Tackling the impact of the Covid pandemic on the poverty paradigm

Published : 09 Feb 2021 08:33 PM | Updated : 09 Feb 2021 08:33 PM

The world has been watching carefully the  various aspects related to the growth of poverty and income disparity because of the Covid Pandemic. This came to the surface during the recent virtual meeting held in Davos of the World Economic Forum. States as well as well known international institutions like Oxfam, the United Kingdom-based charity, took this opportunity to highlight the severe situation that currently exists within the world socio-economic paradigm. Statements by many economists pointed out that COVID had worsened the already existing inequality as the rich became more affluent.

Oxfam has warned that unless governments take prompt action, the world’s poorest will not recover for more than a decade. Others have pointed out that it could take more than 10 years for the world’s poorest people to recover from the economic fallout of the ongoing pandemic.  This has led many to urge governments to act fast and “set concrete, time-bound targets to reduce inequality”. This sentiment has been reflected by Oxfam International’s comment that “the fight against inequality must be at the heart of economic rescue and recovery efforts”. This civil society institution has also indicated- “the top 1,000 billionaires, mainly White men, had recovered all the wealth they had lost … even while the real economy faced the deepest recession in a century.”

Oxfam’s survey carried out by 295 economists from 79 countries, found that 87 percent of respondents expected that income inequality in their country was either going to increase or strongly increase as a result of the pandemic. More than 50 percent of all respondents said gender inequality would likely or very likely increase; and more than two-thirds thought the same about racial inequality. Two-thirds of respondents also felt that their governments did not have a plan in place to combat inequality.

Since the meeting at Davos, socio-economists from other parts of the world have also remarked that the pandemic has particularly had severe effects on women, Black people, Afro-descendants, Indigenous Peoples, and historically marginalized and oppressed communities around the world. The pandemic appears to have also revealed that more than three billion people lack access to healthcare and that three-quarter of workers all over the developing world had no social protections such as unemployment benefit or sick pay. Consequently, in low- and lower-middle-income countries more than half of workers were facing connotations of poverty despite having jobs.

Reuters and other media agencies have also reported that in contrast, billionaires have globally saw their wealth increase by US Dollar 3.9 trillion between 18 March and 31 December 2020. Their total wealth now stands at US Dollar 1.95 trillion, which is equivalent to the amount governments in the largest 20 developed and developing nations, or G20, have spent in response to the pandemic. In this context reports on India have indicated that in that country billionaires have seen their wealth increase by 35 percent in the four months from April through July, 2020 even though the country was under a lockdown to prevent the spread of the coronavirus for most of that time. It may be added that a lot of the information put forward by Oxfam and others were based on data by Swiss bank UBS and consultancy firm PwC. It appears that the world’s 10 richest billionaires have collectively seen their wealth increase by US Dollar 540bn over this period.

The other side of the coin has however noted that the pandemic saw hundreds of millions of people lose their jobs and face destitution and hunger. That “shock” is set to reverse the decline in global poverty that had been achieved in the past 20 years. It is being presumed that in the past year the total number of people living in poverty is likely to have increased by between 200 million and 500 million. This figure has however not been agreed upon conclusively.

The above details have led to one simple consensus- while an increase in inequality is almost certain; the extent of that increase and how quickly it can be reversed will depend on what actions governments take. All of us have to understand that the pandemic has marked a pivotal point which has exposed economic disparities and built support for transformative policies. 

Virtual discussions across the world have also underlined that governments need to set concrete, time-bound targets to reduce inequality, and not allow the horizon to simply return to pre-crisis levels. This could include investing in free universal healthcare, education, care and other public services. The Bangladesh government, also suffering from the dire effects of the pandemic has set an example through its economic support for the affected population. It has also continued its yearly gift of free text books in print to school students. This was specially welcomed by them as they have been forced to stay at home and continue their learning through virtual education. This time it was nearly 38 million books in print.

