The Pandemic of Inequalities
Manuel Valenti Randi[1]
In May 2020 we warned that the global health crisis brings with it a deepening of inequality on three levels:between central and peripheral states; between social sectors; and between states and large corporations”. That is At every level, the weak are getting weaker and the strong are getting stronger. The unjust and chaotic order that prevails globally is becoming increasingly conflictive and volatile, and our region is one of the most affected..
The Covid-19 pandemic accelerated global trends that had been developing since the 2008 crisis: increased inequality, concentration of wealth and destruction of jobs; greater indebtedness of states and private entities; greater geopolitical and geoeconomic tension; increased protectionism in the major powers; global economic growth driven by Asia - particularly China - and stagnation or decline in the US and Europe.
Inequalities between core and peripheral states
According to data from the International Labour Organization's "COVID-19 and the World of Work Monitor," workers in low- and middle-income countries have been the most affected, "experiencing an estimated 23,3% decrease in working hours (240 million full-time jobs) in the second quarter of the year" [2]. The results demonstrate a positive correlation between fiscal stimulus and the ability to sustain labor activity. Of the USD 9,6 trillion announced in fiscal stimulus packages, 88% corresponds to high-income countriesIn other words, the richest countries were those that had the capacity to take measures to preserve employment and production.
The ILO calculated the “fiscal stimulus gap” between the money actually invested and the amount needed to sustain employment. The data are very clear: high-income countries have invested more than enough to cover the number of jobs lost, while middle- and low-income countries have not even managed to contribute half of what they needed. The Americas had the largest fiscal stimulus gap. According to this study, “the fiscal stimulus gap currently stands at US$982.000 billion in low- and lower-middle-income countries, where fiscal space is more limited (US$45.000 billion in low-income countries and US$937.000 billion in low- and lower-middle-income countries). This gap is equivalent to approximately 14% of these countries’ aggregate GDP in 2019. It is significant that in low-income countries the stimulus gap amounts to less than 1% of the total value of fiscal stimulus measures announced by high-income countries” [3]. It is important to note that Argentina's response was more comprehensive than that of countries with similar incomes, although the amounts corresponded to what an over-indebted economy in crisis since 2018 can manage.
The increase in inequalities was also seen in the production sector. According to data from the United Nations Industrial Development Organization (UNIDO), “global manufacturing output registered a general economic slowdown in 2019, which has been further aggravated by the economic crisis due to COVID-19.” [4] According to the UNIDO report, in the second quarter of this year Global manufacturing activity fell by 12,5% over the year. However, while industrialized countries experienced a 16% annual decline in their industrial activity, developing countries saw a 22% drop, demonstrating the capacity of the world's wealthiest nations to sustain activity in the context of the pandemic.China was the only country that grew its industrial activity so far this year (2%), and industrialized Asian countries experienced a smaller decline than European and North American countries, showing that this continent continues to be the engine of global growth. In contrast, Latin America had the worst performance in industrial activity with a 24% drop..
The decline in economic activity led to a tightening of protectionist policies by the world's major powers, proposing not only the protection of industry and strategic sectors, but also the relocation of companies to their countries. In this respect, undoubtedly, stronger economies have a greater capacity to effectively protect local jobs and production than poorer or less developed countries.
The lack of resources to deal with the pandemic in emerging countries led them to take on debt of USD 124.000 billion in the first six months of 2020.While Chile was able to access a loan from the IMF for USD 24 billion, Argentina was unable to access credit markets to address the crisis because it compounded a pre-existing crisis with unsustainable debt. The need to restructure national liabilities with private creditors and the IMF undermined the financing tools available for implementing countercyclical policies in response to the global crisis. It is important to clarify that, in addition to weak global economic growth, stagnant trade, relatively low commodity prices, and over-indebtedness, there was a supply and demand crisis resulting from the pandemic, which caused a rapid and widespread crisis in all countries of the world, especially those with middle and low incomes.
Finally, at the beginning of the pandemic, the volatility and panic created by the crisis led to a massive capital outflow—the largest in history—from emerging markets to developed countries. This added instability to the currencies and economies of emerging markets. Financial volatility, framed within a global context of financial deregulation, brought many countries to the brink of default. According to the IMF, “approximately one-third of all emerging market economies entered the crisis with high levels of debt and are estimated to have little or no room for additional discretionary fiscal policy, or that such room is significantly at risk” [5].
Those countries with weaker scientific, technological, and healthcare infrastructures depend on economic aid and supplies to cope with the pandemic. For example, the United Nations' COVID-19 Global Humanitarian Response Plan provided a total of USD 5.120 billion in funding [6], a noble initiative, but one that falls far short of the real needs of the world's poorest countries.
Social inequalities
Perhaps one of the strongest impacts of the pandemic is the precariousness of the living situation of millions of people worldwide who can practically not subsist. According to a World Bank study, more than 350 million people could fall into poverty and 100 million into extreme poverty due to the global crisis [7]. In Latin America, the situation is very serious. ECLAC estimates that 30 million people could fall into extreme poverty and 46 million into poverty..
