Social Europe

politics, economy and employment & labour

  • Themes
    • Global cities
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter
  • Membership

The problem with the Covid convergence

Pinelopi Koujianou Goldberg 3rd February 2021

A surprising global trend in the pandemic is reduced inequality across countries—but the convergence reflects losses at the top, not gains at the bottom.

Covid convergence,reduced inequality
Pinelopi Koujianou Goldberg

There is broad agreement that the Covid-19 pandemic has exacerbated inequality within countries. Less frequently noted is the impact on inequality across countries, which has been moving in the opposite direction, owing to the disproportionate effect that the virus has had on advanced economies.

Early in the pandemic, many expected that poorer countries would be hit much harder than rich countries. In a May 2020 poll of the Initiative on Global Markets’ Economic Experts Panel, a majority agreed that the ‘economic damage from the virus and lockdowns will ultimately fall disproportionately hard on low- and middle-income countries’. And policy-makers held a similar view, with the International Monetary Fund managing director, Kristalina Georgieva, noting in April that ‘just as the health crisis hits vulnerable people hardest, the economic crisis hits vulnerable countries hardest’.

The assumption was that low- and middle-income countries would suffer from a lack of public-health capacity and fiscal resources. But the data tell a different story. In a June 2020 paper, the World Bank’s Tristan Reed and I found that cumulative Covid-19 deaths per million people were substantially higher in high-income than in middle-income and low-income countries, even when excluding China. Moreover, the trajectories of the pandemic were remarkably different across countries at different income levels.

As we showed in an update in December, this pattern has persisted: there is a strong positive correlation between income per capita and deaths per million. And though it might be tempting to attribute this finding to a measurement error (deaths may be reported less accurately in poorer countries), the magnitude of the differences is simply too large to ignore. For example, recent data show that, as of January 28th, there were 1,323 deaths per million people in the United States and 1,496 deaths per million in the United Kingdom, compared with 712 in South Africa (the hardest-hit country in Africa), 111 in India, 107 in Indonesia, 14 in Angola, and seven in Nigeria. Meanwhile, many of the upper middle-income countries in Latin America have exhibited mortality patterns similar to those documented in Europe and the US.


Become part of our Community of Thought Leaders


Get fresh perspectives delivered straight to your inbox. Sign up for our newsletter to receive thought-provoking opinion articles and expert analysis on the most pressing political, economic and social issues of our time. Join our community of engaged readers and be a part of the conversation.

Sign up here

Unexpected pattern

We do not yet have a full explanation for this unexpected pattern. Preliminary evidence suggests that many low-income countries may have benefited from demographic factors (younger populations, lower obesity rates) and trained immunity (in which the innate immune system reprogrammes itself against a disease). But even more surprising is the unanticipated ‘advantage’ that poorer countries have demonstrated on the economic front.

As a new paper by the Nobel laureate economist Angus Deaton shows, global inequality has declined as a result of the pandemic—at least in the short run. During the past year, income per capita fell by more in richer countries than it did in poorer countries, resulting in an unexpected ‘convergence’ between rich and poor. More deaths per million means not just lost lives but also greater income losses.

Equally important, this pattern is not driven by China. On the contrary, while a population-weighted measure would suggest that global inequality has increased slightly—because China (which is no longer a poor country) pulled ahead of others last year—a population-unweighted measure that excludes China reveals a marked decline in global inequality.

Reduced inequality is usually a welcome development, at least in settings characterised by vast disparities in living standards across countries at different stages of development. And yet the Covid-19 experience serves as a sombre reminder that the ‘how’ matters as much as the ‘what’. In this case, global inequality declined not because poorer countries became richer but because richer countries became poorer.

Disturbing implications

This form of convergence has disturbing policy implications. While low- and lower middle-income countries have fared well in relative terms, their outlook is increasingly bleak in absolute terms. Many now face rising debt, slower growth, declining revenue from commodity exports and tourism and diminishing remittances.

Moreover, we have yet to see the long-term consequences of a lost year of income and investment in human capital. Millions of children (especially girls) have missed a year of school, just as millions of women have been deprived of maternal health care and millions more people have been plunged back into poverty.

Making matters worse, the nature of this unexpected convergence implies that advanced economies will have little appetite to channel resources toward poorer countries, whether in the form of direct aid, openness to international trade and investment or debt forgiveness. Preoccupied with rising inequality at home, high-income countries will continue to turn inwards, prioritising their own citizens’ needs over those of the global poor.

The retreat by the US and Europe from the developing world will create an opening for others, not least China, which has already returned to growth. If gaining access to lucrative western markets becomes untenable as a result of rising protectionist sentiment, China-centric alternative initiatives, such as the recently signed Regional Comprehensive Economic Partnership, may become increasingly attractive to developing and emerging economies.


