From Poverty to Power: The Global Economic Crisis


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Part of a series of lectures by Duncan Green, Head of Research at Oxfam GB on key issues raised in his book From Poverty to Power.

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From Poverty to Power: The Global Economic Crisis

  1. 1. The Global Economic Crisis Lecture given by Duncan Green Head of Research at Oxfam GB Notre Dame University, September 2009Part of a series of From Poverty to Power lectures.
  2. 2. Main Messages The global financial crisis has become an economic and now a development crisis Social impact in poor countries is serious and multi-faceted Origins of the crisis lie in deregulation and financialization of the global economy The crisis brings both dangers and opportunities for change
  3. 3. Where are we at?Growth and Poverty The more integrated the countries are, the faster/deeper the contagion Almost no economy is fully decoupled Crisis has knocked 5.3% off GDP for 115 low and middle income countries in 2009, and a predicted 3% in 2010 Growth collapse greater in less poor countries, so reduces overall poverty impact a bit = +50m on < $1 a day in 2009 (another 39m in 2010) Figs for < $2 a day 64m and 120m This is superimposed on a downward trend – Source: Chen and Ravallion
  4. 4. Trade and Finance drying up Africa loses $250bn in exports in 09 Commodity prices (Zambia/mining tax) Garment other export industries (Bangladesh v Cambodia) Tourism (Madagascar) Financial flows (all) Remittances (Pacific islands, Bangladesh)
  5. 5. Social Impact Interwoven with food price crisis: food riots etc. 5,000 Kwacha in Zambia buys you……
  6. 6. Social Impact (continued) ‘Signs of strain’: fears of conflict, crime, abandoned children and old people; kids dropping out of school (Bangladesh)
  7. 7. Social Impact (continued) 40 million jobs lost worldwide (ILO) and unemployment lags growth in recoveries Women workers in global supply chains: women are often first to be laid off, with employers refusing to pay outstanding wages and evading legal obligations to give notice and pay compensation. Migrant workers: illegal migrants are particularly at risk both from redundancy and abusive employers; in Vietnam and China, families are taking girls out of school to try and raise family incomes; plus returning to places of origin, or being subsidised from home
  8. 8. How did we get here? Financialization of global economy post ‘71 Asset bubbles in North Integration of global economy means countries rise and fall together Lack of systemic oversight
  9. 9. Crisis = Danger + Opportunity
  10. 10. So is this the Great Depression,or the 97-8 Asian Financial Crisis? Some shifts have accelerated or become more likely Others have slowed down or become harder Some could go either way
  11. 11. What gets easier/more likely? International – Rise of China and the G2 – G20 replaces the G8 – Some level of de-financialization National – Washington Consensus a damaged brand, esp. in developing countries – Hence re-regulation and an enhanced role for the state (e.g. industrial policy) – Stressing role of domestic and regional markets > exports – Switch to domestic resource mobilization (e.g. tax)
  12. 12. What gets harder/becomes less likely? International – Aid volumes likely to slow or fall – Less attention to climate change National – Fiscal pressures on government spending on essential services, agriculture etc – Recession makes small reforms harder – Low growth increases risk of conflict (Collier) – Some social partners (e.g. trade unions) weakened by recession – MDG progress likely to slow
  13. 13. And some things could go either way Aid: demand will rise as supply falls, innovative financing may square the circle Foreign investors may get more powerful (Zambia) or weaker (tax havens) Privatization may fall out of favour (critique of Washington Consensus) or grow (fiscal crisis) IFIs become more powerful again, but have promised reforms
  14. 14. Principles for a Sustainable Recovery Well-being is the end, growth just one of the means Assess impact on people and planet before legislating Finance must be servant, not master Build states, not undermine them Process matters
  15. 15. Policy Implications for Governments Be counter-cyclical and poverty-focussed – But most LDCs hitting fiscal crunch, so more aid is needed Small (and medium) is beautiful Jobs (quality and quantity) crucial Expand social protection and get cash into the hands of the poor In the longer term – Build the fiscal covenant (i.e. sort out tax) – Regional strategies for the worst hit countries – Diversify economy
  16. 16. Further Reading from the Blog The rise of the G2 (US + China), UN response to the crisis, How governments are responding in poor countries, Is the global crisis big enough? Shocks and change,
  17. 17. Further Reading and Links World Bank crisis website, International Labour Organization ‘global jobs crisis’, 9453829401 Stiglitz Commission report on crisis and response, cialcrisis/PreliminaryReport210509.pdf