Govts across globe fueled inequality during covid: Study

Governments around the world "fueled an explosion of inequality" with their spending and tax policies during the Covid-19 pandemic that erupted in early 2020, according to new research.

Analysis by nonprofits Oxfam and Development Finance International found that "our index shows that most governments have not taken the necessary steps to counteract the explosion of inequalities generated by the pandemic."

Inequality during covid

The research, published Tuesday, comes as policymakers grapple with the fallout from the pandemic, the war in Ukraine and climate change, which together have fueled inflation and raised the spectre of recession.

“They cut off public services when they were needed most and instead allowed billionaires and big business to pocket record profits,” added Gabriela Bucher, executive director of Oxfam International.

The "Index of Commitment to the Reduction of Inequality 2022", or CRI Index, was prepared together with the development finance management group DFI (Development Finance International), and analyzed the policies and measures applied by 161 countries during the two early years of the pandemic.

Almost half (77) of the countries studied reduced their spending on social protection, and 70% cut the budget allocated to education.

Half of the low- and lower-middle-income countries reduced their health spending, despite experiencing the biggest public health crisis of the last century.

Despite an unprecedented rise in poverty and workers facing increases in food and energy prices not seen in decades, two-thirds of countries have failed to match their minimum wage with economic growth.

And despite the enormous pressure on their public finances, 143 countries froze taxes on their wealthiest people, and 11 countries even reduced them.

Higher food and energy prices

Meanwhile, the world's poorest are disproportionately exposed to higher food and energy prices. More than 250 million more people could fall into extreme levels of poverty this year, a separate Oxfam research found.

Rising interest rates are exacerbating the situation by eating up the budgets of low- and middle-income countries; in 2021 they spent four times more on paying off their debt than on health care.

Meanwhile, 96% of countries surveyed froze or cut taxes on the wealthy, despite extreme gains in their wealth during the pandemic, the research shows.

The report showed that in 2021 low-income countries devoted 27.5% of their budgets to debt service, which is equivalent to twice their spending on education, four times their spending on health and almost 12 times their spending on social protection.

Crisis of global inequality

Matthew Martin, director of DFI, stated that “it is perfectly possible and common sense to avoid increasing inequalities. Inequality is a political choice; governments must stop putting the richest before the rest of the population”.

Oxfam and DFI believe that the crisis of global inequality, within and between countries, already burdened by the pandemic, is exacerbated by high levels of inflation and made worse by the impact of the war in Ukraine, especially rising prices of food.

The global cost-of-living crisis pushed 71 million people into poverty between March and June this year alone, against the backdrop that 828 million people are hungry, 150 million more than before the pandemic, according to Oxfam.

pandemic increased gender-based violence

Another aspect of the crisis is that the pandemic increased women's economic vulnerabilities and gender-based violence, and reversed decades of progress on gender parity, even though women have been at the forefront of responses to covid.

The informal and hospitality sectors were severely affected by the pandemic, resulting in loss of income and livelihoods for women. In 2020 alone, it is estimated that women lost around $800 billion in income.

The analysis ends with a criticism of the International Monetary Fund (IMF) insistence that new austerity measures be adopted to reduce debt and budget deficits

Three-quarters of the countries in the world foresee new cuts in their budgets in the next five years, worth 7.8 trillion (millions of millions) of dollars, according to IMF data considered in the CRI Index.

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