Simultaneously, According to ILO projections, in the second quarter of this year, working hours equivalent to 495 million full-time jobs would have been lost.It is worth adding that job losses and furloughs increased compared to the first quarter, and our continent is the most affected [8]. In total, the global loss of labor income during the first three quarters of 2020 amounts to USD 3,5 trillion. In this regard, the income of working sectors has fallen on average by 10% worldwide, while in our continent the collapse reaches 15%.
Within the workers' sector, young people, older people and women were the most affected by job losses. It is important to highlight the deepening of gender inequalities within the context of the pandemic. Following Batthyány and Sánchez (2020), the impact of the health crisis particularly affects women. “The ILO estimates that, of the 130 million informal workers, 53% are women, who therefore face greater risks in the current situation (ILO, 2020). The increase in unemployment will also negatively impact their living conditions, because 49% of women in the region are employed in commerce and services, two of the sectors most affected by the pandemic (ILO, 2020). It should be added that for every 100 men living in poverty in the region, there are 132 women. And the scenario created by the pandemic suggests that this indicator may worsen even further. At the same time, the pressure of demand from coronavirus patients primarily affects female doctors, nurses, and health workers in general, as they represent 72,8% of the health sector workforce. In addition, formal workers, who earn on average 17% less than men, have also seen their domestic responsibilities increase (ECLAC, 2020)” [9].
While nearly a billion people are at risk of losing their jobs or falling into poverty, or both simultaneously, a small group of billionaires are profiting from the pandemic and the crisis.According to Bloomberg data, the 5 men (yes, they are all men and 4 of them are white and American)[2]The world's richest people have increased their personal wealth by $201.000 billion so far this year. Jeff Bezos, the world's richest man, increased his personal wealth by $72.000 billion. Four of these five entrepreneurs are linked to the technology and e-commerce industries, major beneficiaries of the pandemic. To get an idea of just how colossal the concentration of wealth is in the context of the pandemic, The 50 richest people in the world increased their income this year by USD 413.000 billion, practically the GDP of Argentina in 2019 (USD 449.663 million [10]).
In a context where people are dying of hunger and losing their jobs while a few become astronomically rich, it seems like a bad joke to continue debating whether wealth should be better distributed or wealth taxed. The proposal made by Argentine President Alberto Fernández before the United Nations General Assembly regarding the need to find a “vaccine against social injustice” [11] should be the focus today. leitmotiv for cooperation between nations. If the response of most world leaders is - as in the 2008 crisis - to give weak answers, or to find the enemy in immigrants, the lack of willingness of the most vulnerable to strive to get ahead, political, social and racial conflicts will increase. History is the teacher of politics, and social crises are a breeding ground for internal and international conflicts if solutions are not found that take into account the interests and needs of the entire community.
Inequality between states and large corporations
Since the 70s, the corporate and financial sector has increasingly possessed the capacity to influence states according to its interests. As we have described, the pandemic is requiring an enormous effort from already weakened and heavily indebted states, an effort that is not being matched by the contributions of large corporations. In the context of the crisis, many multinational companies are deciding to reduce their operations and withdraw from emerging markets, focusing instead on their most profitable businesses, or to divest their financial investments and relocate to developed countries that offer greater financial stability. This situation highlights that The market and large concentrated capital are globalized but are not capable of providing global solutions; they share in the profits but not in the losses..
States are bearing virtually all the costs of the crisis, but wealthier individuals and larger corporations are not participating in the recovery effort to the same extent.The post-World War II recovery was largely driven by the Marshall Plan, a major strategy for rebuilding Europe and revitalizing its economy. However, it also entailed a tax system that levied heavy taxes on wealth to finance these projects and strict capital controls to ensure that capital was reinvested in the country where it was generated. Today, it seems that capital is demanding a Marshall Plan to revive the global economy but is unwilling to contribute its share or make any sacrifices. This situation underscores the need to re-evaluate the rules governing international economics and finance.
[1] Bachelor's degree in International Relations and researcher at OCIPEx
[2] Jeff Bezos (Amazon); Bill Gates (Microsoft); Elon Musk (Tesla); Mark Zuckerberg (Facebook); Mukesh Ambani (Reliance Industries)
[3]https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/briefingnote/wcms_755910.pdf
[4]https://www.unido.org/sites/default/files/files/2020-09/World_manufacturing_production_2020_Q2.pdf
[6]https://fts.unocha.org/appeals/952/summary
[7]http://pubdocs.worldbank.org/en/461601591649316722/Projected-poverty-impacts-of-COVID-19.pdf
[8]https://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/documents/briefingnote/wcms_755910.pdf
[9]https://revistas.unc.edu.ar/index.php/astrolabio/article/view/29284
[10] https://datos.bancomundial.org/indicador/NY.GDP.MKTP.CD?locations=AR
If you would like to receive more information about CLACSO's training programs:
[widget id=”custom_html-57″]
to our email lists.
