The super-wealthy won big as COVID-19 spread - here's how they can help alleviate the economic peril faced by most
A garbage collector rests at a demolished housing area in Shanghai January 7, 2007. Image: REUTERS/Aly Song (CHINA) - GM1DUIHQNVAA
- The world’s billionaires got significantly wealthier as the pandemic spread.
- This has raised concerns about money flowing to the well-heeled instead of to services for those hit hardest by COVID-19.
- It also points to broader potential implications for a sustainable reset of the global economy.
More than 16 million cases of COVID-19 were confirmed between April and July of this year, there were nearly 630,000 related deaths, and the world’s richest people got about $2 trillion richer.
Global billionaires managed to increase their collective wealth by 27.5% during the four-month period, to $10.2 trillion, according to a recent report.
News of the windfall for this elite club of roughly 2,000 members comes alongside indications of trillions of dollars in lost wages, and warnings that hundreds of millions of people will be pushed into extreme poverty this year as a result of the pandemic.
That dissonance has raised concerns about so much money finding its way into the portfolios of the already wealthy rather than funding services that could help the vulnerable during a crisis. It also points to broader potential implications for our ability to reset the global economy in a more just and sustainable way.
The report on how billionaires have fared identified 209 who publicly committed to donating a total of $7.2 billion to COVID-19 relief efforts between March and June. The report suggests billionaires have been giving in large amounts reminiscent of the early 20th century – a period of relatively high income inequality that spurred the establishment of federal income tax in the US. Some argue it would now be more constructive to raise taxes on the wealthy in order to fund pandemic relief efforts, rather than rely on donations.
Much of the financial gain for billionaires resulted from approaching the initial impact of the pandemic on asset prices – including sharp stock market declines – as an investment opportunity. As assets like stocks suddenly got much cheaper, the wealthy were able to accumulate significantly more of them before they regained value.
Most people do not have the same type of access to equity markets as the wealthy, who employ bankers and advisers to manage their money – if they have any access at all. In the US, for example, while the wealthiest 1% of the population owned $14 trillion in stocks as of the second quarter of this year, the bottom 50% owned just $160 billion in stocks.
Disparities like this have spurred calls from experts for a progressive wealth tax to fund a pandemic recovery. Because the wealthy have been more comfortably insulated from the crisis than others, the argument goes, it makes sense to tap into their considerable assets when they’re needed most.
For more context, here are links to further reading from the World Economic Forum’s Strategic Intelligence platform:
- The Black Death in the 14th century is an example of a pandemic that dramatically decreased wealth inequality, but this analysis argues that it was unique in that respect – and that inequality and poverty are likely to increase in the aftermath of COVID-19. (VoxEU)
- As the world continues to seek solutions to the pandemic, the presumption that “we are all in this together” is falling apart – as evidenced by its disproportionate impact on the poor in the UK, according to this analysis. (The Conversation)
- COVID-19 has likely accelerated the polarization of the US labour market as “middle-skill” jobs are replaced by entry-level, low-skill work, according to this report, and the use of artificial intelligence threatens to accentuate that divide. (Harvard Business Review)
- The participation of high-income countries is crucial for an effort spearheaded by the WHO to ensure global access to COVID-19 vaccines, according to this analysis – but the world’s two largest economies aren’t participating. (STAT)
- Developing countries raise about one-third as much from income taxes relative to GDP as high-income countries, and the ability of the wealthy in these places to move money offshore remains a constant frustration for authorities trying to stymie inequality, according to this analysis. (Brookings)
- Here’s a seemingly simple potential way to help address inequality in the US: build more bridges. According to a recent study, low-income neighbourhoods are likely to have fewer bridges connecting them to business centres and services. (Next City)
- Switzerland is something of a laboratory for studying the use of wealth taxes, according to this analysis – and they seem “leakier” there than in other places, due in part to comparatively lax enforcement. (VoxEU)
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