Age of deadly disparities: no easy way out

Some losses can never be recovered. Some gaps will not be bridged ever.

The unbeaten Covid-19 continues to wreak havoc on life, income, time and work worldwide. Nobody knows when it will stop, or whether it will ever go away.

The world struggled to cope with the "new normal". The next fight will be to survive the near future, being dubbed as "next normal". Strategists worldwide are groping in the dark to predict what the days after the Covid-19 pandemic will look like.

How long will people be asked to wear masks and keep social distance?

Will they still do shopping, meeting, learning and seeing doctors online?

Will many jobs disappear?

Surveys and forecasts point to a tougher future for most people as the Covid-19 pandemic widened disparities among countries and within themselves.

Jayati Ghosh, professor of economics at the University of Massachusetts Amherst, terms the future as an age of deadly disparities.

High public spending, income support and opportunistic vaccine grabs by rich countries will give people there some respite, while people in poor countries face fiscal austerity and public spending cuts. "The resulting job losses, worsening livelihoods, hunger, and reduced access to crucial public services could lead to a lost generation across much of the developing world," Prof Ghosh warns in a Foreign Policy article.

Lost earnings, lost learnings can never be regained in full. Lost lives and lost hours can never be compensated. Life will go on and the world will recover of sorts. But the pace will not be the same for all.

If vaccination is a driving force for recovery, then many countries will fall behind others. When the USA and Europe will complete mass vaccination drives, most countries in Asia and Africa may still be nowhere near full vaccination and will have to wait for the virus to disappear or weaken itself.

"We are the 99%" was a popular slogan coined during the Occupy Wall Street movement in 2011. It referred to income and wealth inequality in the American society, claiming that the ratio of top-earners and low-earners is 1:99.

Covid-19 surely has had a further impact on the scenario. But the US government spent a quarter of its GDP to help individuals offset some of their income losses. European and other rich nations have strong social security schemes to support their people.

But the pandemic has laid bare the pre-existing gaps in social protection provisions even in advanced economies grouped in the Organisation for Economic Co-operation and Development (OECD).

Though short-time work schemes and unemployment benefits helped to sustain the incomes of many, some workers with non-standard jobs missed out. The situation is worse in countries with large informal sectors where growing numbers of people lose work without any access to income.

Bangladesh's informal sector is the biggest employer, which has missed out too.

Is there any way out?

The UN Department of Economic and Social Affairs (UNDESA) says yes, but there is no shortcut.

The Covid-19 crisis could result in increasing levels of poverty and inequality with impacts lasting for years, even generations. But the new policy brief finds that with proper responses, these ever-widening inequalities are not inevitable, it says in a policy brief.

However, an insufficient response to the crisis and its economic and social impacts will likely deepen inequality, intensifying public discontent and weakening trust in institutions, it warns.

There are debates worldwide about the economic models being practised over the decades. Will true liberalism of Adam Smith, Mary Wollstonecraft, and John Stuart Mill, which liberated and dignified the poor men, still work, Deirdre Nansen McCloskey, distinguished professor emerita at the University of Illinois at Chicago, poses the question.

Will the current public spending spree, which have gone even beyond the government stimulus formula of economist John Maynard Keynes, help?

What else will the countries with limited resources do?

Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, asks: Should those governments let nature run its course?

French economist Thomas Piketty and his colleagues investigate how much redistribution policies account for long-run changes in inequality. In a research paper in November last year, they revealed that redistribution helped reduce inequality significantly in France and the US, but pre-tax income inequality appears to be the main factor. They suggest that research and policy discussions should, in the future, focus on pre-distribution as much as on redistribution.

Economist Professor Mustafizur Rahman from Bangladesh also believes redistributive policy – raising higher tax from high-earning people and spending that for public good – can be a major way to reduce inequality.

Fiscal policy needs to shift from indirect tax to direct tax and allocate more for redistributive schemes like universal pension, universal health insurance and social safety-net, he suggests.

There should be a wage support programme to help workers improve their skills and productivity for decent jobs with higher pay. "We have a very low wage-GDP ratio, which has been on the decline. This must go up," says Prof Mustafizur, also a distinguished fellow of the Centre for Policy Dialogue (CPD).

Some initiative should be there from the central bank to reduce loan woes of CMSEs, which employ most of the workforce. "They cannot afford to give collateral for loans. Their cash flow should be considered for lending them money," the economist says, giving his thoughts on how to help informal sector workers and self-employed people to return to their jobs and incomes.

For immigrant labourers, the per head migration cost is Tk4 lakh on average, which is equal to 18 months' pay and a migration worker needs three to four years just to repay the loans he took before flying. "It could be a big help for them if they were given bank loans against their future incomes abroad."

Thus, a range of measures – from sectoral approach to macroeconomic management to fiscal policy and monetary tools – can help tame income and social inequalities. "Gini coefficient continued a steady rise. In the latest count of the Bangladesh Bureau of Statistics, it was 0.48. One of our survey findings during Covid-19 pandemic suggest it might go up to 0.52, posing a bigger challenge ahead for us," says Prof Mustafizur.

Covid-19 has created disparities in access to education and health services too, requiring more investment in those areas to reduce future disparity, he feels.

When the government reduces its presence and allows the market to decide, then health service costs go up and spiral out of the reach of the poor, says health economist Dr Shafiun Nahin Shimul.

"Bangladesh has one of the world's best health infrastructure down to upazila and union, but the service is among the worst. Health insurance alone will not help if the health system is not improved," feels Dr Shimul, assistant professor at the Institute of Health Economics of Dhaka University.

Education divide is wide

Students have missed their classrooms for 15 months now, and the pandemic exposed how big the divide is in education in access to digital devices – the only means for online learning.

In education, there is a huge inequality in opportunity; a wide gap between rural and urban, even between income groups in villages and towns, economist Dr Kazi Iqbal points out. Until and unless we can ensure equal opportunity for all and improve quality in education, the disparity will keep growing. "Focus should be reversed, quality should be ensured at the grassroots, in primary level first," stresses Dr Iqbal, senior research fellow at the Bangladesh Institute of Development Studies (Bids).