Once the global pandemic reached his city of Florence, one tax assessor noticed that it hit the rich and the poor differently.
People with money ignored the stay-at-home orders and fled to their places in the country, often for 14-day isolation stays in which they drank wine and had fun. Those on low incomes practised physical distancing, but lacked health care and could not always avoid the crowded streets; they died in huge numbers.
Once the curve flattened, though, it was clear that the rich were not better off. In the economic collapse that accompanied the disease, they lost income sources. Surviving workers were able to demand higher wages, and everyone knew the grotesque polarization of rich and poor could not be maintained. “It was perhaps inevitable that among the citizens who survived there arose certain customs that were quite contrary to established tradition.”
So wrote that tax assessor, Giovanni Boccaccio, seven centuries ago. His epic The Decameron chronicles those wealthy lockdown-breakers, and observes the eventual levelling effects of the Black Plague.
Among people who study economic inequality, Boccaccio’s stories form a template: Whenever catastrophes strike, they affect the rich and poor unequally, but their devastation usually causes inequality to decline, at least for a while.
Will it be different this time? Will the COVID-19 pandemic, which is ravaging countries that have spent a decade worrying about rising inequality, even the balance? Or will it make the rich still richer, while wrecking the lives of the vulnerable?
Contrary to what you might think, the less awful outcome might be one that produces a rise in inequality.
Economists and historians tend to agree that one of the most reliable ways to boost equality – at least in incomes – is a devastating event such as a major war, famine, depression or epidemic. It’s not the kind of equality anyone wants, though.
Stanford University economic historian Walter Scheidel made that abundantly clear in his influential 2017 book The Great Leveler: Violence and the History of Inequality. Those cataclysmic events, and the depressions they trigger, are “levelling events” because they destroy the incomes, productivity, consumer demand and often lives of lower- and middle-class people, and thus make it much harder for the rich to make money from their land and industries. Generally, when poverty rises fast, inequality falls.
That’s a cruel thing about inequality, as it’s conventionally measured by such things as the Gini coefficient. If people at the bottom see their annual incomes fall from, say, $500 to $300, they will be plunged into absolute poverty. But if the same event causes incomes of $600,000 to fall to $300,000, the result will be a decline in inequality – the second group have lost more than the first, even though they will still be in the top 1 per cent and those at the bottom will be dying.
We really don’t want that kind of equality, and we’re not seeing it – at least, not yet. Larger corporations have generally remained profitable, and stock markets are still buoyant. That’s partly because governments of well-off countries such as Canada are throwing hundreds of billions of dollars into bolstering their guaranteed-income programs and social safety nets. And the International Monetary Fund concluded this week that they can keep doing so for some time without having to resort to austerity afterwards.
But if the next months tip the world economy into an all-out depression, far worse than the modest 2008 downturn, and governments stop doing things to avoid that fate, then we’ll experience the wrong kind of equality.
Major cataclysms also have another kind of levelling effect, as economists such as Thomas Piketty and Dr. Scheidel have found. Such shocks make us do things “quite contrary to established tradition.” “No matter how you look at it," Dr. Scheidel said recently about the COVID-19 crisis, "if there’s a big shift after this, it’ll be in the direction of a more invasive and active role of the state and a more progressive taxation scheme on private and corporate incomes … because there has to be some balancing of these growing deficits.”
Those are the things that create lasting equality – more robust social programs, more aggressive taxation of high incomes, a more productive market economy.
Which form of equality, if any, will emerge from this crisis?
“I think it is very difficult to say now,” economist Branko Milanovic, a specialist on global inequality, told me. “I have seen some data that show a reduction due to large government outlays. But this cannot go forever. And lower-skill jobs are much more at risk. So ultimately, inequality may go up.”
That would be an unfortunate result. And we can take little solace in knowing it wouldn’t be the worst.
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