Support Progressive Ideas: Become a Social Europe Member!


Support independent publishing and progressive ideas by becoming a Social Europe member for less than 5 Euro per month. You can help us create more high-quality articles, podcasts and videos that challenge conventional thinking and foster a more informed and democratic society. Join us in our mission - your support makes all the difference!

Become a Social Europe Member

Robust institutions

On a more positive note, low interest rates in the US and Europe may lead to a ‘hunt for yield’, driving capital flows into developing countries. But, if so, these economies will need robust institutions and thoughtful policy to ensure that capital inflows foster widely shared growth and poverty reduction, rather than merely enriching a small upper class.

Most important, all countries will need to continue investing in their human capital and improving their domestic institutions, resource scarcities notwithstanding. Many improvements are a matter of will rather than budget. For example, strengthening schools is often a matter of ensuring that teachers show up in the classroom and that students have access to appropriate textbooks.

Efficient use of available resources and effective implementation will be more important than ever. With the rich getting poorer, the poor must take matters into their own hands.

Republication forbidden—copyright Project Syndicate 2021, ‘The problem with the Covid convergence’

Pinelopi Koujianou Goldberg

Pinelopi Koujianou Goldberg, a former World Bank Group chief economist and editor-in-chief of the American Economic Review, is professor of economics at Yale University.

You are here: Home / Economy / The problem with the Covid convergence

Most Popular Posts

Ukraine,fatigue Ukraine’s cause: momentum is diminishingStefan Wolff and Tetyana Malyarenko
Russia,information war Russia is winning the information warAiste Merfeldaite
Nanterre,police Nanterre and the suburbs: the lid comes offJoseph Downing
Russia,nuclear Russia’s dangerous nuclear consensusAna Palacio
Belarus,Lithuania A tale of two countries: Belarus and LithuaniaThorvaldur Gylfason and Eduard Hochreiter

Most Recent Posts

G7,BRICS,China,Russia G7 versus the BRICS: taking stock in 12 figuresThorvaldur Gylfason
solar energy,photovoltaic,Europe,EU,PV Powering up: the EU and solar energyFrancesco Crespi, Dario Guarascio, Serenella Caravella and Giacomo Cucignatto
Nagorno-Karabakh Nagorno-Karabakh: it’s not over yetSvante Lundgren
Sweden,climate,green Sweden’s climate policy—off the railsLisa Pelling
Biden,Detroit,UAW,strike Detroit, Joe Biden and a union renaissancePaul Knott

Other Social Europe Publications

strategic autonomy Strategic autonomy
Bildschirmfoto 2023 05 08 um 21.36.25 scaled 1 RE No. 13: Failed Market Approaches to Long-Term Care
front cover Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship

Eurofound advertisement

Eurofound Talks: does Europe have the skills it needs for a changing economy?

In this episode of the Eurofound Talks podcast, Mary McCaughey speaks with Eurofound’s research manager, Tina Weber, its senior research manager, Gijs van Houten, and Giovanni Russo, senior expert at CEDEFOP (The European Centre for the Development of Vocational Training), about Europe’s skills challenges and what can be done to help workers and businesses adapt to future skills demands.

Listen where you get your podcasts, or for free, by clicking on the link below


LISTEN HERE

Foundation for European Progressive Studies Advertisement

The summer issue of the Progressive Post magazine by FEPS is out!

The Special Coverage of this new edition is dedicated to the importance of biodiversity, not only as a good in itself but also for the very existence of humankind. We need a paradigm change in the mostly utilitarian relation humans have with nature.

In this issue, we also look at the hazards of unregulated artificial intelligence, explore the shortcomings of the EU's approach to migration and asylum management, and analyse the social downside of the EU's current ethnically-focused Roma policy.


DOWNLOAD HERE

Hans Böckler Stiftung Advertisement

WSI European Collective Bargaining Report 2022 / 2023

With real wages falling by 4 per cent in 2022, workers in the European Union suffered an unprecedented loss in purchasing power. The reason for this was the rapid increase in consumer prices, behind which nominal wage growth fell significantly. Meanwhile, inflation is no longer driven by energy import prices, but by domestic factors. The increased profit margins of companies are a major reason for persistent inflation. In this difficult environment, trade unions are faced with the challenge of securing real wages—and companies have the responsibility of making their contribution to returning to the path of political stability by reducing excess profits.


DOWNLOAD HERE

ETUI advertisement

The future of remote work

The 12 chapters collected in this volume provide a multidisciplinary perspective on the impact and the future trajectories of remote work, from the nexus between the location from where work is performed and how it is performed to how remote locations may affect the way work is managed and organised, as well as the applicability of existing legislation. Additional questions concern remote work’s environmental and social impact and the rapidly changing nature of the relationship between work and life.


AVAILABLE HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube