (+9 to 76%), and Thailand (+5 to 66%) and the top winners of public trust for the same year.

#### **9. COVID-19 and democracy**

The growing literature on COVID-19 & democracy can be classified as those articles with evidence of inferior performance for democratic systems compared with less democratic ones versus those with evidence supporting otherwise. Indeed, Dempere [2] identifies some government success metrics in managing the first wave of COVID-19. He finds that democracies implemented the softest social restrictions and experienced the highest daily averages of cases & deaths per million and mortality rates. He also finds that democratic nations demonstrated the quickest outbreak response time and the most prominent daily averages of tests per thousand. Similarly, Engler et al. [45] study the impact of institutional protection of democratic principles among 34 European countries and find that countries with strong regulatory protection of individual freedoms faced substantial challenges in adopting restrictive policies. Likewise, Cheibub et al. [46] find that democracies react slowly to the pandemic by implementing restrictive measures and abrogating some civil rights. They concluded that governments faced conflicting alternatives between preventing deaths with a significant economic cost (long-term) and protecting livelihoods (short-term). The notion of state capacity could not explain their heterogeneous results since most of their metrics for quality of governance did not have explanatory power over the democratic delay measured by daily or cumulative deaths.

In the same way, Cepaluni et al. [47] find that democracies experienced higher COVID-19 deaths per capita and quicker than less democratic countries. They concluded that democracies were less effective at controlling the initial stages of the pandemic. Equally, Narita and Sudo [48] find that democratic nations suffered higher COVID-related deaths and higher Gross Domestic Product (GDP) loss. Herren et al. [49] find that the democracy index, GDP per capita, and country-specific COVID-19

#### *The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

trend have explanatory power on people's acceptance of government restrictions for pandemic control. Trein [50] finds that countries with less democratic institutional traditions faced minor challenges when enforcing coronavirus-related limitations than nations with more democratic institutional legacy. Huang et al. [51] find that most democratic regimes experienced a higher incidence of COVID-19. Valev [52] finds a positive relationship between democracy and COVID-19 cases & fatalities per million using a sample of 45 countries. Mazzucchelli et al. [53] also find that the democracy index and its components have a significant and positive association with the pandemic fatality rates. Ashraf [54] finds a weak association between democracy and pandemic deaths in a sample of 120 countries but a significant relationship between tourist arrivals and COVID-19 fatalities.

Alternatively, some studies have found a negative association between COVID-19 & democracy by using non-official datasets. Indeed, Esarey [55] analyzes Karlinsky and Kobak's [56] dataset in a not peer-reviewed article and finds a negative bivariate correlation between excess mortality and democracy. In another not peer-reviewed paper, Badman et al. [57] study the effectiveness of democracies at controlling the pandemic and find that less democratic regimes are weakly associated with higher excess mortality rates. In the same way, Jain et al. [58] find that democracies have a significant negative relationship with excess fatalities during the first 18 months of the COVID-19 crisis.

Knutsen and Kolvani [59] argue that less democratic regimes have strong motivations to engage in propaganda based on distorted facts to mask domestic problems that may negatively affect the local public perception of government effectiveness. They explain that autocracies have excellent opportunities to misrepresent inconvenient data to foreign audiences. As a result, these regimes are more prone to underreport actual COVID-19-related statistics than democracies. They use excess mortality data from the Economist [60] and find that democratic government have higher officially reported fatality rates than less democratic nations. Still, this difference is due to underreporting in autocracies. They also find that high-capacity democracies have lower fatality rates than autocracies.

There is a flaw in the logic behind the assumption that excess mortality is better than official statistics to measure the real impact of the COVID-19 crisis. One fundamental factor calculating excess mortality is using national historic trends to estimate the expected mortality rate without the effects of the pandemic. Based on past trends, the fatalities above the predicted death toll determine such excess mortality. This methodology implies that autocracies must have reported accurate and reliable data before the COVID-19 crisis and that the same regimes must have provided misleading information only after the beginning of the outbreak in 2020. However, such misleading information must be only about the total COVID-19 deaths since this methodology requires considering the total national deaths as reliable data for all countries and periods. No logical explanation exists to support this rationale. A researcher must assume that all the data from autocracies is unreliable or otherwise. Nevertheless, considering the autocracies' COVID-related data are reliable before 2020 and inconsistent after the pandemic's beginning makes no logical sense. Similarly, assuming that autocracies' coronavirus deaths are false values while their total deaths for the same period are actual values has no rational explanation and produces biased results.

Excess mortality is a measurable phenomenon that cannot be denied. This anomaly in the national statistics can be interpreted in many ways. The health profile of people in democratic regimes may have contributed to the lower deaths caused by COVID-19 in less democratic countries. Indeed, Dempere [1] analyzes the national

health quality index (NHQI), a primary health care system metric, and finds that countries with the lowest average daily cases and fatalities per million also exhibited the highest NHQIs. He explains this seemingly spurious result by classifying the countries based on their NHQIs and finding that nations with the highest NHQIs are wealthy democracies measured by their GDP per capita. People in these countries usually experience health problems that are less frequent in developing countries, like a high percentage of 65 or older, a high incidence of cardiovascular illness, cancer, diabetes, or chronic respiratory disease, and a high proportion of the urban population. All these factors predict the average coronavirus daily deaths per million [61–65].

