First published on Substack on June 7, 2020:
This is EconHistorienne, a newsletter that explains what goes inside businesses, economies and economic events and how that shapes our present. If you’d like to sign up, you can do so here. Or just read on…
Last week, EconHistorienne followed a doctor at a hospital in India’s national capital New Delhi to chronicle his regular day at work and the worsening health inequalities during Covid-19 pandemic. Just as I was preparing to write issue #3, mass protests over the killing of George Floyd in United States exploded globally. The piece I promised in the last issue now has a more urgent purpose – to talk about race as we talk about inequality because #BlackLivesMatter.
Today I’m writing about:
How George Floyd’s murder threatens to worsen modern inequality
How inequality has played out in history
How pandemics affect inequality
What will happen in the post-pandemic world
The world we live in is getting scarier as disturbing events unfold. Floyd’s gruesome killing has sparked fierce reactions globally and we are now left tracing its roots to the long-standing racial prejudices that have existed alongside decades of material prosperity. We know this could be traced to British colonialism in the Americas and the Caribbean and its role in setting up systems of apartheid in the Africas that continue even today, not just in the US but also UK and other parts of the world. This could be traced to the unequal societies and economic cultures that centuries of unbridled capitalism have created. This could be pinned on the collective failure of the governments to act in the interest of black and ethnic minorities and to work on dismantling the racial, class and caste biases that often creep into policing and administration of justice. There are a whole lot more other explanations, each one more searing than the other, which make one thing undoubtedly clear: George Floyd’s murder cannot be dismissed as a standalone American problem because it is not. In many ways, we have collectively felt the need to call out the multiple inequalities embedded in our societies, from caste prejudice and religious bigotry in the East further accentuated by the pandemic to racism and ethnic violence in the West.
All the rioting, police violence and protests over violation of civil rights have led us to a very dangerous place – democracies may fall, the continuing chaos could facilitate a consolidation of right-wing extremism, and whip up social unrest globally. The economic fragility is threatening to pull societies apart, and institutions and existing health infrastructure are already under strain. Some of the biggest democracies in the world have been dealing with political and social unrest for a while now, and Covid-19 has only worsened the crises. The global economy is heading into a recession; 195 million jobs are expected to be lost worldwide; domestic violence and child abuse are on the rise; alcoholism and depression have found new reasons to thrive; and US-China relations are almost on the brink of war threatening to unsettle the prevailing world order. This could very well be the beginning of the making of revolutions that could shift economic and social cultures globally.
To make matters worse, there are depressing precedents for health crises to become an excuse for curtailing civil liberties. Often, contagion has been used by authoritarian regimes to justify the control of people and suppression of human rights, as is the case with many countries today, and to dump science and facts in favour of dominant politics of the day. Around the world, governments have worked to put strict lockdown measures in place during the Covid-19 pandemic, and in some instances, this has come about within a day’s notice. Racial bias in policing is already at the centre of the ongoing protests in the US, with research already disputing the charge. All of these will worsen inequality; in the words of economist Arthur Okun, underlining this feels like watching the grass grow.
For long, we have been told and I have truly believed, getting everyone to become rich is just a matter of sincere efforts. Yet, time and again, especially after Thomas Piketty’s seminal work on inequality, we have realised that this is not necessarily true. From US President Barack Obama to Alan Krueger, Chairman of the Council of Economic Advisors in 2012, world leaders for quite some time have known that high income inequality is increasingly synonymous with the least equality of opportunity, and great wealth accumulation with least competition. Yet, economists have been divided in the decades since, often questioning the data and other assumptions made in the research on inequality. As a consequence, inequality hadn’t been treated as a severe economic and social challenge until Piketty and Saz made it fashionable. In the Global South where inequality has been spiralling out of control, this has had debilitating effects on poverty, hunger and unemployment with the exception of China. Covid-19 has once again brought inequality to the fore. In countries like India where politics always dominates the economics, inequality has the chance to be at the forefront of policymaking for the threat it poses to democracy.
