In this series of articles, The International explores the ways in which Covid-19 has changed the course of our planet’s history. In this first piece, our editor-in-chief Adam Bennett examines how the debate around inequality, a defining issue of the 21st century so far, has been reshaped by the pandemic.
“My savings were non-existent, and I needed to pay rent. Without furlough, it would have been grim”.
Along with some 6.3 million people in the UK, Eve F. has been a beneficiary of the government’s furlough scheme. The policy, variations of which have come into force across the world, has seen administrations free up vast sums of money in order to keep employees and businesses on their feet during lockdown.
Many governments have seen the issuing of a regular stipend (80% of an employee’s normal wage up to £2,000 per month in the UK) as part of the necessary cost of protecting economies throughout a turbulent period. However, whilst the costs are short-term, they are piling up and will continue to do so for as long as it takes countries to navigate a path out of their various lockdown measures.
It’s a path that, no matter which direction governments choose to follow, is fraught with risk. Any comparison between this pandemic and other sharp economic shocks shows that, in all likelihood, it will be the youngest and the poorest who are most adversely affected by any downturn. In instigating policies such as the furlough scheme, governments may hope they are protecting the most economically vulnerable. But will it be enough?
An Economic Illness
We are already seeing the ways in which Covid-19 is increasing existing levels of inequality. In the Western world, those who work invariably lower-paid jobs cram onto busy public transport, whilst the white-collar middle classes are more likely to shelter at home as they work remotely.
In poorer parts of the world, the impact is worse still. In India, those who work in lower-paid jobs in cities have lost their income altogether, and must now walk hundreds of kilometres to their families simply to find a home in which to isolate. The timings of lockdowns have also meant that much food which would normally have been harvested has been left unpicked and rotting in fields. In Sierra Leone, 60% of town-dwellers say they have eaten fewer meals than normal since lockdown began, according to a study from the Yale Research Initiative. There is a tranche of research to demonstrate the link between hunger, lower IQs, and increased poverty. The Covid-19 pandemic is doing much to exacerbate these problems.
Meanwhile, a report from the US-based Institute for Policy Studies showed that America’s billionaires had increased their cumulative wealth by US$282bn during the 23 days after lockdown began in the country (you can download the report for yourself here). That figure represents a total increase of around 10%. Symbolically, Amazon CEO Jeff Bezos is reportedly set to become the world’s first trillionaire at a time during which thirty million of his countrymen are filing for unemployment benefits.
A Time For Big Ideas
Despite all of the above, however, many economists are arguing that the future need not be set in stone. The pandemic, despite its damaging consequences, can still be an opportunity to remodel our economies in a more equal way.
In a long-read piece for The Correspondent, the economist and historian Rutger Bregman argues that history shows governments reach for radical answers when reacting to crises. The furlough schemes which are popping up around the world are evidence that this is already happening in response to Covid-19. The nobel-prize winning economist Milton Friedman argued in his legendary 1982 book ‘Capitalism and Freedom’ that:
“Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”
Milton Friedman, Capitalism and Freedom (1982)
Which begs the question – what ideas are lying around in 2020? For many economists, one attractive solution is a Universal Basic Income (UBI). Similar to the furlough schemes, the central idea of a UBI is that each citizen, no matter their economic circumstance, receives a set amount of money each month from the government. The money has no strings attached, and should be enough to cover most of the basic necessities needed to get by (rent, bills, etc).
The theory goes that whatever money the central government loses from a UBI would be offset by a higher tax intake, plus a removal of all the costs associated with poverty (more strain on healthcare and welfare benefits, to name two examples). In the past, UBI has been dismissed as a handout from the government which would discourage people from working harder for their money. However, supporters of UBI have argued that the widening chasm of inequality, which is accelerating due to Covid-19, has weakened the old assumption that those who receive the most money do so because they work hardest for it.
Additionally, there is little evidence to support the idea that receiving a monthly cheque from the government puts people off the idea of work. As Eve says of her furlough cheque, “it’s bought me time to look for a job I actually want, as opposed to one that is convenient. So most of my free time is spent furiously applying to new jobs”.
It’s an irony that the context of Friedman’s original quote was in support of revolutionary policies of deregulation. Some would argue that the rampant deregulation of the late 20th and early 21st centuries has led in no small part to the inequality we see today. It would perhaps be a poetic conclusion to see Friedman’s logic foreshadow the end of the economic era his ideas brought about.
Historic Decisions
No matter which direction they intend to turn, the decisions policymakers make in 2020 will likely define the 21st century. In terms of inequality, issues that governments have been able to paper over or ignore for years, such as low-paid and insecure work, have suddenly become unavoidable. If these systemic issues are not addressed during this time of crisis, it’s easy to imagine they never will be.
Ideas such as the furlough scheme show just how far governments can move in a crisis. The next few months will show whether that move is permanent, or merely a sticking plaster.
Adam Bennett is the editor-in-chief of The International. He can be found on Twitter here.
While you’re here,
Why not take a moment to subscribe to The International’s free monthly newsletter? It takes seconds to sign up, and you’ll stay up to date with the stories shaping our world at a pace that won’t overwhelm.