MONTREAL ― The world’s richest people have seen their wealth soar to record heights amid the COVID-19 pandemic, thanks to stimulus from governments and central banks that sent stock and other asset prices soaring this year.
But those who don’t own stocks or other assets are facing a new wave of economic misery, with the World Bank predicting in a report Wednesday that as many as 150 million people worldwide could fall into extreme poverty by the end of next year as a result of the current crisis.
It’s the latest evidence confirming some economists’ fears that the policy reaction to the COVID-19 pandemic is making economic inequality, already at historic highs, even worse.
The share of the world’s population living in extreme poverty is expected to increase to 9.1 per cent this year, from 8.4 per cent last year, the World Bank said in a new report, making this economic crisis the worst for increasing poverty in modern history.
Watch: World Bank economist says post-Covid recovery could take 5 years. Story continues below.
A majority of the people expected to fall into this group live in middle-income countries such as India, Nigeria and Indonesia, the World Bank said.
“It appears that COVID-19 has already been the worst reversal on the path towards the goal of global poverty reduction in at least the last three decades,” the Bank said in its report.
Meanwhile, the total wealth of the world’s billionaires soared by 27 per cent in just a few months as the stock market recovered from its rout earlier this year, according to the annual billionaires report from Swiss bank UBS and consultancy PricewaterhouseCoopers (PwC).
The report found Canada’s billionaires have seen some of the strongest wealth growth in recent years, with their net worth jumping 238 per cent since 2009, compared to 170 per cent for U.S. billionaires. Among major economies, only China and France saw greater billionaire wealth growth.
The world’s ultra-rich didn’t escape the stock market crash early in the year, and by March their wealth was down 6.6 per cent from a year earlier, the UBS/PwC report noted.
But the 2,200 or so people who count as U.S.-dollar billionaires bounced back when stocks rebounded, and saw their holdings jump to US$10.2 trillion in July, from US$8 trillion in April.
“From the end of March, governments’ huge fiscal and quantitative easing packages drove a recovery in financial markets. By the end of July 2020, billionaire wealth was back above its 2019 level,” the report said.
Tech, health care boom amid pandemic
The report notes that some billionaires have been doing better than others, particularly tech billionaires and health-care billionaires.
The boost to tech billionaires’ wealth came from soaring stock prices in the sector, as it becomes apparent digital companies will play a bigger role in the post-pandemic economy. For instance, this year Amazon founder Jeff Bezos became the first person ever listed as having a net worth of over US$200 billion, after Amazon sales and shares soared in the pandemic.
Meanwhile, health-care billionaires were helped along by the recent explosion in COVID-19 treatments and equipment, the UBS/PwC report said.
Central banks around the world have been printing money at breakneck speed since the start of the crisis, with the U.S. Federal Reserve adding US$3 trillion to its balance sheet as of this summer.
The Bank of Canada has been no slouch, either, adding some $500 billion to its balance sheet, of which, some $100 billion went to buying federal government debt.
The BoC has also started buying billions of dollars’ worth of Canadian mortgages, which has helped reduce mortgage rates, spurring the boom in real estate seen in Canada in recent months.
“The rules governing globalization must do more than just serve corporate interests; workers and the environment have to be protected.”
- Economist Joseph Stiglitz
While this process keeps the government’s interest rates low ― making it possible for Ottawa to grow large deficits during the crisis ― market experts say it also has the effect of inflating asset prices such as real estate and stocks, while not inflating wages. As a result, many recent economic reports have raised an alarm about rapidly growing inequality in the COVID-19 pandemic.
The problem prompted Nobel Prize-winning economist Joseph Stiglitz to declare, in a blog at the International Monetary Fund, that “we need a comprehensive rewriting of the rules of the economy.”
Stiglitz argued for “monetary policies that focus more on ensuring full employment of all groups and not just on inflation…. The rules governing globalization must do more than just serve corporate interests; workers and the environment have to be protected. Labor legislation needs to do a better job of protecting workers and providing greater scope for collective action.”
With files from the Associated Press