That the global economy is nose-diving is now not news anymore. In a report titled, Global Economic Prospects, the World Bank has warned that the Coronavirus pandemic has caused a deep recession – probably one of the worst we have ever seen.
The repercussions are all too clear – world over, millions are losing jobs and businesses are shutting down. In America alone, between March and May of 2020, 22 million people filed for unemployment benefits. When it comes to businesses, the smaller ones face the worst future – since they have little holding power. In the UK, for instance, a research by McKinsey & Company found that small and medium-size businesses are badly affected, and that one in five may not survive past August 2020.
However, while smaller companies suffer, some of the bigger ones (read biggest) have further consolidated their wealth and have seen their incomes and profits expand exponentially during the pandemic. Unsurprisingly, those at the forefront of these gains include those in industries producing healthcare-related goods – producing masks, gloves, sanitisers, disinfectants and ventilators (amongst other things). The shares of companies working on producing forms of treatments or vaccines for the Coronavirus have seen spikes. For instance, Stephane Bancel, the CEO of Moderna, saw a 103% raise in stocks once vaccine testing began. Similarly, Gustavo Denegri, the CEO of DiaSorin, saw a 32% increase in wealth due to the production of swab-based testing kits.
But the gains, of course, are not limited to those specialising in healthcare. The wealth of the world’s billionaires has soared during the pandemic – with a combined $434 billion rise in their incomes from mid-March to mid-May alone. Needless to add, most of these billionaires are founders of Big Tech companies – Jeff Bezos saw an overall rise of $34.6 billion, and Mark Zuckerberg amassed $25 billion over the last two months. The five richest billionaires alone saw a combined $76 billion rise in wealth. Other tech companies like Alphabet (Google) and Zoom have also seen significant increases in their income during the pandemic.
What do you do when you can’t leave your home? You order what you want online, you take to social media more and you watch a while lot of TV. Quarantine, thus, has led to a huge rise in e-commerce, something Amazon has been able to easily capitalize on. However, this isn’t the only sector where the tech giant has been able to expand. Amazon Web Services, the cloud business provided by Amazon, has large conglomerates like Netflix, Zoom, and Fortnite as clients. With more free time, web streaming services like Amazon Prime Video and Netflix have seen a steep rise in subscription and consumption. Similarly, Facebook and its affiliates (Instagram, What-sapp) and YouTube have seen their sharpest user registrations ever, and also some of the high-est ever prices for ad sponsorships. Lastly, with work from home becoming the norm, video con-ferencing has become an every-day reality for many. This has led to greater usage of already large sites like Google (gmail, google meet), as well as an exponential rise in usage as well as share prices for companies like Zoom.
If reliance on tech services wasn’t enough, we now see tech billionaires diversifying and expand-ing into businesses that are likely to profit during the pandemic – namely, healthcare. While most of the world is afraid to invest in new businesses during a recession, these billionaires have the capital, reputation, and wherewithal required to do so. Microsoft, for example, partnered with Adaptive Biotechnologies to launch a virtual clinical study, mapping the immune response to COVID-19 and selling the data to public health officials as well as private researchers and academics.
Google’s MyBusiness dashboard added COVID-19 telehealth links to make informa-tion seamlessly accessible to to medical professionals and healthcare institutions. Elon Musk, too, has been developing and producing new forms of ventilators and sourcing them to hospitals over America, China, and Europe. Tech companies have also increased investment in wearable health devices such as the Apple watch and the Google Fitbit, both of which have seen a rise in sales over the last three months.
The global recession and economic crisis has caused companies across the world to let go, and reduce the wages, of thousands of their employees. The billionaires and their companies are no exception. From Amazon to Tesla to Apple, large tech companies have laid off hundreds of em-ployees over the world. However, this is not where the story ends. The classic Marxist prediction remains: since there is a surplus of labour due to layoffs everywhere, big tech companies have been able to hire new employees at lower wages, allowing them to cut costs, employ people with short-term contracts or on a freelance basis, absolving them of other responsibilities such as healthcare funds, insurances, and severance packages. Cutting costs and hiring cheaper labour allows these large companies to save on large amounts of wage expenditure.
Another crucial factor that has contributed to the ‘rich getting richer’ – albeit not limited to tech giants – is modified government policy. Amidst collapsing aggregate demand, governments around the world have taken significant measures to try and keep the economy afloat, many of which have been significantly beneficial to the 1%. The most obvious of these are changes to tax regimes. The United States, for example, as part of its Coronavirus relief package, allowed own-ers of businesses known as tax-through entities to deduct as much as they want from income unrelated to their business (a sum previously capped at $250,000). While the primary aim of the move was to improve liquidity, its effect has also been to allow the nation’s wealthiest to avoid nearly $82 billion in tax liability. According to the US Congress Committee on Taxation, almost 85% of the benefits will be enjoyed by those making over $1 million or more annually. Several other governments have provided large bailouts to businesses which provide significant em-ployment as part of their financial stimulus. While the chief focus for such schemes has been industries badly hit by the pandemic – particularly the airline business – their impact has not been limited to these, with many giant equity firms benefiting (the Apollo Group, for example, soared 80% following the aid). Through business, and through policy – the rich only get richer.
While this conclusion paints an uneasy picture, it is also important to point out that not all bil-lionaires have profited from the pandemic. Industries like travel, hospitality and retail have been hit hard, with household names like Ralph Lauren losing over a 100 million since the lockdown began. And it’s not over just yet. No one can predict how long the recession will last and to what extent the pandemic will affect businesses – some may be able to bounce back, others might sink. What is clear, though, is that the Big Tech not only has the holding power but will also come out as the winners of the pandemic.