The economic consequences of the pandemic have also cast a shadow on the international community’s path towards achieving the Sustainable Development Goals (SDGs) set in the United Nations’ 2030 Agenda. In this regard, the pandemic has heightened the importance of “genuine” international cooperation. This is important as statistics have shown that there has been a huge gap between pledges of countries and their actions when it comes to foreign assistance.

It may be recalled that in 1970, the UN General Assembly adopted an ambitious strategy which called for each economically highly developed country to progressively increase its “official development assistance (ODA)” to developing countries to a minimum level of 0.7 percent of its gross national product (GNP) by 1975. However, in the subsequent years, only a few members of the Development Assistance Committee (DAC) at the Organisation for Economic Co-operation and Development (OECD) were able to reach this target. Sweden and the Netherlands met the target in 1975, followed by Norway and Denmark. Luxembourg and the United Kingdom joined this group in 2000 and 2013, respectively, but no other OECD-DAC country has since met this target consistently. It may be noted that in 2019, only five Development Assistance Committee members met or exceeded the 0.7 percent threshold: the UK (0.7 percent), Denmark (0.71 percent), Sweden (0.99 percent), Norway (1.02 percent), and Luxembourg (1.05 percent). These statistics clearly demonstrate the frustrating situation that a majority of high-income countries have ignored or only partly lived up to their commitments on development cooperation so far.

Today, the unacceptable consequences related to the pandemic is clearly underlining that developed countries have a responsibility to immediately start making good on their decades-old pledge.

However, we need to be careful while reviewing the facets related to the matrix of foreign aid and its disbursement principles. Economists and strategists have reiterated that a good plan in this regard will require a careful design with a multifactorial approach, including the proper identification of decision-makers and beneficiaries, as well as goals and the type of intended cooperation. Civil society has also drawn attention that if stake-holders are to succeed in this regard it will need to be calibrated on the basis of humanitarian principles and genuine statistics. A good design will also require implementation of an efficient delivery system within this matrix. It also needs to be understood that for required success pertaining to the foreign aid, there has to be transparency in the delivery mechanism without unnecessary bureaucratic delays. This will facilitate the required factor of accountability.

Consequently, if the world wants to achieve the SDGs set in the UN’s 2030 Agenda, it needs to act, and act fast. Donor countries have to realize that they have a serious responsibility to live up to their developmental aid commitments and engage in effective development cooperation. The pandemic, and the suffering it has already caused and will continue to cause, should serve as a striking reminder of the paramount necessity for a new international development cooperation architecture that is just, effective and functional.

While we shall all carefully monitor wider and more diversified development cooperation, we shall also carefully watch what measures the new US Biden Administration will undertake not only with regard to removing and reducing the socio-economic effects of the pandemic within the USA but also what actions they will take with regard to the rest of the world.

We have followed with care the economic rescue mission that has been courageously undertaken by President Biden after entering the White House. His "America Rescue Plan" – consists of a US Dollar1.9 trillion  effort to fund universal vaccination and more coronavirus testing, and provide funds for households, business and lower levels of government. More than half of the figure is earmarked for direct financial relief for families, including US Dollar1,400 stimulus cheques for most households, as well as significantly increasing and extending unemployment benefits for millions of jobless Americans. The plan also includes raising the federal minimum wage for workers to US Dollar 15 an hour and childcare funding. This massive effort is likely to revive the US economy which shrank by an estimated 4% in 2020. This is indeed a big step. One hopes that the measures that will be adopted will be successful.

At the same time, the developing world, including the least developed countries will watch what the United States Administration will do in terms of global engagement for reducing the impact of the pandemic and consequent rise of poverty. Many will be greatly encouraged if the new US Administration provides financial support for these countries to not only obtain greater healthcare (that could be obtained through vaccination) but also re-create new employment opportunities for their ravaged economies.

Muhammad Zamir, a former Ambassador, is an analyst specialized in foreign affairs, right to information and good governance.