COVID slowed but couldn’t stop the fall in global inequality

Affordability fears, talk of a “K-shaped” economy, and claims of a new Gilded Age have pushed inequality to the center of today’s policy debates. Calls for a worldwide wealth tax and other unprecedented measures are not treated as radical but as inevitable—across academia, non-profits, the press, and international organizations, including the United Nations.

The COVID-19 pandemic seemed to clinch the case. As economies contracted and progress in poorer countries stalled, it was easy to assume that decades of convergence between developed and developing countries had come to an end. The authors of one Oxfam paper, for example, proclaimed during the pandemic that “unparalleled action [is] needed to combat unprecedented inequality in the wake of COVID-19.”

New research suggests a more nuanced reality. The updated Inequality of Human Progress Index assesses how the pandemic affected progress toward a more prosperous and equal world.

The pandemic clearly slowed improvement in global living standards and interrupted the pace at which countries were becoming more equal. It did not, however, cancel out the long-term, positive trends. Even under the strain of COVID-19, its attendant lockdowns, and other forceful policy responses, global inequality across key measures of well-being remained lower than it was a generation ago.

The index looks beyond income alone. It measures inequality across eight dimensions that shape everyday life, including lifespan, child survival, nutrition, education, internet access, environmental safety, income, and political freedom. The index, which I co-authored with George Mason University economist Vincent Geloso, seeks to offer a fuller view of gaps in global development, taking into account more aspects of human well-being than any prior index of inequality.

The data show a substantial decline in global inequality over the past three decades as rising prosperity allowed poor countries to narrow gaps with rich ones. That pattern held through 2019. During the pandemic years of 2020 and 2021, progress slowed sharply and, in some areas, stalled or modestly reversed. Yet the earlier gains were not erased.

This distinction is important. COVID-19 was a severe shock. Life expectancy fell worldwide. School closures disrupted education. Economic activity and international trade declined, with especially devastating effects on low-income countries. The index reflects these setbacks. Inequality stopped falling at its earlier pace and, in some measures, edged upward slightly after years of progress. Still, the overall level of global inequality remained far below where it stood in the 1990s.

In a few areas, improvement continued even during the crisis. Internet access expanded rapidly, especially in poorer countries, reducing inequality in access to information to its lowest level on record. Faster regulatory approvals amid the pandemic helped bring more people online. In Kenya, for example, Alphabet’s high-altitude internet balloons were finally cleared in 2020, allowing rural areas to gain internet access for the first time. The project had been stalled in regulatory review for nearly two years before the crisis prompted action.

Not all the data were encouraging. Inequality in political liberty ticked up during the pandemic as many countries took a turn toward greater authoritarianism. Even with the long-term shift toward electoral democracy intact, the setback shows the importance of protecting political liberty during emergencies.

For all the turmoil, the damage across different measures of well-being was thankfully limited.

These findings complicate popular claims that the world is experiencing a runaway increase in inequality. Calls for a global wealth tax, massive new aid commitments, or other significant expansions of state redistribution often rest on the premise that trade and free enterprise have failed to deliver shared gains. The data suggest otherwise.

If anything, the pandemic highlighted how sensitive progress can be to disruptions in markets. Countries with greater economic freedom generally proved more resilient. In contrast, prolonged lockdowns and restrictions often imposed heavy costs on poorer populations, particularly in countries where remote work and online schooling were not viable options for most people.

The broader lesson is that global convergence is neither automatic nor guaranteed, but instead depends on certain conditions such as undisturbed markets, even as long-term progress has proven more robust than critics often assume.

Mistaken narratives about global inequality have real consequences. They shape public opinion and influence policymakers to embrace sweeping interventions. A more accurate assessment of recent history suggests a need for caution.

COVID-19 tested the global economy in ways few events in modern history have. It slowed human progress and exposed vulnerabilities. At the same time, it demonstrated the durability of the long-term trend toward lower global inequality. Preserving and strengthening the policies and institutions that made that progress possible, including economic and political freedoms, remains a better bet than assuming they have already failed. The gains of recent decades have left the world both better off and more equal.

Chelsea Follett is the managing editor of HumanProgress.org and a policy analyst in the Cato Institute’s Center for Global Liberty & Prosperity.