“We’re all in this together” has become a familiar phrase during the Covid-19 pandemic, an alleged commitment to shared responsibility and collective endeavour. The singer-songwriter Madonna has told us that “Covid is the great equaliser”, while sitting in a petal-filled bath.
Few of us are in the Madonna wage-bracket; some are more equal than others. After all, when was the last time you took a dip in petal-strewn bathwater? The path back from Covid-19 and government lockdowns is likely to be long, stony and will leave scars.
In the UK the Financial Conduct Authority (FCA) has just published its ‘Financial Lives 2020’ survey, which had more than 16,000 respondents and asked them are things “improving, worsening or staying the same”? This survey ended in February 2020 so largely pre-dated the pandemic. The FCA also ran a survey of more than 22,000 people in October 2020, taking into account the impacts of the Covid-19 pandemic.
The last time the FCA did a ‘Financial Lives’ survey was in 2017. Over the last three years, there were some positive results – in 2017 51% of UK adults “showed one or more characteristics of vulnerability”, which had dropped to 46% by February 2020. By February 2020 – shortly after the pandemic struck – more people had financial resilience, neither over-indebted and with a better “capacity to withstand financial shocks”. By February 2020, according to the FCA, one in twenty had persistent credit card debt and a fifth of mortgage holders – up from 14% in 2017 – had mortgage debt at least four times their annual household income. Trust and confidence in the UK financial services industry marginally improved, from 38% in 2017 to 42% by February 2020. But over the course of 2020 the number of UK citizens with “low financial resilience” – able that is to survive shocks – grew from 10.7 million to 14.2 million; 11% of those surveyed said that were now “likely” to use a food bank and 16% said they expected to take on more debt in the next six months. The Resolution Foundation, a British think-tank which aims to improve the standard of living of low and middle-income families, says that as many as 450,000 out of an estimated 750,000 people in arrears in housing payments have fallen into debt as a direct result of the pandemic.
We’re really not ‘all in this together’.
Mind the gap
The European economic think-tank Bruegel reminds us that epidemics have always tended to raise income inequality – the gap between rich and poor widens as people lose their jobs or are put onto part-time work. The digitisation of the world has merely heightened the divide: “in the United States, in industries heavily exposed to the pandemic, employment fell by a staggering 42% for those who cannot telework, and by 22% for those who can, between February and April 2020…the COVID-19 pandemic has increased income inequality between the rich and the poor even in Europe, where governments put in place massive employment protection programmes”.
The pandemic has also exacerbated the difficulties facing young people. Bruegel reported last November that: “young active jobseekers are two or three times less likely than those aged over 55 to be able to find a job” and that “youth unemployment is significantly connected with poorer mental health”.
This divide between rich and poor is not simply generational, it also exists between emerging and developed countries. The International Monetary Fund said last October that during 2002-19, “emerging markets and developing economies enjoyed welfare growth of almost 6% percent” but that the pandemic “could reduce welfare by 8 percent in emerging markets and developing countries”, ‘welfare’ being defined as a combination of life expectancy, leisure time, consumption growth and consumption inequality.
Yet the advance of distance working, or ‘work from home’ (WFH) is becoming entrenched. In January this year, the CEO of the fast-moving consumer goods (FMCG) giant Unilever said its 155,000 office workers will “never return to office work five days a week. Others are certain to follow suit”.
And the super-rich have got richer, powered in part by the extremely loose monetary policy led by the US Federal Reserve; in the second week of February, investors put a record $58 billion into US stocks, prompting fears from some that investors are extending into higher and higher risk. The spectacle of a gleeful pack pushing the previously moribund US stock GameStop way beyond conventional wisdom and the chasing of cryptocurrencies to fresh heights are symptoms of asset bubbles and disaffected younger people, enraged at the sight of the growing wealth and power of an older generation, armed with Covid-19 savings that have mushroomed.
The world’s 10 richest billionaires increased their wealth by $319 billion in 2020. According to the Financial Times, this was fuelled partly by the success of companies that have experienced a demand boost because of the pandemic, but also because central banks’ efforts to cushion the unprecedented slowdown in activity by pumping massive waves of stimulus into the global economy helped drive up asset prices. “Inequality was bad and the Covid-19 pandemic is making it worse” was the view of a fellow at the US Brookings institution last November.
What will follow the end of this pandemic? Mass relief at a restoration of free movement, of course, and perhaps it will unleash a wave of spending, which is what governments want.
But Covid-19 has stress-tested governments everywhere – and they are being tested when public distrust was already at a low level. In 2019, 60% of Europeans felt that mainstream parties and politicians did not care about people like them. The latest Edelman Trust Barometer, which surveyed more than 33,000 people in 28 markets worldwide between October 19 and November 18, 2020, claimed that people distrust the information they’re being given from most sources in an “information bankruptcy”.
Voices questioning how much longer the US dollar can maintain its dominance are becoming louder, with the US economy now burdened with its biggest ever sovereign debt of $28 trillion and a federal budget deficit of more than $3 trillion. Under President Biden, fiscal spending on different ‘must-have’ programmes looks set to go into over-drive. Academics have studied the connections between pandemics and social unrest. While there is no conclusive evidence that mass pestilences (such as Covid-19) cause mass protests, there is a strong correlation between pandemics and civil disorder.
There is no point in being apocalyptic about this – but neither is it wise to sit idly by and do nothing. Conservation of what you have in terms of value will become increasingly important in the choppy waters ahead. Preservation of purchasing power against further erosions will become critical. Cryptocurrencies are not just an interesting extension of technology – they are a form of protest, an attempt to find a means of protection against the decline in the value of money. The trouble is, there are many obstacles to be overcome in the day-to-day use of private cryptocurrencies – and governments everywhere are planning to roll out their own central bank digital currencies (CBDCs), and could steamroller private cryptocurrencies into the ground. After all – what ‘backs’ a cryptocurrency except faith and despair? Glint was created to democratise the oldest form of money – gold – and through Glint, you can buy, spend, and save that oldest form of money, gold, which will last longer than a petal.