Life vs Livelihood: Hobson’s Choice for Emerging Markets

The entire world is fighting the same invisible COVID-19 virus enemy.
However, Developed Markets and Emerging Markets face different sets of challenges, constraints, and social norms. As a result, the policy outcomes and societal reactions will be quite different impacting the near-term economic trajectories in the respective universes. Emerging Asian economies seem wired for a quicker restart.

Uniform Threat, Different Reactions

The world economy has been brought to a standstill by COVID-19. Philosophical debates of human existence on this planet, and our selfish pursuit of growth and profits, and our mindless conquest of space and our grab on nature and the environment over other species have come to the fore – even on the minds of stoic financial investors. As the global death toll keeps rising, nations are speculating on the timeline of the tapering of the infection-curve, and they are already planning on easing of restrictions and lockdowns and on resumptions of economic activities. Inevitably, the moral-philosophical debate on the conflict of “profits over people?” emerges in the developed world1 – uncomfortable indeed! For emerging markets, the luxury of any such debate is scant: what is there to debate on “life vs livelihood”? We expect faster easing of restrictions on businesses and social life in Asia, albeit in a phased manner. Not just because Asia is mostly ahead of the Western world on the COVID-19 infection curve timeline, but also because of an inevitable policy leaning towards the utilitarian2 approach driven by dire necessity of sustaining the livelihood of hundreds of millions of poor people. Additionally, collectivism3 is culturally ingrained in Asia’s community-centric lifestyle*, unlike the Western individualistic societal value system –
Asians are more likely to shake off the virus fear sooner, as we have seen from past experiences of SARS and swine flu incidences. For investors, we believe the bottom line is that Asia will roll back to normalcy sooner, despite the risks of COVID-19 relapses.