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Rich Versus Poor, The Global Gap Is Shrinking

Many people worry that Covid has made the world a less equal place, but that hasn’t been the case so far — at least at a global level. Studies have shown that the global gap between developed and developing countries is narrowing, despite most people’s assumptions.

The left has been quick to criticise income inequality, and there have been narratives that are exacerbated to paint a picture of a widening gap between richer and poorer countries, even in the midst of a crisis. However, there is evidence to the contrary and shows the significant process that poorer countries have made.

On an individual, country-by-country basis, the outcome and effects of Covid are more apparent in Western countries than in poorer countries. From a wider, generalised perspective richer countries are doing better, but not as much as the left would have you believe.

The Facts

Despite income inequality being a huge topic in modern society, there is evidence that suggests that not only is the gap not as wide as people think but that the gap is actually getting smaller despite crises such as the financial crash years ago and the current coronavirus pandemic.

Bloomberg reports that assumptions which automatically favour Western countries to be less affected by the coronavirus pandemic are a misnomer and that in fact, the opposite has happened.

A study by Nobel Prize-winning economist Angus Deaton showed that in 2020, the gap between poorer and richer countries had shrunk, due to the pandemic hitting high-income economies disproportionately.

There is debate as to what the reason for this is. Some theorise that this is not due to the successes of poorer nations, and more to do with the failure of Western countries at handling the virus.

It has exposed the tragic failure of the healthcare systems that Western countries operate, and the sheer size of the death toll from Covid in some of the world’s wealthiest countries is breathtaking.

Deaton also found that on average, places with a higher-per-capita income also suffered mostly from the pandemic and that the countries with the most deaths also had the biggest predicted drop in GDP.

Empty streets and poorer prospects in the West.  Photographer: JUSTIN TALLIS/AFP

I think Bloomberg’s report is a welcome and refreshing response to the seemingly constant ‘doom and gloom’ rhetoric from the left, as well as highlight the failure of Western governments (especially the UK’s) in protecting the financial and holistic wellbeing of its citizens.

Regarding the wealth gap, it’s a good thing that poorer countries are developing at a faster rate and are catching up to Western countries. For those who are concerned about wealth inequality, this should be welcome news. Not only is the gap smaller than people think, but it’s also actually shrinking.

Bloomberg reported that the global income gap was reduced between 2008 and 2013, despite a financial crisis. Although Covid has had a strange and slightly different in Western countries, I see no reason why they can bounce back.

If anything, those who are concerned with an economic gap should be pleased that Covid has slowed down the GDP of some Western countries, as it gives poorer countries a chance to ‘catch up’ and develop their economies. It shows the benefits of capitalism.

‘Lockdowns buy time, but won’t extinguish coronavirus’. Video credit: WHO

It’s also a huge wake-up call for Western governments, who have falsely assumed that lockdowns are beneficial. The report shows that even the countries who took a looser approach to lockdowns in the interest of protecting their economies didn’t benefit much.

Logic dictates that harsher lockdowns would have an even worse effect, as the fewer people are working then the slower the economic growth.

It leaves me wondering why have a lockdown in the first place if the benefits aren’t tangible and all you have left is mass unemployment and ever-deteriorating mental health of the population? If there is no economic benefit to lockdown, why have one?

All in all, it’s a good insight into just how much smaller the gap is becoming between richer and poorer countries. It shows that the so-called ‘wealth gap’ is smaller than people think, and highlights just how harmful lockdowns are.

Despite headlines of the richest adding trillions of dollars to their coffers since the Pandemic started, while the average citizen burns through savings; global poverty levels have been on a steady downward trajectory for decades. China’s economic miracle lifted a billion out of extreme poverty. Too many, worldwide, are stuck in a low-income existence. But the negative ramifications of inequality is not so much from the latest Tech mogul’s product we all decided to buy, but bad government policy.

We could reduce the resentment inducing inequality by annual redistribution until the coffers run dry. But as our former Prime Minister Margaret Thatcher countered, “you eventually run out of other people’s money.”

Inequality isn’t a problem in itself so long as most achieve a decent standard of living. Attending to inequality alone would level down the wealth of the richest and make everyone poorer. The 20TH Century Socialist experiments were testament this diminishes incentives to work hard. The free-market, with winners and losers, spurs harder work, more production of things we actually want and need, leading to everyone doing better combined than the alternatives.

Trade is the essential ingredient to lifting the Global Poor, bringing more affordable goods to more and more people. The more remote from economically active areas, the less able you are to meet material needs.

The world has been catching up to the early industrialisers, outcompeting our domestic industries and displacing jobs. This hurts your British auto or steelworker but benefits your Indian worker who now has a higher paid job.

Wealth has been the exception, not the rule for human history, with existing in relative poverty the norm. It is not poverty, but the existence of wealth and prosperity that requires explanation.

Wealth is an achievement created by specific preconditions. You cannot have a stagnant, closed, collectivist society where the elite’s gain is another’s loss – a zero-sum outcome where greed, backed by coercion causes some to be poor.

Adam Smith realised the division of labour enables different specialisations to cooperate peacefully and spontaneously in voluntary exchange, without the guiding hand of governments. The market process is a source of new wealth. As the population has risen by the billion, so to have standards of living, because the total amount of wealth is not fixed.

The high-incomes and profits are the rewards for serving your fellows by using scarce resources most efficiently in the competition to satisfy consumer desires. Reward is the incentive to create. By permitting profit, it maximises available capital for the next project to satisfy consumer demand.

The only way to get more, in a free market economy, is to serve others. The way to lessen poverty is to create a favourable environment for investment and wealth creation. The necessary condition for prosperity is allowing ownership and exchange of property.

The transfer system locks people in the cycle of poverty by destroying opportunities. The welfare state encourages degrading dependence, rather than self-reliance. A scheme to try to live at the expense of others. The free-market: you gotta give to receive.

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Aaron Fenton-Hewitt is an aspiring journalist and political commentator. He holds a Bachelor's degree in Film from London Metropolitan University, and a Master's in Writing for Creative and Professional Practice from Middlesex University. He wishes to continue his academic career, with a PhD in Politics or related field.

Aaron is also a freelance photographer, an avid foodie and an Arsenal supporter.

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Richard Bolton was born in the UK and is a Manchester University PPE graduate. He is a financial planner. Areas of intrigue include global political affairs, culture and nascent technologies. In his spare time, Richard is a keen sportsman and investor.

Aaron Fenton-Hewitt and Richard Bolton

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