Alternatively, the collapse of deficient health care systems in developing countries may also explain the non-COVID-19-related deaths component of the excess mortality. Indeed, while coronavirus patients crowded hospitals and clinics looking for medical treatment, the rest of the population with other medical conditions could not receive medical attention exacerbating the non-pandemic mortality rates compared with historical records. In addition, people needing medical attention may have been reluctant to go to health care centers crowded with COVID patients and face the risk of infection. Indeed, Taylor [66] informs that on March 17, 2020, nine out of twentysix Brazilian states experienced an 80% occupancy rate of their covid-19 intensive care beds, and 15 states experienced an even higher occupancy rate of 90%. Equally, López et al. [67] inform that the Venezuelan healthcare system collapsed to the everincreasing number of COVID-19 patients needing hospitalization, forcing desperate people to opt for self-medication.

#### **10. COVID-19 and the time-inconsistency problem**

The outstanding performance of central banks in addressing the economic impact of the pandemic described before is due to their relative insulation from political pressures and the resulting capacity to manage the time inconsistency problem. The timeinconsistency problem arises when achieving short-term goals jeopardize attaining long-term strategic objectives. The term is commonly used in public administration to refer to the challenges facing monetary policymakers when pursuing short-term unemployment reductions at the expense of high long-term inflation rates [68–70]. Policymakers are inclined to implement expansionary monetary policies to increase economic growth and employment in the short run. This policy predisposition may happen before electoral processes when political support is usually associated with voters' current rather than future wellbeing. However, such expansionary policies may result in high inflation rates in the long term, which may reduce economic growth and employment.

The time-inconsistency problem may affect policymakers in any national government functional area. In the case of the COVID-19 crisis, the time-inconsistency problem may describe how and why policymakers engage in right or wrong decisions when trying to control the pandemic. At the beginning of the outbreak, human fear was the main driving force behind the public support for restrictive government policies. Indeed, Bol et al. [71] find that lockdowns increased political support, government trust, and satisfaction with democracy using a questionnaire between March 2 and April 2, 2020, in 15 European countries. Similarly, Schraff [72] applies a representative Dutch household survey in March 2020 and finds that increased COVID-19 statistics lead to increased political trust explained by the notion of an emotionally driven anxiety effect.

*The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

Restrictive government policies go against freedom-related democratic values, so public support for such policies is associated with a lack of support for a political system unable to restrict social freedoms and control the pandemic. Indeed, Marbach et al. [73] find that lockdown policies increase authoritarian values and support for autocracy using survey data collected from 27,317 respondents between March and May 2020 in the U.S. and four European countries. Similarly, Amat et al. [74] study survey data collected from March 20 to 28, 2020, and find Spanish public support for a technocratic and authoritarian government style capable of restricting individual freedoms.

The initial public support for restrictive measures to control COVID-19 had a heterogeneous impact among nations in terms of intensity and duration. Such initial support for vigorous government intervention to prevent the pandemic may have explained some electoral outcomes during 2020, the most notorious the US election. Indeed, Baccini et al. [75] study the influence of COVID-19 on the 2020 US presidential election and find that coronavirus cases and deaths had a significant negative relationship with former US President Donald Trump's vote share. Their analysis suggests that Trump would probably have won re-election if pandemic cases had been 5 percent lower.

Knutsen and Kolvani [59] suggest that the lack of electoral accountability provides autocracies more flexibility to adopt restrictive measures. This rationale is simple but incomplete. Although electoral accountability is a powerful political motivation for effective control of the pandemic in democracies, this premise assumes that people would support social restrictions for as long as needed to control the outbreak. Unfortunately, this premise proved wrong in most democracies due to the devastating impact of COVID-related stressors on a personal level.

The literature on COVID-19's psychological impact can explain the waning support for pandemic-related restrictions. The studies include analyses on the resulting domestic violence derived from long periods of lockdown-induced proximity joint with economic uncertainty and crisis-related instability [76]. In addition, during the pandemic, some articles verified high levels of anxiety, depression, and fear [77–79]. Similarly, many studies find a severely adverse psychological impact, including post-traumatic stress symptoms, confusion, anger [80, 81], and high rates of suicide [82–84]. Some studies focused on the negative physiological impact of COVID-19 patients' feelings of guilt and shame [85]. Once the public support for social restrictions disappeared, the electoral accountability logic worked in the opposite direction: most political leaders perceived that lifting pandemic restrictions early would increase their electoral chances.

