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Photo illustration: Sarah Grillo/Axios. Photos: Scott Eisen/Getty Images

The failure of rich countries to share vaccines and financial assistance with poorer ones during the pandemic will exacerbate the rise in global poverty and could come back to bite them, Nobel Prize-winning economists Esther Duflo and Abhijit Banerjee tell Axios.

Why it matters: Duflo initially believed the pandemic would produce a “more cooperative world order” as rich countries felt compelled to show solidarity with the developing world, potentially boding well for future collaboration on issues like climate change. Now she fears the opposite.

  • With the critical COP26 climate summit approaching and "the rich world so brilliantly demonstrating how it doesn’t care about one thing besides itself," Duflo says, "you could imagine a developing country to come very uninterested in doing their bit."
  • "There’s very significant resentment that has built up," Banerjee adds, referring to the hoarding of vaccines by rich countries. "It seems to me there will be a reckoning. I’m not sure in the end where that will land."

Duflo and Banerjee — MIT professors known for their work on poverty, and also a married couple — have long advocated steps like the direct cash transfers many countries have employed to support the poor during the pandemic. But they note that poorer countries found their hands tied.

  • Several countries, including Togo, developed mobile payments systems to carry out such transfers but lacked the funds to make full use of them.
  • Rich countries have spent more than 20% of GDP on average on financial support during the pandemic, Duflo notes. Developing countries, operating under tighter fiscal constraints, managed just 2%.
  • Extreme poverty rose around the world last year for the first time since 1997, with an additional 120 million people falling into extreme poverty, per a World Bank estimate.

Driving the news: The IMF this week revised its 2021 growth projections upward for rich countries and downward for developing countries. Low vaccination rates have tempered hopes that low-income economies would come roaring back and the increase in poverty would be quickly erased.

  • Most people who have fallen into poverty during the pandemic were already in fairly precarious positions, living off their weekly earnings in industries like construction, transportation or agriculture, Banerjee says. For millions, that income dried up during the pandemic.
  • "One could imagine a very fast revival," he says, as such industries ramp back up — but that won’t be fully possible without widespread access to vaccines. Meanwhile, countries like Indonesia and Bangladesh are still having to choose between spikes in hunger or in cases.
  • Banerjee is particularly worried about the implications of school closures that are now dragging into a second year. "We know that one year of school increases lifetime earnings by 7%," and that many kids who leave the classroom for two years will never return, he says.

Duflo and Banerjee contend that rich countries now have an enormous opportunity to expand access to vaccines and, with interests rates low and economic growth booming, to increase their aid to developing countries.

  • "Nobody is talking of expanding aid. I think the psychology, unfortunately, in rich countries somehow — even though the U.S. is going to grow faster in this year than it has in modern memory — is that we are in dire straits and we need to keep resources," Banerjee says.
  • "I find it extremely depressing, I must say. The reaction seems just mean-spirited."

Worth noting: Rich countries including the U.S. are now donating doses, but have moved fairly cautiously while also buying up additional supply for potential boosters at home.

  • Duflo and Banerjee also lament the slow progress on providing cash flow to developing countries via "special drawing rights" at the IMF.

Go deeper

Nov 5, 2021 - Podcasts

Why it’s so hard to tax the uber rich

Yesterday, we talked about President Biden's plans on prescription drug prices and what that could mean for all of us. Another key platform the president campaigned on was taxing the rich, but that's complicated.

  • Plus, behind the scenes of the UN climate summit in Glasgow.
  • And, more reasons working moms feel like throwing in the towel.

Guests: Axios' Felix Salmon, Dave Lawler and Erica Pandey.

Credits: Axios Today is produced in partnership with Pushkin Industries. The team includes Niala Boodhoo, Sara Kehaulani Goo, Julia Redpath, Alexandra Botti, Nuria Marquez Martinez, Alex Sugiura, Sabeena Singhani, Lydia McMullen-Laird and David Toledo. Music is composed by Evan Viola. You can reach us at podcasts@axios.com. You can text questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.

Go deeper:

Updated Nov 3, 2021 - Axios Events

Watch: A conversation on COP26 as it unfolds

On Wednesday, November 3rd, Axios World editor Dave Lawler and energy reporter Ben Geman discussed the COP26 United Nations climate conference as it unfolds, featuring UN Foundation President & CEO Elizabeth Cousens and UN Development Programme Administrator Achim Steiner.

Elizabeth Cousens highlighted environmental agreements from the conference that had stood out to her so far, how to transform climate-related conversations into tangible action, and how she would ultimately measure the success of the conference.

  • On advancements made at the conference so far: “We’ve already seen important advances in Glasgow this week...the direction of travel continues to be the right one. Everyone’s point of reference now is net zero. 90% of the global economy has made net zero pledges, that’s a critical development. Now all the focus is turning to delivery, to implementation, to how do we get to the goal of net zero as countries and others have set them.”
  • On defining successful climate action moving forward: “There are things we should have done 10, 20, 30 years ago that we didn’t do. We didn’t do them, but we can do them today, we can do them tomorrow, we can do them the next day. I think we’re going to get quite far in this COP, however far we get, we need to go farther the next day.”

Achim Steiner illustrated the environmental concerns of developing countries, how to address climate-related issues amidst the continuing pandemic, and how to improve financing processes for countries adapting to climate change.

  • On the economic barriers to investing in climate during the pandemic: “We are still in the midst of a pandemic, and for many developing countries, it’s not just the health crisis that it triggered, but it is really a social and economic crisis also...so that is an enormous constraint on them being able to invest in really making these transitions in the energy sector, in the mobility sector, in agriculture and land use.”
  • On the need to shift climate financing discussions: “International climate financing discussions have to move from this notion that this is some form of philanthropy or perhaps some short-term donations. We need to take a mindset of co-investing in one another because the vulnerability of hundreds of millions of people exposed to the risks of climate change will affect the global economy, will affect us all.”

Thank you Bank of America for sponsoring this event.

WHO: Europe is again at epicenter of pandemic

World Health Organization European director Hans Kluge. Photo: Riccardo De Luca/Anadolu Agency via Getty Images

Europe is "back at the epicenter of the pandemic" and approaching record COVID-19 case numbers as the Delta variant spreads and vaccination efforts stall in several regions, a top World Health Organization official warned Thursday.

The big picture: Germany reported Thursday its highest number of new coronavirus infections in one day since the pandemic began (33,949). New cases across Europe have risen 55% in the past four weeks, per WHO European director Hans Kluge. "We are at another critical point of pandemic resurgence," he warned.