The coronavirus pandemic, while serving as a powerful shake-up, did not become the key to solving the accumulated social problems. High income inequality, often perceived as unfair, provokes an increase in social tension, which, in the absence of social cohesion, finds very crooked answers, writes Valdai Club expert Oksana Sinyavskaya.
Contrary to popular expectations last year about the cleansing power of the pandemic, which was supposed to open the window for possible manoeuvres in social policy, it can rather be viewed as a litmus test that identified problems and contradictions that had previously been brushed aside. These include, for example, the optimisation of health care, which was not carried out over the past years and even decades in many countries. The shortage of doctors and beds in hospitals is an important factor in determining the nature of the response of states to the pandemic. Since financial resources, undermined by anti-crisis spending and production cuts, will be limited in the coming years, it is most likely that the end of the pandemic, which we are all looking forward to, will be a period of aggravating social problems and further socio-economic polarisation, both at national and international levels.
Almost two years after the spread of the coronavirus, all major social challenges and problems remain relevant. Despite the higher mortality rate among the elderly, the aging of the population has not gone away. It continues to affect the processes in the labour market, public finances, and the slowdown in economic growth. Technological change and the trend towards digitalisation remain with us, and have even accelerated. The temporary reduction in migration flows due to the closure of sectors of the economy and borders only emphasised the almost invisible, but important role of migrants in safeguarding our lives.
At the same time, the pandemic showed a clear link between inequality and the magnitude of losses, not only economic or social, but also on a human scale. The phenomenon of higher mortality in countries with higher income inequality, known even before the pandemic, has received new empirical confirmation. More polarised countries are characterised by higher morbidity and mortality rates from coronavirus, and their populations have lower vaccination rates.
It can be considered a great achievement of public administration that the governments of many countries were able to prevent mass unemployment and the impoverishment of the population during the pandemic. Social protection programmes, including programmes to help the poor, have made a significant contribution to this. According to the World Bank and the ILO, from the beginning of the pandemic to the middle of this year, more than two hundred countries have implemented various kinds of social support measures. Over the past 18 months, social assistance programmes have appeared where they did not exist before. They were scaled up where they were not sufficient. According to the World Bank, about 3% of world GDP was spent on anti-crisis support measures for the benefit of the general public by May 2021; 4.5 times more funds were allocated than during the global financial crisis of 2008.
Is this massive fashion for social programmes and the unprecedented increase in social spending a sign of the departure of neoliberal thinking and the emergence of a “left turn”? Can we assume that the obviousness of the multiple negative consequences of poverty and inequality that have grown in recent decades and worsened during a pandemic have yielded a functional demand for strengthening the social role of the state?
I think we can’t.
Since this is merely a function of macroeconomic policy, as soon as the acute phase of the crisis passes, the incidence rate begins to decline steadily, and the economy recovers, there is no doubt that the observed increase in social spending will be replaced by a reduction. Which, of course, will be partly natural, due to the decline in unemployment and poverty. In any event, given the destabilising effect of anti-crisis spending on state budgets and the increased volume of sovereign debt, it is clear that at the stage of the coronacrisis exit, many countries will again face another round of optimisation regarding social programmes. Moreover, given the new demands for investment in health care, the pressure on social protection programmes is likely to be more severe than after the 2008-2009 crisis.
Expenditures on education, health care (that is, what forms human capital and can be viewed through the prism of labour productivity growth) will suffer the least. Support for the poor is likely to be expanded in many countries to cover different life situations, but it will be provided on the basis of rigorous income checks and other assets. Social insurance programmes, the mainstay of 20th century welfare states and a source of wealth for the middle class, will be hardest hit.
This expansion of the market society and the decline in the standard of living of broad strata of the population amid growing wealth inequality, if we recall “The Great Transformation” by Karl Polanyi, is very reminiscent of the situation a century ago. The reluctance of the ruling elites to associate the past crises, both in 2008 and the current one, with the crisis of the self-regulating market also echoes those times. This parallel is especially tempting to highlight given similarities between the Spanish flu pandemic and the current one — the coronavirus. However, there is also a very important difference.
A major challenge for social policy in recent decades has been the following: as industrial employment declines, social cohesion is weakening, which in turn erodes the demand for social programmes and services, especially those based on social insurance. The characteristics, needs and interests of vulnerable social groups differ so much that they have no incentive to unite to fight for their rights. Unlike the situation a century ago, there is no social mobilisation now, and the pandemic has not created the basis for its emergence.
All this creates conditions for a further departure from the short-lived model of the welfare state of the 20th century. To a lesser extent, this will affect the richer European countries with relatively low inequality and universal social programmes; to a greater extent, it will hit countries with an average level of development and high inequality, which include Russia and many countries of the post-Soviet space.
The digitalisation of the social sphere, which blossomed during the pandemic, is unlikely to become a factor in equalising the opportunities of all social groups, but it may turn out to be in the interests of the middle classes. Online education, of course, will not be an adequate substitute for education at elite educational institutions, but it allows you to get a better quality education than in a remote country school or a local provincial university. Telemedicine is not a substitute for a full-fledged examination at a high-class clinic, but it makes it possible to get better quality advice than a doctor in a small town could otherwise give. All this expands the availability of quality services for the middle class. Employment in the digital economy often compensates well for the problems facing traditional labour markets.
Thus, the coronavirus pandemic, while serving as a powerful shake-up, did not become the key to solving the accumulated social problems. High income inequality, often perceived as unfair, provokes an increase in social tension, which, in the absence of social cohesion, finds very crooked answers: “they are looking not where they have lost, but where there is a light” — in migration, globalisation, and European integration. That is, for the time being, this will provoke the growth of radicalism and populism from the right or left, rather than working to drive reforms that strengthen social cohesion through the application of social policy.
On the one hand, this is natural: changes in social policy occur with a lag and much more slowly than changes in technology, economics or politics. The heyday of the social states of the industrial era took place in the 1950s and 1960s — about 10 years after the end of the Second World War, and almost 40 years after the end of the WWI. Seventy years after the first social security laws were introduced in Germany. And a century and a half after the emergence of the first trade unions. Obviously, only a certain number of years or even a decade after the pandemic, will it be possible to speak about the nature of its influence on social policy.
On the other hand, the direction of future dynamics is being laid by how countries are now navigating the pandemic and the associated economic crisis. It is not just about the dynamics of macroeconomic indicators. Over the course of the pandemic, the connection between different forms of trust — public, government, science — and the willingness to voluntarily comply with coronavirus-related restrictions, get vaccinated, and, as a result, morbidity and mortality, has become even clearer. If the global financial crisis of 2008 in many countries led to a decrease in trust in the authorities, then huge and long-term social support during the pandemic became a factor in the growth of this trust in a number of developed European and Asian countries. This is a factor that will affect both the level of social tension and the ability of the authorities to carry out social reforms after the end of the pandemic, which should be taken into account by the governments of other countries.