An Oxfam report confirms what experts had feared. But it is easier to measure billionaire incomes, than incomes of the poor
At the recent World Economic Forum conference in Davos, the exclusive get-together of the global elite, in May, Oxfam released its new report titled ‘Profiting from Pain’ that illustrates how the Covid pandemic caused havoc to millions across the globe and how the already persisting inequality on this planet just got intensified by the once-in-a-century pandemic.
Some catchy figures in the above-mentioned report immediately drew headlines all over the world. For example, along with 40 new pharma billionaires, a whopping 573 people became new billionaires during the pandemic, at the rate of one every 30 hours.
In fact, the number of billionaires has increased more than 27 per cent since the pandemic started. The billionaires of the world own $3.78 trillion more, up nearly 30 per cent, from 2020. And the world’s 10 richest men own more wealth than the bottom 3.1 billion people. Rising income inequality had been observed through Gini index.
Significantly, for every new billionaire created during the pandemic, nearly a million people could have been pushed into extreme poverty in 2022 every 33 hours — nearly the same rate, as is portrayed in the Oxfam report. Specifically, it was estimated that 263 million more people will crash into extreme poverty this year.
The Oxfam report says that billionaires’ wealth rose more in the first 24 months of Covid than in 23 years. And corporations in the energy, food, and pharmaceutical sectors are experiencing record-high profits. As the cost of essential goods rises faster than it has in decades, billionaires in the food and energy sectors increased their fortunes by $1 billion every two days during the pandemic period.
Well, there is no denying that global inequality was widened by the pandemic — the rich became richer while millions lost jobs. In fact, a few months ago, the World Inequality Report 2022, prepared by the World Inequality Lab at the Paris School of Economics, also portrayed a grim picture of widened global inequality.
But how accurate is the underlying data? Understandably, the data for the billionaires are easier to find and calculations of their wealth are far easier. However, the data and estimates on poverty are always in question and these estimates may be subject to high standard errors. For example, in the World Inequality Lab Issue Brief 2020/08 on Asia, Li Yang commented: “…due to lack of consistent data, it is almost impossible to …estimate inequality in the region systemically.”
In fact, in many countries, no official income data is available. Incidentally, the last available consumer expenditure survey data in India is about a decade old. One may certainly wonder how the income distributions of these countries are at all estimated in these worldwide inequality calculations. If some data from some privately organised surveys are used, there would always be room for doubting that. Different organisations certainly use a lot of auxiliary data with bunches of unrealistic assumptions while measuring the income distribution of a country.
However, it was almost apriori known that the pandemic would widen the inequality on this planet, although there may be a debate on estimating the quantum. Almost all the major historical pandemics, except possibly the 14th century Black Death in Europe, have been instrumental in increasing the inequality. Black Death, in fact, killed about half the population of Europe and of the broader Mediterranean area thus making labour scarce and real wages increase, and also an unusual abundance of property, which led to a reduction in both income and wealth inequality.
However, that’s not quite usual for epidemics and pandemics. In an IMF Working Paper (WP/21/127) of 2021 titled ‘Will Covid-19 Affect Inequality? Evidence from Past Pandemics’, Davide Furceri, Prakash Loungani, Jonathan D Ostry, and Pietro Pizzuto provided evidence on the impact of major epidemics from the past two decades on income distribution.
They focussed on five major events — SARS in 2003, H1N1 in 2009, MERS in 2012, Ebola in 2014, and Zika in 2016. It was observed that these past pandemics, even though much smaller in scale, led to increases in the Gini coefficient, raised the income shares of higher-decile income groups, and lowered the employment-to-population ratio of those with basic education compared to those with higher education.
Consequently, these authors perceived that the distributional consequences of Covid may be larger than those flowing from the historical pandemics. And they also expressed the concern that, in the absence of supportive policies to protect the vulnerable, the pandemic could end up exerting a significant impact on inequality.
Governments of different countries injected millions of dollars into their economies as stimulus during the Covid pandemic, significant money has been invested to develop and distribute vaccines, and near- zero-interest loans were given.
And there is little doubt that, in many places, the rich became richer — the number of yachts increased, not the boats. And the economic recovery in many countries is observed to be K-shaped, indeed. It was possibly destined to be so. Some experts knew that apriori though.
The writer is Professor at Indian Statistical Institute, Kolkata