The COVID19 pandemic has surely been the most challenging and costly shock of the past few decades. For some, it was even the biggest shock of the post-Great Depression era. Global economic activity in 2020 went down by 3.3% – and even up to 10% declines for some including the UK. On the other hand, in today’s new post-pandemic era, it is of the uttermost importance that we have learnt from our experiences of 2020 and 2021.

Lockdowns and closures led to unprecedented supply and demand shocks, and further negative long-term effects on investment and expectations. Global lockdowns, factory and business closures, travel restrictions, and school and public service closures, all led to astronomical declines in economic activities. Supply chains were broken, production processes were stopped, and business closures and unemployment rates skyrocketed. Unemployment surge and rising inequalities followed. The poor, low-skilled, and vulnerable were impacted disproportionately by COVID19.

The most eye-catching effect of the pandemic was the increasing inequalities trend all over the world with quarantines and lockdowns contributing to the trend of the past decades. COVID19 widened the gap between the poor and the rich. Inequalities between nations and within nations have all risen. But, how exactly has the recent COVID19 pandemic widened the gap between the poor and the rich? And, what are the implications for the future?

Rising inequalities

The authors of the “World Inequality Report 2022” show that global income and wealth inequalities are at their highest levels since the peak of western imperialism at the beginning of the 20^th century. The COVID19 pandemic was, surely, one of the most significant factors behind this rising trend. (Figure 1)

Pandemic lockdowns and business closures have also affected skilled and unskilled labor, and high-income and lower-income jobs unevenly. The stimulus packages that followed also helped the rich non-symmetrically. Asset price increases, for instance, have added to the wealth of the already “overly rich.” (Figure 1)

According to Oxfam, a UK-based international NGO, the 10 richest people on earth have doubled their wealth, while the rest of the world and, in particular, 99% of humanity has been worse off during the pandemic. Global inequalities have overall increased twofold between 2019 and 2022.

Oxfam 2022 report shows that growing inequalities have even been a key factor in increasing mortality rates during the pandemic

Various reports, from the UN, the IMF, the OECD, and Oxfam as well as World Investment Reports (WIRs) on the World Inequality Database (WID) demonstrate that gender, income, wealth, and racial inequalities, as well as cross-country inequalities, are getting worse. Oxfam 2022 report shows that growing inequalities have even been a key factor in increasing mortality rates during the pandemic.

Policy implications

The need for more equitable and inclusive development and a more balanced distribution of income flow between land, labor, and capital is more evident today. There is an ever-greater need for re-organization of the roles and income flows amongst all production factors.

Meanwhile, the world is moving towards a new era where state capitalism is also more evident. Governments play a central role in new multinational corporations. In particular, the rise of China (and Asia broadly) with its own socialism and state capitalism is a new eye-catching case not to be missed. New measures are needed to ensure inclusive development. Social, psychological, human, and democratic capital accumulation processes and economic transformations remain as the challenges of this new era.

Expansionary policies and government interventions are deemed necessary during the financial turmoil and the following real economic crisis, in order to mitigate the real costs of a recessionary shock. Another noteworthy implication of the pandemic was that it led to this type of interventionist Keynesian policies and the ensuing public debt burden, as well as macroeconomic stability.

However, these expansionary monetary and fiscal policies implemented by the major world economies seem to have exacerbated income and wealth inequality. The World Bank estimates another 100-150 million people have been pushed into poverty. Oxfam estimates this number to be around 160 million people. These figures are proportionately much higher in the least developed countries (LDCs) and the Southern Hemisphere.

A new form of globalization also seems to be in order. While the new post-pandemic era has brought forth the need for more government influence and regulation, it has also resulted in a new and much more complicated form of globalization trend. The post-1980s liberalization and opening up has gained international economic, financial, and technological aspects, and globalization is no more solely a political issue.

However, this latest globalization trend has also brought cross-country dependency and spillover effects, which are self-evident in particular during crises and recessions. More synchronized negative impacts are therefore inevitable.

The way forward

The post-pandemic era is becoming well-known for an acceleration in the rise of the developing world. China and Asia are two particular examples here. Developing economies have increased their share in the global economy, since at least the global financial crisis of 2008. The COVID19 pandemic has expedited this process.

The pandemic has also shown that capitalism is dysfunctional when labor is inactive.

The pandemic has also shown that capitalism is dysfunctional when labor is inactive. There has since been more focus on income and wealth equality, the rise of states and their institutions, and public interventions. The social and human development aspects of the discussions, and the search for alternative ways of getting out of the crisis are more widespread today. Economic growth and development discussions have been less cost-efficiency related, with an emphasis on the need for fairer and more inclusive development that ensures the continuation of labor.

The pandemic’s implications for rethinking in economics, as a critical assessment of the retro-Keynesian and neoclassical schools of thought, is also noteworthy. The classical approach of a sole focus on high productivity in the long run and low inflation, and efficiency and markets acting as invisible hands have been proven incompetent, especially during recessions. The Keynesian public interventions to correct the markets, stabilizing economic activity on its trend growth, and the pure focus on maximum employment have also proven nonfunctional.

The story of South Africa’s anti-apartheid struggle is glorious, even romantic, that of its post-apartheid era, beginning with the country’s first democratic elections in April 1994, is less so. Less glorious, less romantic, more complex, more tragic.

The democratically-elected government, led by the African National Congress, inherited, in 1994, a state that had been designed to serve only one ‘racial’ group. State systems and institutions had been oriented in a well-thought-out system of racial capitalism that ensured that wealth and poverty were racialized. State policies contributed both to creating and protecting White wealth and to ensuring Black impoverishment.

Thus, the challenges facing a new government that hoped to ensure equal access to state resources by all citizens, including the almost-90 per cent politically and economically disenfranchised, were enormous, especially because it needed to be done in the context of a structural economic crisis caused partly by the global sanctions campaign against apartheid.

With this backdrop, many of South Africa’s post-apartheid achievements have been quite remarkable.

On a constitutional and legislative level, obviously-racist laws were repealed, and racism removed from most other laws. South Africa is often lauded for having one of the “most progressive constitutions” in the world, but the open, transparent and democratic process that led to its creation was also impressive.

And even though the ANC government rejected its social-democratic Reconstruction and Development Programme (RDP) in 1996 in favor of a more neoliberal approach, there are important achievements on the socio-economic front too. Millions of houses have been built for the poorest South Africans; from around one-third of the population having access to clean water in 1990, now more than 90 per cent does; and sanitation and electricity access have been extended to millions of additional households.

The social welfare net that already existed was improved, with the state increasing the amounts paid to citizens in pensions and social grants, and creating parity between the different ‘race’ groups. State-provided education and healthcare was made free, and facilities were desegregated. Much emphasis was placed on gender equality, with attempts to give effect to these provisions in the constitution, provide services to women (including those concerning gender-based violence), and so forth.

These worthy achievements do not, however, tell the full story of post-apartheid South Africa. South Africa’s negotiated settlement achieved a great deal in terms of the political liberation of the masses of its people, but, in many ways, its poor – mainly Black – citizens languish in ongoing economic subjugation. Even the socio-economic achievements mentioned above must be qualified.

A quarter of a century after South Africa’s first democratic elections, 10 per cent of the population owns 90 per cent of the country’s wealth, and the vast majority of that wealthy minority is Whites; by some estimates, 85 per cent of the country’s wealth remains in White hands.

This includes the serious (and very emotive) issue of land ownership/control. At the beginning of 1994, over 80 per cent of the land was in the hands of whites, much of this in massive white-owned farms. Land reform programs promised much, but, 26 years later, only 10 per cent of the total land has been redistributed from white to black ownership.

Land reform programs promised much, but, 26 years later, only 10% of the total land has been redistributed from white to black ownership.

The land reform program was part of a larger attempt at the redistribution of wealth; another was BEE (Black economic empowerment, later BBBEE – broad-based Black economic empowerment). In reality, BEE was geared not towards eliminating the impoverishment of Black people, but in transitioning some Black people into the capitalist class. To some extent, it succeeded; a small group of Black faces have joined the economic elite.

This has not economically empowered Black people broadly; it has helped increase inequality (making South Africa one of the most unequal societies in the world). One of its results is that the inequality gap within the African part of the population hugely increased.

Having dumped the RDP in 1996, the ANC government adopted elements of neoliberal economic policy, with the assistance of World Bank and IMF advisers. I say ‘elements’ because the state also maintained elements of welfarism, with a great deal of resources being directed towards pensions, child grants and so forth. These welfarist elements are extremely necessary in a country with an unemployment rate of over 40 per cent, but they are also useful as bribes to ensure repeated reelection of the ruling party.

That the welfare net is not intended or designed for fundamental transformation is highlighted by the poor delivery of various kinds of services – even in the ‘achievements’ mentioned above, and in persistent inequalities in service delivery. Inequalities, e.g., in the education and health sectors are stark, with richer citizens using private schools and health services while the rest suffer with inferior services.

While many rich children attend fancy schools that resemble those in rich European countries, children in some rural areas are still taught under trees; while sick rich people get private healthcare, patients in overcrowded public hospitals often sleep on floors.

The discriminatory service delivery also extends to areas such as policing, with police brutality a serious problem. During the 2020 Covid-19 lockdown, at least eight South Africans – all Black and all poor – were killed by police. And despite excellent legislation relating to GBV, it remains a huge problem, and police handling of GBV cases leaves much to be desired. All these services, thus, have levels of privilege, with White men at the top and African women at the bottom.

Despite the increase in clean water access across South Africa, this too is discriminatory and affected by neoliberal notions of commodification. Among the poorest South Africans, 80 per cent have no running water, and a higher proportion have no toilets.

A tragic illustration of the problem is the case of Empangeni on the country’s east coast. In August 2000, the area experienced a cholera outbreak directly related to the provision of clean water. Within a year, over 100,000 people across the country had been affected, and more than 200 had died. The epidemic began in the squatter settlement of Madlebe, where residents began to be charged for water that, under apartheid, had been provided gratis. Unable to afford the costs, they resorted to unpurified sources, resulting in the outbreak.