Nightmare and bonanza
JIN DING/CHINA DAILY
The pandemic has been disastrous for the poor, but it has been highly lucrative for the mega-wealthy
The world's rich are getting richer, and the poor are getting poorer. Almost all the evidence since the pandemic's onset points in this direction.
At one extreme, Oxfam estimates that Elon Musk's wealth has increased by 699 percent since 2019. Also, 573 new billionaires have emerged--globally we have 2,668 billionaires now. At the other extreme, the World Bank estimates 75 to 95 million more people have fallen below the $1.9-a-day poverty line. This is a desperately low line. These families are going hungry and cannot pay for drinking water, health expenses or schooling.
Between these extremes, many of the world's middle class--be they from Atlanta to Kolkata to Manchester to Mombasa--are feeling squeezed by a cost-of-living crisis. Food and fuel bills are rising much faster than wages. Governments are responding: the UK promises "leveling up "and China is pursuing "common prosperity".
Pessimists would say things have always been like this: "the rich get richer and the poor get poorer". However, that would be a wrong thing to say. From 1920 to 1970, income inequality in much of the world declined as workers came together to demand higher wages and governments created welfare states with progressive taxes financing public health, education and housing.
From 1990 to 2019 the world has actually experienced an era of "the rich get richer, and the poor get a little bit better off". The United Nations' Millennium Development Goals recorded extreme poverty dipping from 47 percent of people in developing countries in 1990 to 14 percent in 2015.More than a billion people escaped poverty as the emerging economies powered ahead. In all world regions poor people were doing a little better every year--more income, more food and more schooling--until 2020.
So, what's been happening with global inequality in the 2020s?
Let's start with the poor. The golden era of UN poverty indicators showing global reductions in extreme poverty has stalled or ended. Climate change, the COVID-19 pandemic and war in Europe have raised the head counts for poverty and hunger by tens of millions, especially women and girls.
The poorest have experienced a triple whammy. The COVID-19 pandemic and lockdowns gummed up the informal jobs that poor people depend on. Casual employment on farms and construction sites, petty trading by the roadside and similar activities stopped overnight. To survive, families had to liquidate their savings or take on debt. Getting COVID-19 increased the suffering of the poor, causing deaths and bankrupting household budgets in many countries.
Through 2021, many poor families began to recover economically, only to be knocked down by the dramatic rise in basic food prices. The UN estimates that cereal prices have risen by 48 percent over the last two years (17 percent of that 48 percent was in March 2022). For very poor households, spending 40 to 60 percent of their income on food, such a rise is catastrophic. All other spending--on health and rent--must stop. This causes additional problems--ailments, job loss and evictions. Things fall apart.
The impact on middle class people has been more complicated. While the early waves of COVID-19 caused terrible suffering--as evidenced in the images of professional people in India fighting to buy oxygen cylinders for their dying parents--subsequent impacts varied. Middle class people running small businesses--restaurants, clinics, gyms--hit upon hard times. But the living standards of those who could work from home often improved: they spent less time commuting, reduced their transport and eating-out costs, and had more family time. For millions of office-goers in Europe, North America and East Asia, life got better.
So, what about the rich? In the pandemic era, the world's richest people have been doing very well. Oxfam's Profiting from Pain report shows the ways in which "owners" of food, big oil, big pharma and technology corporations have exploited the recent crisis. Amazon's founder Jeff Bezos's wealth has increased by $45 billion since 2020 thanks to labor put in by hundreds of thousands of low-wage warehouse and delivery workers. Cargill, one of the world's biggest food traders, paid the Cargill family $1.13 billion in dividends in 2020. Their 2022 dividends should be bigger.
These mega-wealthy individuals and families have not only found ways of increasing their trading margins (charging poor and middle class people higher prices). They have negotiated and litigated for international and national policies that enhance their profitability. Cohorts of lawyers and accountants ensure that their personal and corporate taxation is minimized, intellectual property rights are monopolized, and potential competitors are blocked.
As Nobel Prize winner Joe Stiglitz argues, such concentrated wealth has facilitated "policy capture" in the United States, Europe and other parts of the world (China now regulates the influence of its billionaires). Policy capture occurs when large corporations and their leaders can negotiate the public policies they want regardless of the social consequences. Low tax and no tax policies for the wealthy, anti-union legislation and IPR monopolies allow the richest to make more money, but they are disastrous for societies.
What to do? Challenging such wealthy individuals and corporations is hard but increasingly activists are powerfully making the case for progressive national taxation, government investment in public services, and effective international regulation of corporate ownership and taxation. Some wealthy individuals, such as the Patriotic Millionaires, a group of high-net worth US citizens who are greatly concerned about the destabilizing level of inequality in the US, are recognizing that such an unequal world is not the world they want. Values need to be challenged and changed. Such concentrated wealth will not provide the grandchildren of the rich with sustainable, fair, socially-cohesive societies--a pleasant world to go for a walk in the sun or have coffee with a friend.
As Richard Wilkinson and Kate Pickett's book Spirit Level revealed a decade ago, more equality is not just good for the poor, it also makes the better-off and rich more content with their lives.
The author is a professor of development studies at the Global Development Institute at the University of Manchester and chair professor at the College of International Development and Global Agriculture at China Agricultural University.The author contributed this article to China Watch, a think tank powered by China Daily.
The views do not necessarily reflect those of China Daily.
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