The pandemic did widen wealth inequality, but not in the way you think
If you’ve been reading the news about coronavirus, you might have seen outlets like CNBC and Forbes reporting that billionaires grew their wealth by $434 billion during the first two months of the pandemic. They both cited a study by an organisation called Americans for Tax Fairness. And if you were attentive, you might have noticed that the same organisation also published a study two months later measuring the impact of the pandemic on billionaire wealth—this time, from March to July. At that point, they reported an even bigger $637 billion increase. Media outlets like Business Insider and others were even quicker to jump on this claim, with The Guardian releasing an Op-ed from Bernie Sanders citing the $637 billion statistic. But the study neglected to provide all the necessary information for a clear and transparent picture.
Here’s how the study worked: it measured the increase in net worth from the start date of the pandemic to July, adding up the values obtained for all the 600+ billionaires included in the study. The study classified the pandemic as starting on March 18 and concluded that the total wealth of America’s billionaires increased by $637 billion during the pandemic, with Amazon CEO Jeff Bezos, Facebook’s Mark Zuckerberg, and TESLA’s Elon Musk each reporting eleven-digit gains. Meanwhile, over 40 million Americans filed for unemployment and tens of millions were out of a paycheck.
The problem with this study was its misleading adoption of the term ‘during the pandemic’. Think about it logically: the pandemic did not start on March 18. The spread of the virus—and the financial impacts it kicked off—were felt before then. By February 2020 already, investors were losing trust in the market, and this led to stock values tanking until they hit a low on March 23; with the richest 1% owning 50% of stock, they lost the most from this crash. It was then from this ultra-loss that they began to rise back gradually; in other words, the study ignored the initial losses from the stock market early on in the pandemic.
First off, let’s establish who did reap massive profits from the pandemic: tech companies. As the world shifted toward an online medium of communication, softwares like Skype and Teams, both owned by Microsoft, saw a spike in use. And it would be impossible not to mention Zoom CEO Eric Yuan, whose video platform creation saw his net worth jump 396.5% to $17.7 billion.
This is also where Amazon comes in. As physical shops became obsolete, people all over the world moved to the online retailer Amazon to order items to be delivered to their home. This led Jeff Bezos, its CEO since inception, to cash in on $87.1 billion—making him the pandemic’s biggest financial profiteer out of anyone on Earth.
The second group who profited from the pandemic were large retailers. As households across America began stocking up on basic goods like toilet paper and food, shopping outlets like Walmart and Target saw their profits balloon upward. Another factor behind this is that during times of crisis, people flock to large outlets that they know to be trustworthy. This hurts smaller businesses and stores that lose out on customers, causing large numbers of ordinary Americans to lose income to a concentrated handful of mega-rich billionaires. And therein lies the crucial problem underpinning this issue: the pandemic has lead a small number of big corporations to eat up everyone else’s share of the market.
The study cited by the outlets also doesn’t take into account dispersion—how evenly the change in wealth is distributed. For billionaires who weren’t involved in tech or retail, the impact on their total finances is less clear; some may have lost money from shares due to the stock market crash, while others may have bounced back in good time. Reports show that on average, they did see a net increase in wealth by betting on the rebound of the stock market, but it wouldn’t have been nearly as high as $637 billion.
We need to change the way we think about this issue to properly understand it. The catchy ‘$637 billion-claim’ made headlines, but articles that claimed to explain the reasons behind it often defaulted to listing numerous and hashed-out examples of which famous billionaire made how much, instead of providing a deeper explanation for how a pandemic caused a specific minority of the population to get richer. In a video called, “How Billionaires Got $637 Billion Richer During The Pandemic”, Business Insider brings up that companies like Amazon haven’t paid federal taxes for two years in a row. Other sources have blamed tax havens, despite the fact that both of these factors have have always existed and are independent to the pandemic. They act as separate problems; and they require long-term solutions that extend beyond the current global crisis.
Here’s the twist to this story: the issue isn’t just that billionaires got richer during the pandemic. It’s that a smaller handful exponentially grew their market share, taking away income and employment from millions of Americans who need it far more.
After such a huge loss in February and early March, it was only natural that the stock market would rebound to its normal state after a period of time, leading to the false impression that those who invested in it made a much bigger profit than they really did. Only by recognising this can we become unmoored from misconceptions and move towards fixing the real issue: how a sub-section of mega-corporations, like Amazon, Walmart and Zoom, have replaced other interactions between consumers and companies throughout daily life.
And there’s more. There are other, deeper, specific problems that NPR and the other outlets neglected to mention, like the fact that relief bills that were supposed to help small businesses actually ended up in large companies’ pockets. The Paycheck Protection Program, signed by President Trump, caused a surge public outcry due to the fact that large sums of money were given to large corporations that had been legally or financially struggling before the virus; Shake Shack, which received $10 million, was one of the few to disclose the amount they received and promise it pay it back. Dozens of big companies also received large payouts, despite some having previously reported that they were able to raise large sums of money through private means.
Secondly, there are allegations that Trump used the pandemic to engage in insider trading with pharmaceutical companies. Insider trading is a practice where an individual or entity trades a company’s public stock based on insider information about the company; and NowThis News reports that pharmaceutical companies like Vaxart invested money into their own stock just a few weeks before Trump announced that they had been selected to develop a vaccine—driving the value of their stock to explode sixfold. Trump has been plagued with allegations of insider trading for over a year now, and if this is true, it would be another example of large and powerful businesses exploiting the political system for their own gain. If media outlets reported on this, public awareness about the pandemic and the ultra-wealthy would become much more comprehensive, paving for greater accountability for those involved.
It’s time for outlets to reframe how they discuss the disparity in billionaire wealth before and after the pandemic; misleading statistics make a punchy headline, but they don’t contribute a meaningful impact to the discussion surrounding crisis-fuelled wealth inequality. Instead, we start providing useful and deeper explanations. Only then can we begin to pick up the pieces left by the crisis and start to dismantle the Pandora’s box of problems it’s opened.