By the end of 2020, financial markets — mostly in the United States — had reached new highs, owing to hopes that the numerous Covid-19 vaccines would create the conditions for a rapid V-shaped recovery. And with major central banks across advanced economies maintaining ultra-low policy rates and unconventional monetary and credit policies, stocks and bonds have been given a further boost.

But these trends have widened the gap between Wall Street and Main Street, reflecting a K-shaped recovery in the real economy. Those with stable white-collar incomes who can work from home and draw from existing financial reserves are doing well; those who are unemployed or partly employed in precarious low-wage jobs are faring poorly. The pandemic is thus sowing the seeds for more social unrest in 2021.

In the years leading up to the Covid-19 crisis, 84% of stock market wealth in the US was held by 10% of shareholders (and 51% by the top 1%), whereas the bottom 50% held barely any stock at all. The top 50 billionaires in the US were wealthier than the bottom 50% of the population (a cohort of about 165 million people). Covid-19 has accelerated this concentration of wealth, because what is bad for Main Street is good for Wall Street. By shedding good salaried jobs and then re-hiring workers on a freelance, part-time, or hourly basis, businesses can boost their profits and stock price; these trends will accelerate over time with the wider application of artificial intelligence and machine learning (AI & ML) and other labour-replacing, capital-intensive, skill-biased technologies.

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