In other words, after the initial public support for restrictive measures disappeared, many government authorities find themselves confronting a time-inconsistency problem. Graichen [86] illustrates this COVID-19 time-inconsistency problem in his comparative analysis of Germany's first and second waves of the pandemic. The poor performance of the German government in managing the second wave of the outbreak was due to the changing priorities of German politicians. The short-term economic recovery represented by keeping businesses open took precedence over strict social distance policies and mobility restrictions to reduce cases and deaths over the long term. The second wage challenged many democratic systems to persuade people to follow the recommended scientific path, as scientific arguments were less relevant in the second wave than in the first.

Similarly, Sager [87] studies the Swiss response to the first COVID-19 wavebased expert medical advice from the Federal Office of Public Health. He finds that during the lockdown period, the Swiss political debate about the country's timing for reopening switched from analyzing scientific health-related evidence to an economic-centered discussion. Such arguments were driven by economic actors with vested interests and special access to the Swiss political elites, particularly the restaurant and tourism umbrella organizations: GastroSuisse and HotellerieSuisse, which were severely hit by the COVID-19 crisis. The outcome was an earlier than expected restaurant reopening and a reversal in the customer contact tracing program, which might have explained the devastating Swiss second COVID-19 wave.

The lack of realization about the time inconsistency problem as a critical democracies' structural problem reduces the chances of urgent restructurings in these regimes. Indeed, Golberg [88] clearly expressed the need for reforms when analyzing the interaction of US President Joe Biden with the Chinese leader Xi Jinping where he explained that: "... *democracy doesn't work anymore. Among other things, Xi said, democracy requires consensus, and mustering a consensus takes too long in a fast-moving world. Only autocracies are equipped to meet the extraordinary challenges of modern times...We Americans often treat our liberal democracy as a national religion, and routinely assert, as if no evidence were needed, that it is the most moral, just, effective and admirable system on Earth. But few would deny that there's been some disturbing evidence to the contrary in recent years. The Jan. 6 riot, of course, was a low point. Then there was the chaotic, inefficient, politicized response to the pandemic... Another reason is that in a democracy, elected officials have no incentive to support policies that require pain and sacrifice today in exchange for future gain... In most cases, courageous politicians who supported such policies would be voted out of office*..." [88].

Like the Chinese leader Xi Jinping, Knutsen and Kolvani [59] also recognize that democracies have a more complex institutional and regulatory framework that hinders the quick passage and implementation of restraining pandemic policies and regulations. The critical impact of time when adopting coronavirus mitigating strategies places democracies at a disadvantage compared with less democratic regimes. Autocratic regimes could react faster to the pandemic because they did not need to invest any time to reach a consensus or get input from many institutional actors with veto power on government decisions.

Hodge [89] suggests that Russian President Vladimir Putin is another autocratic leader aware of democracies' time-inconsistency problems. Putin has engaged in a long-term war with Ukraine, hoping that international fatigue will force the international community to push Ukrainian President Volodymyr Zelensky's government to make concessions to Russia. The US faced this same time-inconsistency problem when fighting the Afghanistan war. The saying "You have the watches, but we have the time" attributed to a captured Taliban fighter reflects the Taliban's awareness that they were operating on different political horizons and timelines. Like the US war in Vietnam, the Taliban only needed to outlast, but not defeat, the technologically superior US military since they were confident that public support for the war in a democracy would wane over time. Like the fading initial support for social restrictions during the COVID-19 crisis, Putin is waiting for the same outcome as the impact of inflation and economic recession will switch the public support for the war in Ukraine in most western democracies. Another tragic example of democracies without politically insulated institutions capable of avoiding the time-inconsistency problem in critical decision-making processes.

*The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

#### **11. Conclusions**

The fallacious argument that any criticism of western democracies in their current state of historical development implies automatic support for their authoritarian counterparts is prevalent even in academic forums. The deficiencies of democratic systems must be solved to avoid the threat to their existence represented by disenfranchised voters.

Democracies should struggle for an institutional and regulatory framework that insulates policymakers from political pressures when the time-inconsistency problem can result in biased decision-making processes. Independent central banks constitute an example of effective institutions engaging in quick decision-making processes that allow policymakers to pursue long-term strategic goals without significant pressure from short-term political priorities.

National government institutions with political insulation like that enjoyed by many central banks should constitute an effective national crisis management system for western democracies. Such institutions should design multidisciplinary-based policies with input from previous domestic crisis experiences and foreign ones. Indeed, Yang et al. [90] find that the exemplary case of South Korea at implementing effective and innovative initial measures to control the first wave of COVID-19 overshadows the valuable lessons painfully learned from its efforts to control the Middle East respiratory syndrome (MERS) in 2015. The most valuable knowledge from the Korean MERS failure experience was the lack of government informational transparency and openness to the public.

