International Monetary Fund
A Vicious Cycle: How Pandemics Lead to Economic Despair and Social Unrest

Pandemics, social unrest, inequality and economic growth

This paper from the International Monetary Fund (IMF) analyzes the correlations among past major pandemics, economic growth, inequality, and social unrest. The report finds how social unrest increases on average about 12-14 months after pandemics due to lower economic growth and increasing inequality and how all these variables “reinforce each other, forming a vicious cycle”.

This paper analyzes the correlations among past major pandemics, economic growth, inequality, and social unrest using a sample of 133 countries from 2001 to 2018. Key findings of the report are as follows:

  • Past major pandemics, even though much smaller in scale than covid-19, have led to a significant increase in social unrest by reducing economic output and increasing inequality, creating a vicious cycle, in which these variables reinforce each other. The paper provides evidence that higher inequality and lower economic output are persistent and visible effects even after five years of the beginning of the pandemic analyzed. On average, social unrest and risk of civil disorder increases about 12-14 months after pandemics appears.
  • Policy measures are needed to protect the most vulnerable group in the society as the covid-19 crisis will likely trigger this “vicious cycle” in the following years. In particular, the report remarks how useful have been “Unemployment benefits and improved health benefits, such as sick leaves” during the pandemic and how “where informality is pervasive, cash transfers may be the best response”.
  • On the positive side, the paper points out how covid-19 crisis could “provide an opportunity to address longstanding inequalities in access to health and basic services, finance, and the digital economy and to enhance social protection for informal workers".

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