A signature characteristic of the Covid-19 pandemic has been its unpredictability. While sophisticated epidemiological models have proved invaluable in short-term planning and national leaders have very publicly relied on “the science” to justify policy responses, politics has necessarily driven the choice and timing of interventions with less predictable outcomes. Moreover, the ability of the virus to mutate into more virulent and contagious variants has undermined the value of horizon projections of the diffusion of the disease. Furthermore, attempts to assess the likely economic impact of the pandemic have been hindered by the prevalence of equilibrium models used in forecasting and the difficulty of accounting for disruptive events such as a pandemic. This has left forecasters scrambling to draw lessons from previous economic shocks of equivalent scale and from earlier pandemics most of which occurred in a noticeably less integrated global economy.

Writing anything about the implications of the pandemic while it continues is, therefore, full of attendant risks. To accommodate the uncertainty, the chapter is divided into two sections with a brief postscript included in the conclusion. The intention is to assess the impact of the first two years of the pandemic, although many of the necessary facts are unavailable. The lack of evidence is mostly due to the inevitable delay in assembling comparable information necessary for global analysis but is sometimes a result of the pandemic disrupting the collection of reliable statistics. Even so, the accumulation of evidence points to the very inequitable impact of the pandemic discussed in the first section, and to a sizeable increase in poverty which is considered in the second.

Covid-19 and income inequality

From the very earliest days of the pandemic, the expectation was that it would most disadvantage people who were already poor. That, after all, was the experience with previous pandemics (Alfani 2020; Furceri et al. 2020).

The Huanan Seafood Wholesale Market in Wuhan, where the first cases appeared to be clustered, was frequented more by migrant workers than by Wuhanren with urban residency. The Wuhan lockdown initially hurt daily labourers, denying them income. Then, when the lockdown was quickly extended nationally in China, poorer migrant workers who were caught at home because of the New Year festival were prohibited from returning to work in the cities.