As countries plunge into uncertainties of all hues, let us step back a little to think about the pandemics in history and how they affected global inequality.
Violence of “Four Horsemen” and the promise of equality
Pandemics in history tell us many things. They tell us that human civilisation has lived in the midst of ostentatious riches and disturbing inequality. They tell us that when a virus came to bite us, there were always an overwhelming number of people who died of hunger even as a lot many of those on the other side of the socio-economic gulf fled or worried about freedom or loneliness or death from the comfort of spaces where, more likely than not, none of these would kill them. Pandemics often were a violent stirring of the established socio-economic hierarchies but for this stirring, millions had to die, history tells us.
Deaths by highly contagious pandemics are tragic, sad and lonely, but deaths by hunger are the cruellest of human miseries. Deaths by hunger deserve our loudest condemnation but the feeling of horror and shame over it isn’t universal. Pandemics help us realise this because in our quest for economic growth, humankind may have become immune to sufferings of the worst kind.
Barely a quarter of a century ago, Surat in the prosperous Indian state of Gujarat dealt with an outbreak of pneumonic plague in a peculiar way. I start with this so we can locate infectious diseases within a relatively recent time period. In 1994, pneumonic plague unleashed fear and mayhem in the western Indian city known for its diamond business that eventually survived the plague but laid bare unspeakable social and economic inequalities. The outbreak, which led to 41 deaths, was highly contagious. It forced a wave of migration like the one we are seeing today. But families who fled the city at the time belonged to Surat’s upper and middle classes who escaped by the first mode of transport they could find – air, road or train. The economically weaker migrants, working in the factories of the wealthy, were blamed for transporting the disease to Surat. They also accounted for majority of deaths because they couldn’t afford arrangements to flee.
Throughout history, this seems to be the distinct pattern during pandemics. In a frightening and intensely personal first-hand account written during the yellow fever attack of 1798 in Philadelphia, Edward Garrigues, a wealthy carpenter, noted in his diary the depressing details of deaths, despair and horror caused by the pestilence. “On passing through a sick neighborhood,” he wrote, “the cries of a child arrested my progress by its moans for its departed mother and in vain I offered to console this poor orphan.” This anecdote in Garrigues’s diary serves as a cruel reminder of the deaths that have happened during Covid-19. Before the disease could kill them, several migrant labourers died just kilometres short of their homes in India. Several in Europe died a lonely death in quarantine wards. Old people were found dead and abandoned in care homes.
During the yellow fever pandemic, those who couldn’t leave Philadelphia were swallowed by the disease, and those who survived lived in temporary tents provided by the administration. Affluent classes rented expensive rooms in neighboring villages. The pandemic had a distinct class preference, leading to a heavy toll of Philadelphia’s labor class. Economic activity ceased with closure of shops, construction projects and the marketplaces. Shrinking jobs added to the troubles and the labour class, already underfed and surviving in overcrowded spaces, was left vulnerable to the disease. If the labourers and the working class were lucky enough to survive the pandemic, unemployment and extreme poverty crushed them.
In other instances, as cholera struck New York in 1832, the rich of the city escaped to the countryside; during the plague in England in 1636, the advisory for the rich was to escape from the infected cities until normalcy returned; and in Vienna plague of 1678-80, barely 10 of the wealthy died for every 1000 deaths. The lower and working class people didn’t have the resources to escape like the rich, and when they did, they had little choice but to flee as employment in the city dried up.
A similar tragedy unfolded during the plague outbreak in Bombay in 1896. The city’s municipal authorities employed over thirty thousand staff, mostly belonging to the lower socio-economic strata, to disinfect streets, sewers, and houses. Those unwilling to carry out the task were forced into complying. Hundreds of slums were demolished and soldiers searched houses and rounded up people suspected of carrying the plague by invoking the draconian Epidemic Diseases Act that vested absolute power in the state. Once again, the worst affected who succumbed to the disease were the Indian soldiers who were exposed to the epidemic more than the British soldiers. The death rates among the wealthy Europeans and Parsis in 1918 were also found to be lower than among the Muslims and low caste Hindus.
