We started a new year, but the pandemic is still here. We have all bit hit by this pandemic. Some have lost their lives, others have lost their dear ones, and many have lost their income. Inequality is growing fast.
While the covid-19 crisis affects all, its impacts are not being felt the same way by everyone. The pandemic has reached every country on the planet. It did change the way we live. The crisis is bringing inequalities in society into sharp focus, as very often those with less to start with—poorer health, inadequate housing, less secure jobs—are experiencing larger losses. The evidence available so far suggests that the crisis is likely to have long term implications for equity and social mobility.
Over the past months, we have witnessed pandemic-driven lockdowns and political upheaval. But it does not stop there. Covid-19 has turned the poor into poorer and the wealthy into wealthier.
The most obvious economic legacy of the COVID-19 recession will be higher government debt levels. Though debt will remain manageable while real interest rates remain low, which is widely expected – indeed promised by central bankers – over the next few years.
Another worry is that the recession will give way to even lower long-term productivity growth. This is because of its effect on investment in human and physical capital. It is because of tightening of financial constraints on the most vulnerable firms and individuals. Certainly, concern about children missing school is justified. However, the evidence so far is that – helped by liquidity injections – gross fixed capital formation remains near pre-crisis levels. Bankruptcies have increased but remained within tolerable bounds, and banks remain adequately capitalised.
Inequality all over the globe
The new economy that took shape in the wake of the Covid-19 pandemic destroyed the lives, savings and many small businesses. 2020 wasn’t a financial washout for everyone.
With major stock markets soaring high, Forbes estimated that the 2,200-plus billionaires in the world have collectively gotten $1.9 trillion richer in 2020. The world’s billionaires are worth some 20% more in collective wealth when compared to the end of 2019. They had an incredible 2020. Many companies owned by the world’s billionaires soared in value during this pandemic.
According to Forbes, the 659 American billionaires hold roughly $4 trillion in wealth. This is a figure roughly double what the 165 million poorest Americans are collectively worth. 10 of these 659 American billionaires have a combined net worth of more than $1 trillion.
While U.S. tycoons grab most headlines for their increasing fortunes, they are not alone. In terms of US dollars, Chinese billionaires have gotten the richest in 2020. China, which imposed heavy lockdown rules after the Covid-19 outbreak began, has bounced back in stunning fashion.
It is a shocking snapshot of how the pandemic has distorted large sections of the real economy. A persistent economic inequality is growing fast, in every country.
New Oxfam research shows that over a third of the world’s population has had no public money to cope with the effects of the pandemic. Oxfam is calling for a Global Fund for Social Protection to avert a huge increase in global inequality and poverty. This as a keystone toward a more equal and resilient post-Covid economy.
Many argue that inequality threatens to undermine healthy market competition both now and, in the future. As more small- and medium-sized businesses are forced to close their doors and consolidation accelerates. A temporary loss of income for micro and small firms can turn into longer-term destruction of jobs. Jobs on which the vulnerable groups in urban areas are particularly reliant on. Many micro and small enterprises are likely to collapse. Particularly those in the service and small manufacturing sectors in the urban areas, so that many of the jobs they produce would not come back readily even when the economy starts to recover. Thus, the duration of the shock to livelihoods would be higher in those engaged in these firms and sectors. This will have implications for equity in the short and long term.
Inequality at country level
This global inequality is not just between the rich and poor people. It is also between so called rich countries and those labelled as third world countries. The global economy has long been cleaved by profound disparities in wealth, education and access to vital elements like clean water, electricity and the internet. The pandemic has further widened these disparities. Covid-19 will likely add another division that could shape economic life for years, separating countries with access to vaccines from those without.