The radical view of considering any government policy or practice from less democratic countries inferior is not based on science but on ideology. The assumption that the current dimensions of democracies and autocracies are the only alternatives for government regimes is an absurd dichotomy. Unfortunately, such a view is prevalent in many organizations and directly affects decision-making processes. Indeed, Repucci and Slipowitz [91] suggest on behalf of the Freedom House that autocratic leaders have succeeded in shifting global democratic incentives to place at risk the premise that democracy is "the only viable path to prosperity and security" [91] while promoting more authoritarian political regimes. Blaming others is an easy way to justify that in 2021 more democracies suffered deterioration compared to those experiencing progress, expanding a trend of 16 consecutive years of democratic decline. Unfortunately, the need for urgent institutional reforms is rarely suggested as a possible explanation for this democratic decline worldwide.

Alternatively, several less democratic regimes have evolved quickly by implementing reforms that provide their citizens with levels of freedom (e.g., business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom) far superior to many democracies. Most democracies assume that democracy in its current form constitutes the best political system, so the need for reforms is not considered an urgent priority. Unfortunately, this lack of immediate reforms may explain the significant decay of democracy worldwide.

*Resilience and Realities – Exploring Pandemic Effects, Governance Challenges, and Economic Insights*

#### **Author details**

Juan Dempere HCT, Ras Al Khaimah, UAE

\*Address all correspondence to: jdempere@hct.ac.ae

© 2022 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

*The Challenges of Assessing Government Economic Restrictions to Control the COVID-19… DOI: http://dx.doi.org/10.5772/intechopen.107079*

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#### **Chapter 5**

## Entrepreneurship during a Crisis: An Examination of the Insertion of Millennial Workers in "Yurimaguas, Peru"

*Jesús Enrique Reyes Acevedo, Nayeli Yulissa Tello Campos, Santiago Luis Vela Del Águila, Yuli Novak Ormeño Torres, Rosa María Velarde Legoas, Flor Lavanda Reyes, Jorge Lázaro Franco Medina and Ramon Osorio Alberto Bueno*

#### **Abstract**

The goal and purpose of this theoretical research are to analyze the evidence provided on the characteristics of the millennial generation and verify how these traits influence the human talent retention practices carried out by entrepreneurs. The empirical analysis is based on a systematic review of the scientific literature that includes 17 studies that were found in academic Google databases and university repositories. The results indicate that millennial workers are the generation with the highest rate of labor turnover so the retention practices most valued by them are related to opportunities for professional growth, greater flexibility between work and personal life, and better organizational communication. In most of the studies analyzed, economic remuneration is not a practice highly valued by this generation; however, in other studies, the results indicate that remuneration has a higher percentage of valuation, with a slight difference between the factors with greater and lesser representation by millennial employees.

**Keywords:** millennials, labor force, retention, human talent, entrepreneurship

#### **1. Introduction**

The term generation has been approached in different ways. However, its definition can be encompassed as the group of people who were born in the same period of time and who have lived within the same historical context. This has allowed them to develop distinctive features (lifestyles, ideologies, needs, expectations, behaviors, etc.) that differentiate them from previous generations. From the perspective of the Strauss-Howe generational theory, generations are characterized by cyclical changes called "turns" that occur in the same pattern. Each turn has specific archetypes

classified as: prophets (baby boomer generation), nomads (generation x), heroes (millennial generation), and artists (homeland or centennial generation). According to this theory, after the hero generation, the change would return to artists, thus producing a cycle of archetypes.

For Howe, the hero archetype was born during an awakening, in a time where institutional weakness prevails and where individuals were forced to become self-sufficient and pragmatic. So that it is believed that they grow up as optimistic youth, into energetic, overconfident, and politically powerful adults. This describes the current millennial generation, which, according to these authors, responds to the typical nature of the previous generation and the crises of the new millennium (technological age, economic recessions, political crisis, social movements, etc.). This gives rise to the contribution of Karl Mannheim's generational theory, whose foundation is that the generations are more influenced by the social contexts they live in than by the generations that preceded them. And it is that in the current world in which we live, dominated by globalization, instability, and constant technological development, a generation has emerged that has changed all the rules of the game: The Millennials or Generation Y.

Millennials are a demographic successor to generation x and predecessor to generation z or centennial. Even if the start and end dates of this generation are not precise and vary according to the authors, most studies consider the age range from 1981 to 2000 given by American authors Karsh and Templin (2013) in their book "Manager 3.0: A Millennial's Guide to Rewriting the Rules of Management". There, they mention that Millennials are tearing down the corporate ladder through a creative, collaborative and ambitious approach.

This is how today, this generation is made of people between the ages of 22 and 41, who represent the majority of the workforce worldwide.

In order to understand millennials, the historical aspects in which they were born and raised must be considered. Authors such as Nilda Chirinos point out that, among the events that defined this generation, the creation of computers, the development of the Internet, global warming, the economic boom of the 1990s, and terrorist attacks in various countries stand out ([1], p.140). In this way, millennials were born and grew up alongside technology, understanding it and developing skills that would allow them to master it and thus adapt to the current era of information technology. That is why they are also called digital natives.

