Inequality, intensified: Unequal covid response failed to reduce global income or wealth inequality

By Atanu Biswas

As Lizzie Wade noted in her May 2020 article in the journal Science, inequality made historic pandemics “worse than they needed to be,” as people on the margins suffer the most. Likewise, the recent Oxfam report titled Profiting from Pain, released at the World Economic Forum’s Davos conference in May, painted a grim picture of the increased global inequality caused by the once-in-a-century pandemic. It says the pandemic has created a new billionaire every 30 hours and that by 2022, a million more people will find themselves in extreme poverty every 33 hours. Greater global inequality, perhaps in a different quantum, is also outlined in reports from other global organizations. While the fancy numbers of these reports and the quantum of inequalities portrayed are always subject to further introspection and debate, and the underlying data and methodologies often raise concerns, there’s no denying that overall global inequality has been magnified by Covid-19.

Several researchers argue that the direct impact of the pandemic on income distribution is closely related to the fact that the spread of a deadly virus in a society leads to the death of a large number of workers, as poverty-stricken and low-income groups are most vulnerable to disease. After Covid broke out, IMFs Davide Furceri and his co-authors studied the impact of five epidemics of this century, namely SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014) and Zika (2016) to observe that . these events have led to an increase in inequality in the countries covered by the study. In a 2021 article in SN Business & Economics, two researchers from Huazhong University of Science and Technology, Wuhan, China, examined historic pandemics such as the Spanish flu (1918-20), Asian flu (1957-58), Hong Kong flu ( 1968-69) and H1N1 and found that these pandemics actually increased income inequality.

Is greater inequality than the ultimate effect of pandemics? Not really! The research and historical data analyzes by economists such as Thomas Piketty and Guido Alfani with their co-authors show that inequality in Europe has in fact been eliminated by at least three catastrophic events over the past seven centuries: the 14th-century plague, the Black Death and the two world wars. wars. The Black Death may be the only recorded major pandemic to level income inequality, as evidenced by data from northwestern Italy, Spain and England. From 1347-1352, the Black Death killed about half of all Europeans, making labor scarce and real wages rising. There was an unusual abundance of property, leading to a reduction in both income and wealth inequality.

It would be absolutely wrong to assume that pandemics in general have the power to (brutally) eliminate inequality, even if the pandemic is caused by the same pathogen. Pandemics of the following centuries were staged amid different institutional environments and labor market effects. For example, the 17th-century plagues did not have the same economic effects as the Black Death. As pandemics became inevitable, the elite found ways to preserve their wealth and even health.

It would be important to note the effect of the Spanish flu – a flu pandemic and arguably the closest equivalent to Covid-19. It is also widely believed that the Spanish flu has led to an increase in both poverty and income inequality. One serious reason is that the age curve of Spanish flu mortality was W-shaped, meaning that the death rate among individuals aged 15-44 was high. However, it must be remembered that the economic legacy of the Spanish flu is quite unclear. Admittedly, its impact on inequality largely coincides with that of World War I, and it is simply impossible to disentangle the effects of the two. Guido Alfani, an economic historian from the Bocconi University of Milan, also noted this.

What about Covid then? As early as 2020, the aforementioned IMF team saw that Covid would increase inequality if past pandemics were a guide. However, the SN Business & Economics paper argued that the characteristics of Covid-19 are such that fatalities are highly concentrated in older age groups and neither a labor shortage nor a sharp decline in productivity due to the Covid pandemic can be expected. One might have expected a decline in consumption, the possibility of savings, high unemployment rates and high government debt-to-GDP ratios. However, these authors questioned the ultimate effects of Covid-19 on inequality, thinking that some of its inherent features push for an increase in inequality, while others push for narrowing the income gap.

But of course, as we see now, the ongoing pandemic caused massive unemployment, especially among the poorest. The prolonged global lockdown, uneven distribution of vaccines and an overall uneven Covid response that generated more yachts than boats certainly didn’t help reduce global income or wealth inequality. No wonder the economic recovery is K-shaped in many countries. And global inequality may have been destined to widen in the wake of the Covid-19 crisis. However, the exact picture may remain unknown.

The author is Professor of Statistics, Indian Statistical Institute, Kolkata

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