In its report The Inequality Virus,1 the charity Oxfam highlighted one of the most startling figures of the Covid-19 pandemic so far: US$500bn. This is the amount by which the world’s 10 richest men added to their wealth from April to December 2020. Read that again: Added to their wealth! In an effort to put a scale against this figure for us non-billionaires, Oxfam says this amount would be enough to vaccinate everyone on the planet against Covid-19 and to ensure that nobody ended up worse off due to the outbreak.
So where did this money come from? Well, you don’t need to look beyond the cardboard box on your doorstep to see why Amazon’s Jeff Bezos gained a tidy US$70bn in 2020. Elon Musk saw his wealth grow five-fold to US$170bn as shares in Tesla jumped 650% on hopes that the pandemic would speed up electric mobility. As online communication boomed, Facebook’s Marc Zuckerberg saw his company grow by 30%, taking his wealth past US$100bn.
This is great for the stock markets, which following the immediate pandemic shock spent much of 2020 seemingly unaffected by the real economy outside. In the real econony, millions have lost their jobs and surviving businesses have lost orders. According to The Inequality Virus, it could take the world’s poorest countries until 2035 to recoup their Covid-19-related losses. The IMF estimates that these require a combined US$2.5tn.2 So far they have received around US$100bn, 1% of what has been spent by the world’s richest economies.
The effects of the pandemic are uneven between economies, but also within them. In the US, the world’s largest economy, 44 million people lost their jobs in the second quarter of 2020. In that country and elsewhere, research has repeatedly found that those in lower-paid professions, for example in retail and hospitality, have been more likely to be laid off due to outlet closures or, if fortunate, put on government job-retention schemes. Higher earners, often in computer-based professions have been able to continue working from home, with relatively limited disruption to their wellbeing. Like the billionaires, they were more likely to hold onto their jobs, incomes and their pre-existing savings than those in lower paid sectors. The effects of Covid-19 on wealth inequality have reinforced pre-pandemic disparities in many countries. Women and ethnic minorities, over-represented in low-paid jobs, have borne the brunt.
The disconnect between the theoretical economy of the stock market and the economy ‘as lived’ was highlighted earlier in 2021. In January Wallstreetbets, a Reddit-based group of small-scale investors, noticed that shares in videogame retailer GameStop were being borrowed by large hedge funds, which were then selling them with a promise to buy back at a later date. This process, known as short selling, relies on the share price falling over the lending period and routinely turns a profit for well-placed hedge funds.
It would have worked if members of Wallstreetbets hadn’t stepped in to ‘defend’ GameStop by buying up shares. This took the price from ~US$20 to ~US$350, flipping the hedge funds’ expected profits into huge losses. While this provided profits for those that sold at the right time, many others lost out when the share price returned to its long-term value. Some claimed that this was a price worth paying to see the hedge funds suffer. GameStop didn’t get anything out of the situation either, as it continues to close stores and shed jobs, the kind of jobs that lower paid workers rely on. The share-price rollercoaster was entirely unrelated to its fundamental prospects.
It is the hedge funds’ losses that put the spotlight onto GameStop. Now illuminated, it brings wider attention to some of the methods by which wealthy entities can manipulate the economy to their advantage, sucking money out of GameStop, its employees and others like them. Oxfam, the World Economic Forum and others are now calling for progressive taxes, debt relief for developing economies and wide-ranging investment in the lives of the world’s poorest to build an economic recovery from the pandemic that benefits as many as possible. This will cost a lot of money. Maybe we should ask Bezos, Musk, Zuckerberg, et al...?
1. https://www.oxfam.org/en/press-releases/mega-rich-recoup-covid-losses-record-time-yet-billions-will-live-poverty-least.
2. https://www.weforum.org/agenda/2020/10/covid-19-is-increasing-multiple-kinds-of-inequality-here-s-what-we-can-do-about-it