The Mapungubwe Institute for Strategic Reflection (MISTRA) celebrated their 10th anniversary with their flagship event hosted in partnership with the University of Johannesburg (UJ).
This year’s annual lecture was delivered on Wednesday, 31 August 2021 by Mr Jonathan D Ostry, Deputy Director of the Asia and Pacific Department, International Monetary Fund (IMF) under the theme: Will Covid-19 Raise Inequality? Evidence from Past Pandemics and Crises. For the second consecutive year, the lecture was held as a webinar.
UJ Vice-Chancellor Prof Tshilidzi Marwala welcomed the keynote speaker, remarking on how the pandemic has been a brutal setback.
“The impact of Covid-19 on poverty is not only still present but it has worsened. The reality is that alongside the progress we have made in recent months, there is still immense vaccine inequity. Even as we begin to return to a sense of normalcy in some nations, the virus is evolving and devastation is unfolding in other nations…As we find ourselves emerging out of an incredibly difficult period, the urgency to create a more just and equitable world is unparalleled.”
Prof Marwala added that according to the United Nations, the next 18 months will be critical to achieving this. In his opening remarks, Mr Ostry, who is an international macro-economist, noted that major epidemics in this century have raised inequality and that the anecdotal evidence was more than suggestive that Covid-19 would have adverse distributional impacts. He speculated about how inequality might evolve in the post-Covid world – whether or not the past would be prolonged given that past pandemics raised inequality.
“One of the key issues is how the pandemic will continue to evolve. We don’t know the evolution of vaccine availability and rollouts across the world. We don’t know how epidemiology is going to evolve; we don’t know a range of things about the crisis itself.”
Mr Ostry’s address focused on themes from his book Confronting Inequality: How Societies Can Choose Inclusive Growth that he believed were salient once the pandemic became a thing of the past.
“We readily accept the idea that central banks can control inflation; that treasuries can control budget deficits and the evolution of debt and together those agents can regulate macro financial stability and growth. Inequality itself, in my view, should be a policy target with instruments that are used to effect and regulate the degree of inequality in society.”
He also touched on globalization, suggesting that financial globalisation needed to be managed in a way that improves equity trade-offs. The third theme was the issue of public debt management and the global attitude towards it. He stressed on the importance of not withdrawing fiscal support prematurely. The last theme related to how seismic events like the pandemic often gave rise to a material uptake to which automation takes hold in economies.
“Automation is an important driver of inequality and distributional concerns. The gains from automation need to be widely shared.”
Looking at the major epidemics of the century, Mr Ostry said the relevance of history was still present as past pandemics had raised inequality.
“Will this time be different? No. Unless attitudes and policies really change, unless globalization is restored with inclusiveness in mind. Unless public debt is paid back slowly in green zone countries that retain fiscal space. And unless the gains from automation are widely shared in society.”
Mr Ostry focused on five epidemic episodes namely the SARS outbreak, H1N1 flu virus (Swine Flu), MERS (Middle East Respiratory Syndrome), Zika fever and Ebola.
“It is remarkably easy to ignite growth, it is far more difficult to sustain growth over long periods that are needed to really make a dent in converging capita income to the rich world frontier.”
Mr Ostry emphasised on the need to make sure spending reaches the most vulnerable and does not go to waste.
“The message that countries should not withdraw stimulus prematurely has been listened to in this pandemic. What I would emphasise now as fiscal space is eroding everywhere, there is even greater priority to make sure spending reaches the most vulnerable and does not go to waste. A premature return to consolidation would not be welcome from an equity standpoint. In the aftermath of consolidation episodes unemployment tends to rise, income tends to fall and inequality tends to rise.”
He concluded by stating that past major epidemics had raised inequality and this time was no different unless attitudes and policies change.