According to Karsh and Templin, during their childhood, millennials received a lot of attention from their parents, who made them believe that they were the most special and precious thing in the world and always told them that they could become what they proposed because they had been born perfect (Karsh and Templin, 2013) cited in Mitta Flores and Dávila Salinas [2]. Retention of human talent: policies and practices applied to young "Millennials" in a group of entrepreneurs.

The fact that authors such as those mentioned describes the context in which millennials have developed, and lays the groundwork for understanding their behavior when joining entrepreneurs and the factors that influence them to decide whether or not to stay within those entrepreneurs.

In the workplace, millennials are well-rounded individuals with exceptional skills, making them very appealing to entrepreneurs seeking to attract and retain them. However, their attributes can become a double-edged sword for those in charge of the human resources area, since, although millennials have everything they seek as employees, this generation does not usually tolerate rigid work structures, routine jobs, and much less a bad work environment. They are not willing to sacrifice their

*Entrepreneurship during a Crisis: An Examination of the Insertion of Millennial Workers… DOI: http://dx.doi.org/10.5772/intechopen.109469*

personal lives for work and are always looking for more and better opportunities to grow professionally. Unlike previous generations like generation x or baby boomers, millennials do not live just to work, they want to change the world and make a difference. Therefore, having different characteristics, needs, and expectations from previous generations in relation to employment, they show work behaviors and decision-making not fully understood by entrepreneurs, causing them to choose to leave their jobs, causing high levels of turnover. Here then is the need to better understand this generation that has been taking the reins of the labor market and that needs different attention from entrepreneurs in order to retain them through management practices that meet their expectations. Well, now it is the organizations that must adapt to this generation and not *vice versa*.

In this way, the objective of the following review is to systematically analyze the available evidence about the practices most valued by the millennial generation in the workplace and to verify whether or not these practices are carried out by entrepreneurs, all this with the intention of shedding light on the current panorama and contributing to the better functioning of human talent management.

#### **1.1 Population and methods**

In this work, a systematic review of the published scientific literature on human talent management and its relationship with the millennial workforce has been carried out. Next, the elaboration process will be detailed in its different phases.

#### **1.2 Initial search**

The first searches were carried out in May 2022 in the Google academic databases as part of the research work II course. The terms "millennial generation," "workforce," and "retention of human talent" were combined. The combination of these terms yielded a fairly large number of results, and many of them were not very useful for the review. However, the different studies provided a global vision of the subject and a better understanding of it.

#### **1.3 Systematic search**

The systematic search was carried out in August 2022 in the same database, Google Academic, limiting the results from 2015 to the present.

The combination of terms that yielded the best results in this search engine was millennials and retention of human talent "millennial workers." Specifically, 76 results were obtained in this database. Adding 13 more works found in repositories of different universities, being a total of 89 works. Prior to the selection of the works, the following inclusion and exclusion criteria were defined:

Inclusion criteria.


Exclusion criteria.


Based on these criteria, and only by reading the title, 27 articles were considered adequate. After that, it was proceeded to read the abstract, the results, and the conclusions. From this reading, 9 studies were discarded mainly because they were only a literature review (n = 1) and because they did not have a representative sample of the population to study (n = 9).

Finally, 17 articles met the inclusion criteria and were selected to carry out the systematic review.

#### **2. Results**

A summary of the results of the selected studies can be consulted in the table provided. However, the analysis to be carried out was considered the most pertinent to facilitate the understanding and integration of the results.

Mitta Flores and Dávila Salinas [2] inquired about the policies and practices of retention of human talent in entrepreneurs, with the general objective of identifying the policies and practices of personnel retention that serve to retain millennials young collaborators. The approach they used was mixed, using quantitative (survey) and qualitative (interview) tools. The survey was applied to 237 students of the ninth and tenth cycle of PUCP of the careers of Management and Senior Management, Economics and Industrial Engineering who have had work experience, while the interview was conducted with the managers and/ or managers of human resource areas of a group of entrepreneurs. The results of this study were that, with respect to the behavior of the young people surveyed, it was obtained that 94.94% of the participants reflected that their position regarding the future is optimistic; 92.83% feel the need for feedback about the development of their tasks; 82.70% of the participants look for a balance between work and family; 80.17% consider themselves collaborators; 78.48% feel respect for the authority in their workplace; 74.68% perform several tasks at the same time; and 70.04% of the participants finish their pending tasks in any place. The results reflect in this case that millennial workers value non-remunerated aspects more, such as better feedback from their superiors, as well as the balance between work and family, thus confirming what was previously mentioned about the fact that this generation looks for flexibility and balances its personal life with work.

Bergerman Zapata and Tantaleán Sánchez [3] developed a proposal for the retention of millennials in the Banco de Credito del Peru financial entity in the department

#### *Entrepreneurship during a Crisis: An Examination of the Insertion of Millennial Workers… DOI: http://dx.doi.org/10.5772/intechopen.109469*

of Lambayeque, with the purpose of providing relevant information for that entity and for other companies in order to know the behavior, attitudes, and interests of this group of people who are the direct potential of entrepreneurs today. The approach used was non-experimental and of field, having as a representative sample 148 young people between 18 and 35 years old who work in the Credit Bank branches of the said department. The results showed that millennials look for to transcend and develop experiences in their work stage that help them in their personal and professional development. In this way, the study concluded that it will not be possible to retain them for a long time, since the main characteristic they have is that they look for short-term experiences, and for this, they must seek opportunities elsewhere.

Buitrago García et al. [4] conducted a study about the impact of millennials on human talent processes in the Club el Nogal corporation, located in Bogota city, Colombia. The main objective of the work was to show the impact that collaborators identified as millennials have within the processes of attraction, selection, hiring, and reasons for retirement at El Nogal Club. To achieve the aforementioned objective, the technique of collecting information from the club's database and the analysis of its content was used. In this way, it was identified that, of the 776 employees of the club, 353 belong to the millennial generation, being the workforce with the greatest presence in entrepreneurs. Likewise, it was reviewed that, of all the retirements by generation during 2016 and the first semester of 2017, 58% came from the millennial generation. Among the reasons why millennial employees quit are job opportunities (37%), study opportunities (14%), and opportunities to become independent (8%). These results are aligned with the global characteristics of this generation, confirming that they are people who are always looking for growth and opportunities and with high job demands, which cause their retirement and high turnover.

Authors such as Pacheco et al. [5] studied the high turnover of this generation from the perspective of climate, motivation, and job satisfaction, with the objective of studying these three factors and the relationship with job turnover in the main banking entities in Cuzco city. The methodology used was descriptive-correlational research with a non-experimental design, with the survey as the main technique for collecting and measuring data. The study sample consisted of 159 workers belonging to the millennial generation of the banking entities of Cuzco. The results obtained by the study indicate that if the staff of generation Y presents a low level of motivation, it generates a 100% turnover as a consequence, but if the motivation is high, the percentage of turnover is 47.7%. On the other hand, it was also observed that of the 100% of the personnel that presented low levels of job satisfaction, and 75% of them presented rotation of their positions; while the staff that presented high levels of job satisfaction, 37.5% rotated from their job. The results also concluded that staff turnover in banking entities does not depend on the work environment.

On the other hand, Leal et al. [6] investigate more about the retention of human talent in the millennial and centennial generations in Bogotá with the aim of generating strategies for the optimization of the processes of retention in Bogota companies, taking into account the differential needs of the millennial and centennial generations, since this would allow not only to increase the efficiency of the programs and projects carried out by the human resources area, but also the short and medium term of collaborator development. The approach used is the mixed one, making use of a survey, which was analyzed quantitatively. Likewise, the qualitative analysis of the results obtained was also used. The sample was made up of 66 people, 56 of them belonging to the millennial generation and 4 of them belonging to the centennial generation. The results of the study determined that the millennial generation is a

generation that looks for stability with themselves, growth, and personal development; however, they are still very shy about entrepreneurship and generating ideas that allow them to achieve other results outside of entrepreneurs. This point differs from the study by Buitrago García, L. T., García Castillo, B., Ruíz Bautista, T. G., & Suesca Cortés, A. M, who found that opportunities for independence were one of the main reasons that millennials quit. Therefore, both studies have a slight contradiction regarding the reasons that lead workers of this generation to constantly rotate jobs.

Martín-Buro García de Dionisio [7] carried out a study with the purpose of analyzing the labor factors that millennials consider important to develop their professional career in a company over a long period of time. The approach was mixed, with the use of survey as the main analysis technique. The questionnaire was applied to 149 people who presented an age range between 20 and 24 years old and belonging to different branches of study, such as psychology, pharmacy or nutrition, social sciences such as business administration and management, human sciences such as law or translation, scientific-technological, and artistic-musical. From the results, it was obtained that the majority of the respondents selected four retention variables: salary (72%), work environment (61%), and training (58%), while the variables with less representation were performance information, social commitment, and closeness with superiors with a percentage of less than 20% of the total number of respondents. In this study, the salary issue was the most valued factor, contrasting with previous studies where growth opportunities and work-life balance were the most representative.

Alegre Cruz and Pretell Muñoz [8] conducted a study to determine the relationship between retention and turnover of the millennial generation in the company Homecenters Peruanos S.A. through a non-experimental quantitative approach—transversal. To do this, they surveyed 130 millennial collaborators of this company, obtaining as main findings the existence of a relationship between the retention and turnover variables of the millennial generation, since the data analyzed show that, when retention is very good, there will never be turnover because employees will have no reason to leave the company and they will feel comfortable in it, they will be more productive, and this performance will be reflected in the day to day and in the treatment that these employees give to the client. However, when retention is poor, there will always be turnover, thus confirming the direct relationship between both variables.

