Inequality, intensified: Uneven Covid response didn’t help level global income or wealth inequality

By Atanu Biswas

As Lizzie Wade perceived in her May 2020 article in Science magazine, inequality made historical pandemics ‘worse than they had to be’ as people on the margins suffer most. Similarly, the recent Oxfam report titled Profiting from Pain, released during the World Economic Forum’s Davos conference in May, portrayed a grim picture of the intensified global inequality due to the once-in-a-century pandemic. It says that the pandemic created a new billionaire every 30 hours, and, in 2022, a million more people will crash into extreme poverty every 33 hours. Widened global inequality, maybe in a different quantum, is also outlined in reports of other global organisations. While the fancy figures of these reports and the portrayed quantum of inequalities are always subject to further introspection and debates, and the underlying data and methodologies are often subject to concerns, there is no denying that overall global inequality was widened by Covid-19.

Various researchers argue that the direct impact of the pandemic on income distribution is closely associated with 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 the most vulnerable to disease. After Covid broke out, IMF’s Davide Furceri and his coauthors 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 led to a rise in inequality in the countries covered by the research. Also, in a 2021 paper in SN Business & Economics, two researchers of the Huazhong University of Science and Technology, Wuhan, China, examined historical pandemics such as Spanish flu (1918-20), Asian flu (1957-58), Hong Kong flu (1968-69), and H1N1, and found that these pandemics actually widened income inequality.

Is widened inequality the ultimate effect of pandemics then? Not really! The research and historical data analyses by economists like Thomas Piketty and Guido Alfani with their coauthors show that inequality was actually levelled in Europe by at least three disastrous events in the last seven centuries—the 14th century plague, the Black Death, and the two World Wars. The Black Death is perhaps the only recorded major pandemic that led to levelling income inequality—as is observed in data from northwest Italy, Spain, and England. From 1347-1352, the Black Death killed about half of all Europeans and thus made labour scarce and real wages increase. There was an unusual abundance of property, which led to a reduction in both income and wealth inequalities.

It would be absolutely wrong to postulate that pandemics, in general, have the power to (brutally) level inequality, even if the pandemic is caused by the same pathogen. Pandemics of the subsequent centuries were staged amid different institutional environments and labour market effects. The 17th-century plagues, for example, didn’t have the same economic effects as the Black Death. In fact, as pandemics became inevitable, the elite found ways to preserve their wealth and even health.

It would be important to note the effect of Spanish flu—an influenza pandemic and maybe the closest equivalent of Covid-19. Incidentally, people grossly believe that the Spanish flu led to rises in both poverty and income inequality. One serious reason is that the age curve of mortality of Spanish flu was W-shaped, meaning that the number of deaths among individuals aged 15-44 years was high. Still, one should remember that the economic legacy of the Spanish flu is quite unclear. Admittedly, its impact on inequality is largely confounded within that of World War I, and disentangling the effects of the two is just impossible. Guido Alfani, an economic historian of the Bocconi University of Milan, also noted that.

What about Covid then? As early as 2020, the above-mentioned IMF team perceived that Covid would raise inequality if past pandemics are a guide. The SN Business & Economics paper, however, argued that the characteristics of Covid-19 are such that namely fatalities are highly concentrated in older age groups and one can neither expect a labour scarcity nor a sharp decline in productivity due to the Covid pandemic. One could have possibly expected a reduction in consumption, the possibility of savings, high unemployment rates, and high public debt ratios. These authors, however, were doubtful of the ultimate effects of Covid-19 on inequality, as they thought that some of its inherent characteristics push for an increase in inequality, while others push toward narrowing the income gap.

But, as we see now, the ongoing pandemic, of course, triggered huge unemployment, especially among the poorest. The prolonged worldwide lockdown, uneven vaccine distribution, and an overall uneven Covid response that generated more yachts than boats did not help level the global income or wealth inequality, for sure. No wonder the economic recovery in many countries is K-shaped. And global inequality was possibly destined to widen in the aftermath of the Covid-19 crisis. The exact picture, though, may remain unknown.

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

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