HomeBusiness DigestDynamics of inequality in new world economic order

Dynamics of inequality in new world economic order

Nyasha Mandeya :ECONOMIST

Public policy formulation is currently ceased with tackling glaring inequalities at a global level, in response to the more daunting redistributive task at hand, considering the projected end of the Covid-19 pandemic.

This presents the need for a rescue strategy from the most traumatic global economic catastrophe since the Great Depression, in a global economy long cleaved by profound disparities in wealth, education and access to vital elements like clean water, electricity and the internet.

Inequality explains the differences among people in their command over available resources. Generally, economists are concerned specifically with the monetarily-measurable dimension related to individual or household income and consumption.

However, this is just one perspective, as inequality can be linked to inequality in skills, education, opportunities, happiness, health, life expectancy, welfare, assets and social mobility. The relationship between inequality and the development process has long been of interest and in this instance, we focus on health aspects.

Living a long and healthy life is among the most highly-valued and universal human goals, as enshrined in the 2030 Sustainable Development Goals, which aim to ensure healthy lives and promote well-being at all ages.

The linkage between social, economic rights and political freedom starts from the perception that Franklin Roosevelt put in 1944 as, “true individual freedom cannot exist without economic security and independence . . . Necessitous men are not free men”.

The United Nations Universal Declaration of Human Rights is based on this perception. Therefore, increasing inequality at the bottom, growing income gaps between the middle class and the poor, can also be seen as a human rights issue, because the denial of social and economic rights implies deprivation of the functional freedoms which those rights entail.

Ostensibly, Sustainable Development Goal number 10, which entails “reducing inequality and ensuring that no one is left behind”, comes to the fore, as the intended distribution of vaccines is marred by the inequality, increasing nearly everywhere in recent decades, but at different speeds.

It is lowest in Europe and highest in the Middle East, with the richest 10% having up to 40% of global income whereas the poorest 10% earn only between 2% to 7%. Such widening disparities require sound policies to empower lower income earners, and promote economic inclusion and more importantly, access to the Covid-19 vaccine by of all regardless of sex, race or ethnicity.

What makes the task of the economist daunting are societal norms, the morality behind the deepening inequalities, whereby politicians, being custodians of public policy, are driven by the wealthiest in society.

The rich exert a lot of influence among politicians, as they offer donations and fund political campaigns, among other incentives. As such, the rich are likely not to favour any increases in taxes which are detrimental to the smooth functioning of public policy, thereby reducing expenditure on public health on which the poor depend on.

Therefore, high income disparities result in further disparities in health outcomes between the rich and the poor. Ultimately the poor die prematurely, thereby increasing mortality inequality.

Inequality is a broader concept than poverty in that it is defined over the entire population, and does not only focus on the poor, as we witness global inequality reaching far beyond academia, as countries are battling under siege from the Covid-19 pandemic, with emerging data from World Bank showing over 78 million cases and 1,7 million deaths.

Furthermore, the pandemic has also sparked fears of an impending economic crisis and recession.

Social distancing, self-isolation and travel restrictions have led to a reduced workforce across all economic sectors and caused many jobs to be lost. Schools have closed down, and the need for commodities and manufactured products has decreased.

In contrast, the need for medical supplies has significantly increased. This has the potential to reignite the threat of HIV, which has been gravest in the sub-Saharan Africa region, where in 2018, an estimated 25,7 million people were living with HIV, of whom 16,4 million were taking antiretroviral therapy.

The number of deaths from Aids-related illness in sub –Saharan Africa could double if the provision of health care to HIV patience is disrupted during the Corona virus crisis (UN, 2020), leading to more than
500 000 extra deaths in the region by 2020-21(WHO and UN, 2020).

There is a need to identify ways to sustain all vital health services as any knock on effects such as the interruption in supply chains or healthcare services being overwhelmed due to the Covid-19 pandemic, could be catastrophic for affected populations.

It is feared that this could turn back the clock to 2008 when more than 950 000 Aids-related deaths were recorded in the region. Another salient aspect of this tragedy is its relative effect on women as more women than men have died of Aids in South Africa (United Nations Integrated Regional Information Networks, 2002).

