Wealth gap widens as pandemic worsens economic inequality
- COVID-19 has widened wealth gaps across the world.
- The richest 10% of the world’s population now own 76% of all wealth.
- Urgent action is needed to support people experiencing poverty and reduce economic inequality.
- Scaling up immunizations and mobilizing aid and debt relief will help developing countries.
The world is facing rising economic inequality accelerated by COVID-19 and exacerbated by the impact of war in Ukraine. Governments must initiate urgent changes to tackle extreme poverty and narrow the gap between rich and poor, laying the foundations for a more equitable and sustainable future.
The numbers reveal the extent of the problem. According to the World Inequality Lab, the richest 10% of the world’s population own 76% of the wealth, while the poorest half own only a fraction of it. Global economic inequality is now as extreme as it was at the height of Western imperialism in the early 20th century, the Paris-based research group says in a report.
The richest 10% of the world’s population own 76% of the wealth.
Image: World Inequality Report 2022
The pandemic has reversed years of progress in reducing poverty and has driven up economic inequality. The world’s 10 richest men have doubled their fortunes since the start of the global health emergency, while the incomes of 99% of humanity have deteriorated as a result, according to Oxfam. More than 160 million people have also been pushed into poverty, the British charity estimates.
Today, Russia’s war in Ukraine is deepening the darkness. Beyond the battlefield, the conflict has upended commodity markets and global supply chains, driving up energy and food prices.
For developing countries that rely heavily on fuel and food from Russia and Ukraine, the impact of the war will be devastating, according to International Monetary Fund Managing Director Kristalina Georgieva. “To put it very simply, a war in Ukraine means hunger in Africa,” she told Foreign Policy magazine.
COVID-19 has caused more economic inequality
Even before the war, the recovery of emerging and developing economies from the pandemic recession was weak, returning inequality between rich and poor countries to levels not seen a decade ago, according to the World Bank.
COVID-19 has reversed progress in eradicating poverty.
Image: World Bank Global Economic Prospects Report
According to the bank’s Global Economic Prospects report, economic inequality within countries remains particularly high in developing regions, which are home to about two-thirds of the world’s poorest people.
The COVID-19 pandemic and recent social and political unrest have created a deep sense of urgency for businesses to actively work to address inequality.
The Forum’s work on diversity, equality, inclusion and social justice is led by the New Economy and Society Platform, which focuses on building prosperous, inclusive and just economies and societies. In addition to its work on economic growth, recovery and transformation, labour, wages and job creation, and education, skills and learning, the Platform takes an integrated and holistic approach to diversity, equity, inclusion and social justice, and aims to combat exclusion, prejudice and discrimination based on race, gender, ability, sexual orientation and all other forms of human diversity.
The platform produces data, standards and information, such as the Global Gender Gap Report and the Diversity, Equity and Inclusion 4.0 Toolkit, and pilots or supports action initiatives, such as Partnering for Racial Justice in Business, The Valuable 500 – Closing the Disability Inclusion Gap, Hardwiring Gender Parity in the Future of Work, Closing the Gender Gap Country Accelerators, the Partnership for Global LGBTI Equality, the Community of Chief Diversity and Inclusion Officers and the Global Future Council on Equity and Social Justice.
The war has aggravated this difficult situation. Economists at the United Nations (UN) Conference on Trade and Development have revised down their global growth forecast for 2022.
And with inflation soaring and developing countries already saddled with $1 trillion in debt, the UN body says an economic rescue effort of the magnitude and scale Marshall Plan ambition in the aftermath of World War II might be necessary to sustain the poor and even the means. income countries from sinking.
Huge economic rescue efforts may be needed to help some countries (Note: EMDE = emerging markets and developing economies).
Image: World Bank
Policies to fight poverty and economic inequality
To address this problem, global policymakers must recognize that the current gap between rich and poor is not inevitable, according to the World Inequality Lab. The experience of many European countries and China – which have relatively low levels of economic inequality compared to countries like the United States and India – shows that the right policies can make a difference.
The first critical task is to revive economies by stepping up global immunization efforts, according to the World Bank. The main obstacle in 2021 was limited access to doses, with low-income countries being the most affected. Oxfam says people who live in low- and middle-income countries are about twice as likely to die from COVID-19 as those in rich countries. This “vaccine apartheid” “amplifies inequalities in the world”, says the charity.
Efforts are also needed to provide developing country governments with greater financial resources to address economic inequality. The main areas to focus on will be supporting vulnerable populations and expanding access to key services such as education and health care.
According to the World Inequality Lab, governments have become significantly impoverished over the past 40 years as the private sector has acquired an increasingly larger share of total wealth – a trend amplified by massive government borrowing during the pandemic.
According to the World Bank, immediate action is needed to mobilize financial aid and accelerate debt relief efforts for the poorest countries. A recent positive step has been the replenishment of $93 billion from the International Development Agency to help low-income countries respond to the pandemic and rebuild their economies.
Finally, to enable social spending while investing more in infrastructure, climate change adaptation and clean energy transition, countries will need to prioritize spending and consider broadening their tax base.
Possible prescriptions include progressive taxes to redistribute wealth and investment through programs such as universal health care that benefit society as a whole. Oxfam estimates that a progressive tax on the rich could bring in up to $2.5 trillion a year.
