Economy

Covid-19 will result in greater income inequality and unemployment, says Kaushik Basu

M Ramesh | Updated on April 02, 2020

Kaushik Basu   -  Arunangsu Roy Chowdhury

Sees increasing automation in post-coronavirus world

Coronavirus will go, but the kind of world it will leave behind will be a very different one than now. There are widely varying views on how the new world will look, with each expert looking at it from his or her perspective.

Dr Kaushik Basu, Professor of Economics at the Cornell University, US, and former Chief Economic Adviser to Government of India, believes that income inequalities will rise after the coronavirus episode.

He feels, “we will come out into a much more automated world.” These months of working from home “will cause a jump in our level of comfort” with technologies such as Zoom, Skype and Facetime.

"We may begin to see many more universities where students do not come to campus but turn on their zoom sitting at home,” Dr Basu said.

Impact on labour, health sectors

All this will inevitably have consequences on labour. “In the last 40 years, the world saw a steady decline in the relative demand for labour,” Dr Basu, a former Chief Economist in the World Bank, observed in an email interaction with BusinessLine.

There will be a sharp increase in the trend (of decline in the relative demand for labour). “This will create new opportunities but also greater income inequality and higher unemployment,” he said, adding that countries that are able to re-train their workers to do more creative work would fare better.

“I also think that the health sector will see huge growth — more doctors, more nurses, more pharmaceuticals and more medical research. Nations that gear themselves better for this will do well and by the same argument, others will do worse,” Dr Basu said.

Asked about India’s prospects in the post-coronavirus era, Dr Basu stressed on upholding democratic institutions. “If India can hold on to its democratic institutions, it can come out on top”.

“Democracy is harder to manage but if done well during times of crisis, it becomes a source of great strength,” he said.

Climate change too

While Dr Basu foresees a rise in income inequality arising out of increasing automation in the post-coronavirus world, others see climate change leading to the same effect.

Writing in CarbonBrief, economists at France’s Center for International Research on Environment and Development (CIRED), Aurélie Méjean, Nicolas Taconet and Céline Guivarch note that climate change could reverse the declining trend in income inequalities seen in recent decades.

“The world today is less unequal than it was in 1990,” they said. However, this trend could reverse if the costs of climate change mitigation “disproportionately fall on the poorest.”

Published on April 02, 2020

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