It is said that in the 15 to 29 age group, HIV/Aids deaths among females was about three times higher than among males (Gregson, Garnett, and Anderson, 1994).

This is attributable to the general tendency for female partners to be younger than their male counterparts, implying that the increased mortality rates from HIV affects women at younger ages than it does for men.

The food sector is also facing increased demand due to panic-buying and stockpiling of food products in response to emergency measures in the fight against Covid-19 pandemic. Developing countries like Zimbabwe are already faced with a myriad of problems in this regard, requiring the fieldwork of the economist.

The United Nations World Food Programme (WFP) recently appealed for an additional US$204 million to support four million of the most food insecure Zimbabweans for the next six months, to allow WFP to provide the minimum amount of emergency food assistance to the most vulnerable 3,5 million rural and 550 000 urban citizens.

The equally vulnerable in Zimbabwe are also under the imminent attack from Cyclone Chalane, expected to strike hardest in Chimanimani and Chipinge and the southern eastern parts such as Bikita, Rusape and other areas in Manicaland.

In response to the Covid-19 pandemic, a global initiative has been set in motion by international aid organisations, philanthropists and wealthy nations who have coalesced around the noble undertaking to ensure that all countries are equipped with the tools needed to fight the pandemic.

These include protective gear for medical teams, appropriate test kits, therapeutics and vaccines. However, there has been grossly insufficient funding to back these assurances, with the most prominent initiative between the World Health Organisation and the Bill and Melinda Gates Foundation (Act-Accelerator Partnership), sourcing close to $5 billion far from the targeted $US38 billion.

There hurdle is how this pittance will be apportioned in a world with such gross inequality.

Meanwhile the rich nations in the Organisation of Economic Cooperation grouping have fortified the bulk of limited stocks of vaccines, positioning themselves for starkly improved economic fortunes.

In sharp contrast, developing countries which are home to most of humanity, are left to fend for their own doses. This is despite the understanding that vaccines need to be seen as a global good. Surprisingly, the provision remains largely under control of large pharmaceutical companies in the advanced economies.

The skewed distribution of vaccines appears certain to worsen a defining economic reality, separating countries with access to vaccines and those without, shaping a new world order of new highs of inequality never seen before. The pandemic will unleash more deaths and destruction of livelihood on ethnic minorities, women and lower-income households.

Meanwhile, poor countries will continue to be ravaged by the pandemic, forcing them to expend meagre resources that are already stretched by growing debts to lenders in the United States, Europe and China.

The unprecedented levels of inequality in the new world order will give birth to a society sharply divided between winners and losers. As such, some of those losers are going to conclude that the game is rigged and that it is not in their interest to play by the rules.

Income differences create an incentive for those relatively poor to steal from richer households. The links between inequality and violent crime are found both within countries and between them. The implication is that high levels of inequality create a permanent underclass forced to compete, sometimes violently, either with itself or with other classes for scarce resources.

South Africa, which is one of the most unequal societies has a notably high rate of murders, assaults and other crimes compared to other countries. Zimbabwe has also witnessed an increase in violent gun crime in 2020 as the gap between the rich and poor widens.

In light of the imminent dangers of inequality, this calls for prioritisation of Sustainable Development Goal number 10 by policymakers and for economists to complement such efforts with the pragmatic approach of the plumber through more fieldwork experiments.

Field experiments have been used successfully by Nobel Prize Winner, Esther Duflo, and designed to shed light on core issues in economics, such as the role of incentives or social learning in the fight against inequality. This approach goes beyond textbook definitions and classical assumptions and could be used in the quest to reduce inequalities arising from the Covid19 pandemic. Markets alone will not be able to reduce inequalities. Governments need to pay the philanthropy price if we are to succeed in eradicating inequality.

Mandeya is a Zimbabwean economist currently based in Canada. These weekly New Horizon articles are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society and past president of the Institute of Chartered Secretaries and Administrators in Zimbabwe. Email: kadenge.zes@gmail.com/ Cell: +263 772 382 852

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