Additionally, Viena and Carol carried [9] out a study to determine the characteristics of millennials that influence human talent retention in a human resource service company. The type of research was quantitative with a non-experimental approach. The sample consisted of 87 millennial workers and 5 people in charge of the human management area. According to the results obtained, the characteristics of commitment, attitude, and motivation are the ones with the highest representation of millennials with a percentage greater than 90%. Along the same lines, 60% of those in charge of human management indicate that job rotation has changed due to the entry of generation Y as entrepreneurs and affirm the need to change talent retention policies. These results show, then, that there is an influence of the characteristics of millennials over retention policies and that the actions carried out to change those policies will have a positive impact on the talent management of this generation.

Along the same lines, the work of Bautista et al. [10] determined the impact of retention strategies on job satisfaction and stability of the millennial generation. To do this, its methodology was based on quantitative research with a non-experimental approach. In this way, a sample made up of 98 people considered millennials were surveyed, it was observed that this generation is very open to challenges, to new experiences, and to discovering new skills every day that allow them to perform other

#### *Entrepreneurship during a Crisis: An Examination of the Insertion of Millennial Workers… DOI: http://dx.doi.org/10.5772/intechopen.109469*

activities. According to the results obtained by the study, more than 70% opt for a change of position in which they are offered the possibility of having new challenges and responsibilities, versus to having an increase in salary in the same position and with the same functions. This does not mean that millennial employees are willing to accept low-paying jobs, but rather that they look for jobs with a fair salary, but where their contributions to innovation and, above all, their academic and training inclinations are also compensated. For them, knowledge weighs more than money, and this is a key aspect to be able to understand and retain them correctly.

This topic was also addressed by Ramírez Angel, LM, [11] whose study aimed to determine how the job expectations of the generation of millennial workers influence their permanence in the entrepreneurs. The author used a mixed approach to carry out his research with the application of a survey and an interview as the main techniques of data collection and analysis. A questionnaire was applied to 5027 workers in Bogotá between 17 and 37 years old (ACM analysis of the Great Integrated Household Survey GEIH 2017) and qualitative with 20 generation Y workers between 19 and 39 years old, who have more than 3 months in their current entrepreneurs, who have ever resigned from a job, who have a fixed-term employment contract, and who have more than 1 year of work experience. From the results obtained in the quantitative phase, it was possible to conclude that millennial workers who are older and have a higher level of education have better working conditions, while those who are younger and have a lower level of education tend to rotate faster. On the other hand, of the results obtained in the qualitative phase highlight the development of a career, autonomy, having staff in charge, and being able to contribute to organizations as the main expectations of millennial workers that had not been found in previous studies. Likewise, the study also highlights that non-financial benefits also attract a lot of their attention, as long as they are related to what they expect such as days off, training, recognition.

Aucalla Taira and Benavente Cordova [12] investigated job rotation from the perspective of job satisfaction in order to establish the relationship between the main variables that influence job satisfaction and its impact on the millennial staff rotation intention within the fast food mass consumption sector. The research they carried out was quantitative in nature with a non-experimental, cross-sectional approach. The sample was made up of 395 millennial collaborators who work in the Fast Food of Lima city. The results obtained showed that, as the level of satisfaction of the workers increases, their intention of job rotation decreases. In turn, of the dimensions studied, the most significant refer to remunerative benefits, physical and/or material conditions, administrative policies, and task performance. These are the factors that contribute to reduce the initial intention of labor workers turnover.

Pasko et al. [13] investigated the attributes related to the preferred job of millennials and their relationship with retention. The methodology used was quantitative research with a non-experimental, cross-sectional approach. Thus, a survey was applied to 300 millennial employees of a large firm in the southwestern United States. The findings showed that the attributes with the greatest support by the respondents are related to work, job security, work-life balance, and company leadership.

In turn, the study by Duque Arias [14] identified and analyzed the main factors of attraction and retention of human capital in the millennial generation, in the government administration sector of Quito city, Ecuador. The approach used was mixed with an exploratory scope. The sample consisted of 374 millennials whose age was between 25 and 35 years old, having as main results that factors such as professional growth, economic stability, jobs by objectives, and economic bonuses are the most important aspects to attract and retain millennial workers. The study also identified that job

stability, ongoing training, and work-life balance will contribute to the development of strategies within the human resources area to retain this workforce.

From the same perspective, Henao Preciado and Mejía Torres [15] carried out an investigation to identify the facilitating and hindering factors in the retention of a group of millennial generation workers in the city of Pereira, Colombia. The approach used was quantitative of descriptive type. A survey was carried out on a sample of 383 people between the ages of 18 and 34, the results of which indicated that, in order to motivate younger employees, work must be dynamic and with a good work environment, since one of the most valued things for millennials, beyond economic remuneration, it is being able to work comfortably, with a good team, daily dialog, and good training and benefit policies. Active listening was also highlighted as one of the most important factors along with constant training, the application of new technologies, and giving them an important place in the team that they feel really valued within the company.

