Central bank group calls for urgent action to tackle inequality

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A new study by the so-called central bank of the world’s central banks, the Bank for International Settlements (BIS), has called for urgent action to tackle growing social inequality, warning that the problem is fueling a dangerous cycle of recessions and poverty.

While government policies have been largely blamed for rising inequality since the 1980s, central banks have also come under fire in recent years for fueling huge gains in the stock market with ultra-low interest rates and asset purchase schemes.

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The BIS, analyzing 182 recessions in 70 countries, found that even six years after a downturn, the income share of the poorest 50% in an impacted economy remained 0.3% below the pre-recession level, on average, while for those in the wealthiest 10% it was still 0.7% higher.

More unequal economies experience deeper recessions, which in turn further increase inequality, the analysis showed. Less progressive taxes and social support programs in many countries also compounded the problems.

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“It is increasingly evident that inequality has evolved from an academic issue to an urgent political issue,” the BIS document said, adding that one of the main risks for central banks is that their policy tools become less effective.

The BIS study showed that low-paid workers in some countries were more than three times more likely to lose their jobs during the Covid-19 pandemic, while rising inflation was now disproportionately hitting the poorest households.

Source: CNN Brasil

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