The coronavirus itself was not the cause of the divergence. Rather, the cause was the disparate and inequitable responses to the twin public health and economic crises brought on by the pandemic: Some countries had the vaccines to protect their populations and the means to stimulate their economies; others did not. And unfortunately, wealthier nations and international institutions have so far failed to intervene adequately to support middle- and low-income countries.
The new era of economic divergence is a tragedy for the billions of people who live in the developing world. But as long as it lasts, it presents risks for everyone, since unvaccinated populations are more likely to produce the next deadly variant; waves of migrants will flee lower-income nations, potentially creating political instability in the countries they enter; democracies will backslide; and failing states are ripe for conflict or authoritarian takeovers. Wealthy nations ignore these risks at their peril.
For a sense of how the pandemic derailed economies, consider India. For decades, the world’s most-populous democracy has been a development success story. From 1990 until 2019, its economy grew at an average annual rate of just over 6 percent. (In contrast, the United States’ average economic growth rate was less than 2.5 percent over that period.) In that time, India’s poverty rate was cut in half, child mortality and education improved, and women and girls made gains in education, health and the workplace. The story, however, was not all positive: In 2019, the human rights group Freedom House highlighted worrying developments under Prime Minister Narendra Modi, including increasing harassment of journalists and growing sectarian violence.
Then the pandemic delivered a true economic shock. In 2020, India’s economy was expected to grow at around 6 percent yet again, but it instead contracted by almost 7 percent — a 13 percentage-point swing in a single year. The government’s fiscal response was limited; one big part involved loans to private-sector actors. The result was that unemployment rose, 75 million people fell into poverty, and the middle class shrank as India’s billionaires grew richer. This devastation worsened after the delta variant emerged (it was first reported in India), putting additional pressure on the country’s democracy. Freedom House and others believe that democratic backsliding, including diminishing freedom of expression, is accelerating.
In some cases, economic slowdowns in non-wealthy countries preceded the pandemic, but the crises of 2020 and 2021 exacerbated them. At one point, Brazil was growing so fast that it was for a time the fifth-largest economy in the world. Fueled by soaring mineral and agricultural prices, its economy hit a growth rate of 7.5 percent in 2010. The poverty rate dropped by nearly two-thirds, to 8.5 percent, from 2004 to 2014. But when the commodity market shifted, structural economic weaknesses and faulty governance led to a deep, years-long recession.
In response to the pandemic’s initial economic crisis, the Brazilian government mounted an above-average stimulus response that caused poverty to drop. But this year, President Jair Bolsonaro and other officials in Brasilia continued to minimize the risks of the virus, shifted further toward autocracy and cut back economic measures despite a delta variant surge. The economy quickly contracted: The nation saw unemployment spike to the highest level in decades; it hit nearly 15 percent in April. The unemployed and distressed filled makeshift camps, and some fled north, roiling the United States and other nations.
Haiti had been on an extremely fragile and oft-interrupted path toward progress. But the pandemic, and yet another natural disaster, has left it nearly bereft of hope. In 2010, as administrator of the U.S. Agency for International Development, I helped lead the American response when a devastating earthquake killed 200,000 in that country, leaving many buried under rubble. Although U.S. action helped save lives and repair damage, it did little to reform the struggling government or economy. By 2019, Haiti’s economy was shrinking by almost 2 percent annually and people were migrating to Brazil and elsewhere.
Even though it has seen relatively few coronavirus cases — officially just 23,000, clearly an undercount — the effect of the economic crisis, including lockdowns, on this fragile state was severe. In June 2020, the United Nations declared that Haiti’s stability was “in peril,” as youth joblessness passed 60 percent and inflation hit 20 percent. Crisis followed crisis: This past July, its president, Jovenel Moïse, was assassinated; then, tragically, another earthquake struck in August. Today, Haiti appears to be failing, with gang violence surging, children going without schooling, and food scarce. Its residents are fleeing — and 17 American and Canadian missionaries were kidnapped last weekend.
Faced with a global emergency, what did wealthier countries do? Not enough. The most glaring example involves vaccines: Sixty-three percent of residents of high-income countries have received at last one dose of a vaccine, compared with 4.5 percent in low-income countries. (In India, however, more than 50 percent have received one shot, and in Brazil the figure is 63 percent. Haiti is at 0.5 percent.) The world is not on track to achieve sufficient immunity everywhere. Among other reasons, the international community has yet to fund global vaccine initiatives adequately and the lack of transparency of vaccine supply, manufacturing and distribution further hampers the effort.
The international response to the economic crisis has been equally insufficient. The International Monetary Fund estimates that wealthy countries have spent more than 24 percent of their gross domestic products to support their economies, dwarfing what the lower-income countries have been able to do for themselves. (Whereas the United States has spent more than $5 trillion, 27 percent of its GDP, India has spent the equivalent of 4.1 percent of GDP, while in Haiti the figure is 0.6 percent and in Brazil it is 9.2 percent.) Exacerbating this inequity, wealthier nations committed only 1 percent of what they spent at home — $161.2 billion — to overseas development in 2020. Overall, the World Bank and similar regional banks increased lending to lower-income countries far less than they did during the 2008 financial crisis.
As a result, hundreds of millions of people have fallen farther behind in India, Brazil, Haiti and elsewhere. In the United States, the poverty rate declined in 2020 because of fiscal and other measures, but the World Bank estimates that, globally, more than 500 million additional people have been pushed into poverty — living on less than $5.50 per day — since last year. Before the pandemic, many of those people were making enough to improve the lives of their families, drive local economic growth, and provide political and social stability in their communities. No longer.
The global economy will recover eventually. But without greater economic support, this increased vulnerability in the developing world will take years, perhaps a decade, to repair. Until then, as these examples show, the new divergence will stoke national and global instability and create risks for every nation — high-, middle- and low-income alike. Such vulnerability at such a scale also means that many nations are ill prepared for the next crisis, whether caused by a new coronavirus variant, an economic shock or a severe weather event driven by climate change.
Divergence is not inevitable. It’s a choice. Decisions by leaders, governments and institutions caused the divide between wealthier and lower-income nations to widen over the past year and half. That means leaders can choose to narrow it again. We don’t need novel ideas. The world knows what’s required to recover from the blow delivered by the coronavirus: sufficient vaccinations along with the fiscal resources to restore economic growth — precisely what developed nations have pursued at home. Leaders from wealthy countries should recognize that their nations will reliably recover from the pandemic’s health and economic crises only if the whole world does.
Twitter: @rajshah