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“The coronavirus is deepening inequality”

Interview with former KfW sector economist Dr Maria Ziegler on growing injustice in the world and the lack of opportunities for people to lead self-determined lives.

Portrait of Maria Ziegler
Dr Maria Ziegler, former sector economist at KfW Development Bank.
Is it true that the gap between rich and poor in the world is widening?

This is not true across the board as the situation varies significantly around the world. And it depends on which indicator you focus on: income, wealth, access to basic services, etc. But it is true that inequality is very high overall. In developing countries, for example, income inequality has actually increased on average since 1990, despite large disparities from country to country.

Is inequality greater between or within countries?

Before the coronavirus pandemic, the differences between countries were diminishing; but this is likely to change again now. Within the countries themselves, as I mentioned, there is a high degree of heterogeneity.

What do you think will change as a result of the coronavirus?

The pandemic is intensifying inequality at different levels. The weakest and most vulnerable in society suffer the most; this is true in our country as well as in developing countries: day labourers who are now out of work; workers in the low-wage sector, for example in tourism, women, people with disabilities and many others. They have all been hit much harder than other sections of the population by the lockdowns that nearly every country has experienced in various phases over the past year. At the same time, however, the gap between countries is widening. Rich countries have completely different ways to mitigate the crisis, to set up support programmes for the economy and to introduce social measures for those who are particularly severely affected.

Does this mean that the progress made in the past twenty years through the Millennium Development Goals and since 2015 through the Sustainable Development Goals is in danger of being eroded?

This danger exists. Following a drop in the number of people living in poverty over the last two decades, albeit at a somewhat slower pace recently, the World Bank now predicts an increase of around 100 million additional people as a result of the coronavirus. This would, in fact, be a setback.

If poverty is reduced, does that automatically mean that inequality decreases?

Not necessarily. While it is gratifying to see poverty falling overall, this does not mean that people in a society have the same opportunities for a fulfilled, self-determined and reasonably secure existence. The differences can still be immense and even continue to grow.

Children carring wood
Whether children have the opportunity to lead self-determined lives often depends on where they were born.
Economic growth is seen as an important lever for creating more prosperity in a society. How important is it when it comes to reducing inequality?

There is no doubt that successful economic growth is important, but it does not automatically benefit everyone equally. India is a good example; high economic growth has been accompanied by a marked decrease in poverty but also a sharp increase in inequality. In other words, growth does not lead to equality in living conditions per se. Instead, further economic or political measures are needed.

What kinds of measures would this entail?

There is no one-size-fits-all solution; the approaches must be different from country to country depending on the situation. But it is clear that economic growth alone is not enough and must be accompanied by other programmes. In predominantly agricultural countries, land reforms often play an important role in giving more people access to their own land for their livelihoods. If the differences between urban and rural areas are very pronounced, programmes to promote rural areas are appropriate, for example through new infrastructure, so that small farmers can reach markets more easily. An educational policy that specifically includes children from poorer families is also essential. We have known for a long time that education is a key factor in social mobility and can move people to other (income) strata. Social security systems are also crucial to cover people’s basic risks. So, beyond purely economic development, there are a number of factors that can contribute to reducing inequalities – and which, incidentally, can then also stimulate economic growth

In many countries, however, social security systems are still wishful thinking...

That’s right. Around one-third of the global population is protected by social systems. Almost half of people have at least rudimentary coverage but are not insured overall against the eventualities of life. The rest are abandoned to their fate. This is not enough to reduce inequality, as envisaged by Sustainable Development Goal 10.

Inequality is a flexible term. What exactly does it include?

It has different dimensions. Some people think it’s all about income inequality. But this isn’t accurate. This is because differences in income are usually caused by structural inequalities that point to exclusion and discrimination and are also reflected in other dimensions of inequality, such as education, health and economic, social and political participation. Differences between religions, regions, urban and rural areas or population groups, for example between women and men, play a role here: women are exposed to completely different risks in their life cycles, for example through pregnancy and childbirth, and are often insufficiently protected in this area in particular. Inequality does not mean egalitarianism, because people’s needs are also different. Nobel laureate Amartya Sen is a philosopher who focuses on justice and talks about “opportunity freedom”. Not everyone wants the same thing, but they want to have the chance to do what is best for them as individuals.

At the moment, our opportunity freedom depends very much on the coronavirus vaccines. But they are in short supply and not equally available everywhere. Is this another dimension of inequality?

I am afraid so. We can already see that the wealthy nations in Europe and North America have secured most of the vaccine doses and developing countries have to take a back seat, even though they are home to the majority of the world’s population. Not only do I think this is unfair, it is also unwise.

Why is it unwise? Isn’t it almost a natural reflex to protect your own people first?

Maybe, but it’s not helpful. Because as long as most of the world’s population is not vaccinated, the virus can continue to circulate. This increases the risk of it returning and developing mutations against which the vaccines may no longer be effective. We need to make sure that as many people as possible are vaccinated as quickly as possible around the world.

How can this be achieved?

I would encourage pharmaceutical companies to make their vaccine expertise available to developing countries as well. The best way to do this is through the World Trade Organisation. This would allow more countries to produce vaccines and thus also supply developing countries. At the same time, massive vaccination campaigns would then also be needed in poorer countries, most likely supported by the international community.

A woman puts her hand on a mobile EC device to receive a cash payment .
Access to financial services facilitates economic activities and economic participation.
How does KfW contribute to reducing inequality in all its forms?

Quite a lot. We generally become active where the greatest shortcomings exist. But we also try to develop markets with our programmes, create opportunities and thus unlock economic potential. Many of our projects directly target disadvantaged groups, for example in the health or education sector, in climate change adaptation or in terms of financial inclusion. Reducing inequality is a major priority for us. We strive to improve living conditions for everyone, especially the poor.

But doesn’t KfW make the majority of its commitments to infrastructure such as power plants and power lines?

Here, too, we are making a contribution, even if perhaps a little more indirectly. After all, a stable energy supply is an essential economic factor. And we also deliver energy to areas that previously had no access to it. This means that we also counteract inequality with this approach.

Around the globe, there are now social movements like Black Lives Matter. Is this a sign that we are about to work on the problem and solve it?

I think social media plays an important role in these movements because it raises awareness of injustices. They are certainly also a sign that something is shifting, not least in people’s minds. But I also perceive strong counter-tendencies, a roll-back on gender issues, for example, widespread racism, anti-democratic movements. We must always continue to fight inequality, everyone in their own place. We cannot take what has been achieved for granted. And what has not yet been achieved will not happen on its own.

The interview was conducted by Friederike Bauer. Published on 20 February 2021.