Topic updates

Risks to inequality from premature fiscal austerity

Geoff Riley

3rd June 2021

Premature austerity is self-defeating from both a macro and an equity standpoint according to new research from economists working for the IMF.

The authors argue that continued investment in green and digital infrastructure can help to sustain a posit-pandemic recovery. Severe fiscal austerity measures after a pandemic are associated with inequality increases three times greater than expansive fiscal policy. The research analysed evidence from five previous outbreaks (SARS, H1N1, MERS, Ebola, and Zika).

Suggestion for follow-up reading: Pandemics and inequality: A historical overview (October 2020) - this paper argues that inequality and poverty are likely to increase in the aftermath of the Covid-19 crisis.

See also this article (December 2020) published in the Financial Times: How the pandemic is worsening inequality

And this research from Oxfam (January 2021): The Inequality Virus

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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