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The immediate impact of the COVID-19 pandemic is likely to accelerate various forms of economic inequality in wealth and income.

Peace Science cannot ignore the recent erosion of liberal democracy across swathes of the developed and developing world in the past decade because of the potential for civil conflict emanating from these developments.

The world has been afflicted by the Covid-19 pandemic since late 2019 and this has had major impact on lives and livelihoods. The immediate impact of the COVID-19 pandemic is, therefore, likely to accelerate various forms of economic inequality in wealth and income. This is because the income of the poor was adversely affected most, both because of the already present trends in unskilled labour substitution, but also because the types of employment that the world’s poor engage in was severely disrupted by COVID-19, and the subsequent public health response.

Certain countervailing income and job protection schemes can help, but these are mainly a short-term palliative. Population weighted international inequality has also risen because China’s economy suffered less, and recovered faster, from the pandemic(2). During the onset of the pandemic, and before vaccines were developed, there appeared to be no livelihood-lives trade-off(3) as countries with more COVID-19 mortality suffered greater national income contractions.

Recent empirical evidence suggests that excessive inequality does not foster economic growth, and furthermore, increasing social protection does not crowd out private investment, so the traditional efficiency-equity trade-off in economics is no longer applicable(4).

In the final analysis, the growth in inequality over the last four decades poses a menacing challenge to liberal-democratic governance. There is a rising wave of autocracy, especially in developing countries, accompanied by a rise in ‘populism’ in the context of democratic electoral processes, chiefly, but not exclusively, in developed countries(5). All of this is occurring in the background of a highly globalised international economy, which helps to alter the domestic social contract in favour of the rich. The forces behind highly internationally mobile capital in a globalised context promote plutocratic policies and declining social protection in order to maintain international ‘competitiveness’.

Greater, and rising, inequality is the product of accelerating globalisation, and trade favours the highly skilled and owners of footloose capital. In the traditional Western democracies where the traditional working class, and in some instances even the lower-middle income groups have become pauperised and left bereft of hope, there is a political backlash resulting in a vacuum which seemingly only populists can fill.

Dani Rodrik(6) suggests that the rise in populism coincides with hyper-globalization. The vote share of populist parties since 2000 in selected European and Latin American nations has exceeded 10% (7). The mechanism that transforms increased globalisation into populist political success is the inequality that is produced by globalisation and its concomitant plutocratic economic policies.

Examples of recent populist victories include in the United States in 2016, in the UK in 2019 (along with Brexit referendum in 2016), Brazil in 2018 and in India in 2019. These populists are elected with nationalistic agendas, but do little to lessen inequality, while promoting illiberal and intolerant tendencies. This is the curious admixture of populism and plutocracy(8).

In recent times, liberalism and democracy have become strange bedfellows. Excessive inequality not only contains within it the seeds of conflict; it can also undermine the liberal aspects of democracy in settings where the electoral engine of democracy still appears to function as smoothly as ever. Also, a highly plutocratic system will ultimately make capitalism and democracy incompatible producing the mother and father of a great conflict to come.

FOOTNOTES

This blog draws upon Syed Mansoob MURSHED’s book chapter: Consequences of the Covid-19 Pandemic for Economic Inequality, in Elissaios Papyrakis (ed), Covid-19 and International Development, 59-70, Springer, October 2021.
(2)Deaton, Angus. 2021. “COVID- 19 and Global Inequality”. National Bureau of Economic Research (NBER) Working Paper 28392.
(3)Gans, Joshua. 2020. Economics in the Age of COVID-19. Cambridge MA.: MIT Press.
(4)Dabla-Norris, Era, Kalpana Kochkar, Nujin Suphaphiphat, Frantisek Ricka and Evridiki Tsounta. 2015. “Causes and Consequences of Income Inequality: A Global Perspective”. IMF Staff Discussion Note. See also Ostry, Jonathan, Andrew Berg and Charalambos Tsangarides. 2014. “Redistribution, Inequality and Growth”. IMF Staff Discussion Note.
(5)VDEM Report. 2021. Alizada, Nazifa Rowan Cole, Lisa Gastaldi, Sandra Grahn, Sebastian Hellmeier, Palina Kolvani, Jean Lachapelle, Anna Lührmann, Seraphine F. Maerz, Shreeya Pillai, and Staffan I. Lindberg. 2021. Autocratization Turns Viral. Democracy Report 2021. University of Gothenburg: V-Dem Institute, https://www.v-dem.net/en/publications/democracy-reports/, accessed 26th March 2021.
(6)Rodrik, Dani. 2018. “Populism and the Economics of Globalization”. Journal of International Business Policy, https://doi.org/10.1057/s42214-018-0001-4.
(7)Rodrik (2018), ibid. figure 1
(8)Pierson, Peter. 2017. “American Hybrid: Donald Trump and the Strange Merger of Populism and Plutocracy”. British Journal of Sociology 68 (S1): S105-S119.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Vision of Humanity.

AUTHOR

Prof. Syed Mansoob MURSHED

International Institute of Social Studies (ISS), Erasmus University of Rotterdam (EUR)

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