The pandemic triggers inequality around the world | Economy

A more unequal world is the immediate legacy of the pandemic. The gap between rich and poor continued to grow between 2019 and 2021, when COVID-19 imposed an abrupt hiatus on the growth stage of the global economy. At the top of the pyramid, a small and select club of billionaires – 0.001% of the population – saw their fortunes grow by 14%. On a very broad base, an additional 100 million people were driven into extreme poverty. According to a macro-study prepared by the World Inequality Lab to which EL PAÍS has had access, in the last two years there has been an acceleration of the process of concentration of income and wealth that began in the eighties. “We see an even more polarized world: the covid has amplified the phenomenon of the rise of billionaires and has left more poverty,” says Lucas Chancel, who led the investigation.

The prestigious French think tank (co-directed by Lucas Chancel, Thomas Piketty, Emmanuel Saez and Gabriel Zucman), puts black on white for another year in the process of income and wealth inequality, which was exacerbated by the wave of deregulatory policies and privatizing companies of the eighties. That was the beginning. In the last two decades, the distance between labor income and capital received by the richest 10% of the population and the poorest 50% has doubled. And the concentration of wealth has reached an “extreme” share, since the most powerful 10% already own three-quarters of all the world’s heritage. The coronavirus has not truncated that trend. Quite the contrary: it has accelerated that process until it reaches a kind of new Belle Epoque for elites around the world, since the inequality between those above and below has never been greater since the beginning of the 20th century. “It is not observed that the process started in the early eighties has changed so far. Rather, this trend is maintained and what can be expected is that it will have accentuated, particularly in 2020, ”says Luis Bauluz, researcher at the World Inequality Lab.

Globalization was presented as an opportunity to cut inequalities between countries. And actually, it was: new powers such as China, India or Brazil ascended. But inequalities within nations continued to widen: the top of the pyramid of all countries continues to swim in abundance. “In modern capitalism, an individual’s income group (whether he belongs to the bottom 50% or the top 1%) matters more than his nationality in determining levels of global inequality,” the report notes. The 517 million citizens who are among the richest 10% capture 52% of the 86 trillion euros that is distributed in income and 76% of the enormous pie of 510 trillion that constitutes the world’s wealth. In turn, half the population continues to deal with shortages. And a good part of them, with poverty. 50% of the adult inhabitants of the planet (2,500 million people) are only capable of capturing 8% of the income and barely 2% of the wealth. The report also confirms a rule: the richer a citizen is, the more his wealth grows. Since the 1990s, the richest 0.01% saw it grow by 5% each year; 0.001%, 5.9%, and 0.00001%, 8.1%. “One thing is for sure: if the inequality rates of the past decades continue into the future, then global inequality will continue to increase to enormous levels,” the study adds.

Poverty reduction in the US and Europe

This trend is repeated in all regions of the world, although some have experienced greater increases in inequalities since the 1980s (the United States, Russia and India) than others (Europe and China). It is still early to see all the scars that the pandemic has left, but some are already evident. The World Bank estimates that successive covid-19 outbreaks have increased the number of citizens living in extreme poverty by 100 million, to 711 million, especially in Africa and Asia. And while that was happening, a handful of billionaires, 0.001% of the population, increased their wealth by 14%. Some studies already point out how in France those with the highest income and assets took advantage to save and lose weight and reduce their debts, while the poorest were forced to borrow to weather the storm.

However, not all bad news. The pandemic has forced many countries to lay down safety nets for their citizens. In the United States, the outbreak of the pandemic disproportionately targeted the most vulnerable citizens. Employment rates fell 37%. “And yet we saw that there was no increase in poverty. Just the opposite: there was a decrease ”, highlights Chancel. The actions of the Administration through spending and social transfers not only protected these citizens, but also made it possible to reduce poverty rates between 2020 and 2021 by 45% compared to 2018. In total, 20 million people escaped from this situation of vulnerability. “What does that mean? That social policies are effective, that we can reduce extreme poverty in rich countries. And this emphasizes a key message: inequality and its reduction is not a question of economic limitations, but rather a political choice about the type of society in which we want to live ”, adds the economist. This aid, however, was not enough to reduce inequalities because of the high rate at which the income and assets of the richest grew.

The pandemic has accelerated another process that had been taking place since the 2008 financial crisis: the loss of wealth from the public sector in favor of the private sector. States have already been losing heritage in the last 50 years, so that in countries like the United States or the United Kingdom (or Spain) all wealth was private. “Governments today are much poorer than 40 years ago. It is a secular trend that we observe: the public sector is getting poorer and the private sector is getting richer ”, highlights Chancel. The pandemic has exacerbated that process, as governments have protected their citizens by raising their public deficits and borrowing on a large scale, reaching record levels. And that increased debt has further eroded the public sector.

This phenomenon leads to the following question: Who will pay that debt? The future recomposition of public finances is beginning to move the debate on the possible solutions that could be on the table: from restructuring, to budget adjustments or the effect of inflation. In silver: if it will return to austerity plans, such as those that existed a decade ago, which delved into inequalities. “Everything is open. We do not know if there will be more taxes on consumption, if public services will be reduced, which will affect low-income groups … It would be logical to ask the richest for more instead of demanding more from the new generations, which are the ones who have suffered the most from this crisis ”, Chancel emphasizes.

Related Posts

George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

Leave a Reply

Your email address will not be published. Required fields are marked *