In almost two centuries, a similar movement of the rich towards their vacation homes or farmhouses or the countryside to escape infection has been reported during Covid-19 from across the world even as the labour class has been forced to return home after mass layoffs and stringent lockdown measures.
Pandemics, in history as in present, serve as the most telling markers of inequality but these could also act as disrupters in the interest of a more equitable world in the long run. Walter Scheidel in his important work The Great Leveller significantly advances the scholarship to argue that throughout history, violent natural disasters have been one of the most effective ways to mitigate inequality. Exploring the causal relationships between war, revolution, state failures and natural disasters or epidemics, and the emergence of mechanisms that significantly redistribute wealth, he argues that violence unleashed by these “four horsemen” eventually leads to a more egalitarian society.
Guido Alfani, economic historian specialising in economic inequality, in processes of concentration and distribution of wealth and in the history of epidemics and famines, argues that in most of Europe and the Mediterranean world, the Black Death re-adjusted the relationship between the population and natural resources, which had become precarious by the start of the 14th century, re-organized agricultural production towards greater efficiency and led to increases in real wages and eventually, reduced wealth and income inequality.
What history tells us can be prescient or disconcerting or both. In the context of Covid-19, two important lessons can be drawn from history: severe pandemics can result in potentially permanent asymmetric economic consequences and expose the ‘unjust’ character of asymmetric shocks depending on unpredictable epidemiological factors, quality of health institutions and policies for pandemic containment.
To sum up, pandemics may potentially worsen present-day inequality, which is already quite complex, and leave us no better than the inequalities of the past. Musing on modern inequality, Piketty and Arthur Goldhammer in their latest book, Capital and Ideology, write:
Modern inequality also exhibits a range of discriminatory practices based on status, race, and religion, practices pursued with a violence that the meritocratic fairy tale utterly fails to acknowledge. In these respects, modern society can be as brutal as the premodern societies from which it likes to distinguish itself. Consider, for example, the discrimination faced by the homeless, immigrants, and people of color. Think, too, of the many migrants who have drowned while trying to cross the Mediterranean. Without a credible new universalistic and egalitarian narrative, it is all too likely that the challenges of rising inequality, immigration, and climate change will precipitate a retreat into identitarian nationalist politics based on fears of a “great replacement” of one population by another. We saw this in Europe in the first half of the twentieth century, and it seems to be happening again in various parts of the world in the first decades of the twenty-first century.
What will happen when the pandemic is over
We know history paints a grim picture. History also tells us that things may improve eventually. But given the force of nature pandemics turn out to be, it is myopic to assume that things would return to normal anytime sooner. In this fragile world cracking open every single day, slowdown of economies will unravel stories of despair, anger and depression. Riots, social unrest, unemployment and violence may intensify, and populist or radical movements may seize the popular imagination. At the same time, there will be greater role for the governments to either espouse state-sponsored capitalism or radical socialism. All countries will have the choice to come together to rebuild and resuscitate societies and economic cultures, or enter into prolonged periods of disengagement in an attempt to deglobalize. What do you think is most likely to happen?
I recommend five reads to make sense of the future in the post-pandemic world:
This new paper contributes to the Great Divergence debate between Europe and Asia by offering fresh quantitative and qualitative evidence about the development of real wages and functioning of the northern Indian labour market between the late sixteenth and late nineteenth centuries. Read the full paper here.
An interesting piece by Branco Milanovic laying out the three established ways to riches where he reviews Daniel Shaviro’s Literature and Inequality.
A cross-institutional initiative by leading UK universities and thinktanks that seeks to answer questions from policy-makers and the public about the economics of the coronavirus crisis and the recovery.
Last but not the least, some house-keeping.:
One, my heartfelt gratitude to Shriya Bhagwat for her generous support for original artworks in the newsletter.
Two, an update on the long read you read in #Issue 2:
Keep your feedback coming. I read all of it with dollops of gratitude, and every mail / comment / like / share from you steels my resolve to keep writing.
Questions? Comments? Ideas? Email me: