What is a K-shaped economic recovery and is the world heading out for the same as part of its recovery from the pandemic?
The recovery shapes
There are many forms of economic recovery like a V-shaped recovery, U-shaped recovery, prolonged U-shaped recovery, W-shaped recovery or L-shaped recovery. The growth rate graph resembles the shape of the letter.
For example, a V-shaped recovery means a quick and sustained rebound from a recession after a sharp decline, while a U-shaped recovery occurs when the economy does not immediately bounce back from recession but remains in a declining trend for a few quarters before bouncing back again.
Now, why are we talking about this suddenly? Because we have been reading a bunch of news in the previous months about how the billionaires are competing with each other to top the world’s richest positions. Along with this, we have also been reading about the rising unemployment and sufferings of small businesses. This makes one wonder about the imbalance between the two scenarios.
Amid the Covid-19 pandemic, there has been talks of another shaped recovery that the world may be seeing i.e., the K-shaped recovery. What does it mean?
It means that a particular economy gets split into two where one part of the population recovers quickly while another part ends up suffering. It suggests the growing gap between the rich and the poor. For example, sectors like technology, pharma, retail are said to be the top arm of the K-shaped economic recovery in which they are doing better in the times of pandemic. On the other hand, food, entertainment, leisure, airline, hospitality, restaurant, real estate are some of the sectors that have taken a major hit.
Why is this bad? The rising income inequality which was even there before the pandemic has now accelerated even more. And the previous months have shown evidence of the same.
The likes of technology giant owners like Jeff Bezos, Elon Musk, Mukesh Ambani, Mark Zuckerberg have all seen a soaring net-worth during the pandemic, making them the world’s richest. The year has been a moneymaking one for the richest. Despite the pandemic and widespread layoffs that have disproportionately affected the world’s working class and poor, as per Bloomberg the members of the Bloomberg Billionaires index have collectively gained 23% or $1.3 trillion since the year began.
Last month, a report covering over 2,000 billionaires from 43 markets in the Americas, Europe, Middle East and Africa (EMEA) and Asia Pacific countries stated how the billionaire wealth reached record high levels amid the coronavirus pandemic.
Coming to the bottom arm, small businesses across industries have lost businesses, witnessed huge layoffs, with many of their operations shutting down. The middle income and poor section of the countries have also been suffering the most.
The growth story
Even though income inequality isn’t a new story, the rising pace of it during the pandemic is a big concern. Also, even if we eventually do not witness a K-shaped recovery after all that many critics claim, one cannot dismiss the fact that the pandemic hasn’t been kind to many who are still experiencing the hardship of 2020 and that hasn’t been a pretty sight.
Many countries’ governments have been claiming while announcing stimulus measures that their respective economies will witness a V-shaped recovery. Now, what kind of economic recovery will the world actually see depends on how all the sectors emerge out as the world now tries to pick up its broken pieces to build its own growth story.