In a complementary way, the study carried out by Rodríguez Millán [16] identified what young people belonging to the millennial generation value most when looking for a job and staying in it, in the city of Asturias, Spain. The methodology used was a quantitative research with a non-experimental, cross-sectional design. About 359 belonging to this generation were surveyed. The main findings were that the main factors that attract millennial talent are having interesting tasks, job security related to promotions, and a good salary. Likewise, it was also determined that among the main reasons for millennials to remain in the same entrepreneurs for a long period of time (more than 5 years) stand out the value of work, labor flexibility, and the diversity of tasks. The interesting thing about this study was that remuneration was not a priority motive for millennials. This contradicts other investigations where a good salary is one of the factors with the highest percentage of representativeness.

Bocanegra Álvarez [17] also analyzed the motives of millennials in relation to their professional practice in Piura city. The approach used was the non-experimental one with a cross-sectional design—descriptive. The survey was applied to 240 young millennials who have at least one work experience and are between 22 and 34 years old. The results obtained were that the priorities of these young people in the workplace are to have a good salary, get better development opportunities, and achieve a balance between personal life and work. Likewise, the study also found that the respondents would stay in their same jobs only if their working conditions were improved referring to good remuneration, professional development opportunities, and job recognition.

Finally, the research work of Huaraca Yaranga [18] was carried out to determine the relationship between job satisfaction and the retention of millennial employees in Metropolitan Lima. For this, the approach used was a quantitative approach, with a non-experimental and cross-sectional design with the application of a survey to a representative sample of 222 millennial workers. The main results obtained from this study determined that the existence of a positive, moderate, and significant correlation that indicates that, the more intense the job satisfaction is for the functions performed, the more millennial workers will want to stay in their workplace and thus, they will be able to collaborate depending on the achievement of its objectives and goals and *vice versa*.

#### **3. Discussion**

With this review, the objective was to analyze the evidence provided about the characteristics of the millennial generation and verify if these characteristics influence the practices of retention of human talent carried out by entrepreneurs. All the

#### *Entrepreneurship during a Crisis: An Examination of the Insertion of Millennial Workers… DOI: http://dx.doi.org/10.5772/intechopen.109469*

studies were reviewed to confirm the influence between both variables. However, there are differences regarding the factors that millennials consider most important when deciding to stay in the same entrepreneurs for a long period of time. Most of the studies found that millennials prioritize non-remuneration aspects such as growth opportunities, a good work environment, feedback from their superiors, good communication between collaborators, and work and personal life balance as factors that would positively affect their permanence in the workplace. However, other studies found that millennials value remunerative aspects more, such as a fair salary and promotions in terms of bonuses or promotions when deciding whether to stay or not in their same job. Although it is evident the influence that exists between the characteristics of millennials with talent retention, the determining factors between both do not yet fully coincide. This aspect is important because, according to the literature reviewed, millennials are a generation that does not think about economic aspects as something fundamental in the workplace, since they are in a constant search for growth, flexibility, and emotional stability. If in entrepreneurs where they work, there is nothing that involves these aspects, they will not hesitate to look




*Entrepreneurship during a Crisis: An Examination of the Insertion of Millennial Workers… DOI: http://dx.doi.org/10.5772/intechopen.109469*


#### **Table 1.**

*Cuadro de inclusion y exclusion.*

for another job in a short time. However, various studies have different results than expected, raising a new question about whether millennials value remunerative or non-remuneration aspects more to stay in an entrepreneur or not.

Below is shown the table with the studies analyzed in this review (**Table 1**).

#### **4. Conclusions**

The Millennial generation is changing the way how entrepreneurs manage their human factor. It is a generation that highly values non-remunerative aspects such as a good work environment, flexible hours, professional development opportunities, good relationship with their co-workers, and constant feedback from their superiors. However, this does not mean that they are willing to accept low wages, but rather that they look for jobs where they feel that their work needs and expectations are understood and, above all, attended to.

*Entrepreneurship during a Crisis: An Examination of the Insertion of Millennial Workers… DOI: http://dx.doi.org/10.5772/intechopen.109469*

#### **5. Recommendations**

It is recommended that entrepreneurs get to know their Millennial employees better and analyze what factors they consider essential in their work environment, since only then can they design effective retention policies to reduce the high rates of job turnover caused by this generation.

### **Author details**

Jesús Enrique Reyes Acevedo1 \*, Nayeli Yulissa Tello Campos1 , Santiago Luis Vela Del Águila1 , Yuli Novak Ormeño Torres2 , Rosa María Velarde Legoas3 , Flor Lavanda Reyes4 , Jorge Lázaro Franco Medina5 and Ramon Osorio Alberto Bueno5

1 Universidad Nacional autónoma de Alto Amazonas, Yurimaguas, Peru

2 Universidad Privada del Norte, Trujillo, Peru

3 Universidad tecnológica del Perú, Lima, Peru


\*Address all correspondence to: jreyes@unaaa.edu.pe

© 2023 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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### Section 2
