When you live in Australia it’s easy to think that the global economic crisis was a speed bump – something that upset growth and required navigation, but not a long term setback. As part of an international research project unveiled today, Oxfam heard a vastly different perspective from more than 2,500 people in poor countries in the Asia-Pacific region and further afield in Africa and Latin America.
Many governments in these regions used fiscal policy to stimulate their economies and maintain social spending. While initially spending held up, poor country revenues slumped, through falling direct and indirect taxes, and royalties from commodities such as oil and minerals.
Overall, the crisis has left poor countries with a $65bn fiscal hole and in 2010 that deficit is forcing cuts in health and education.
Despite G20 and donor country promises to help poor countries cope with the global economic crisis, only $8.2bn in grants has made its way to poor countries – plugging only 13 per cent of the fiscal hole. Poor countries that were already failing to meet the Millennium Development Goals on reducing poverty and guaranteeing health, education and other aspects of a decent life, are being pushed further off-track.
If aid donors and international institutions do not buck the historical trend of cutting aid after a crisis, the prospects for many poor countries look grim.
During the crisis people in poor countries lost jobs or customers, had their hours and wages cut, or sold their crops for less. Add to this the high food prices families in poor countries struggled with in 2007-2008 and the result for many was a slide deeper into poverty.
In countries such as Thailand and Cambodia, women employed in the front line of the world’s consumer supply chains lost their jobs in large numbers. Many others suffered reductions in work hours, or were pressured into less secure contracts. In households, women reported eating less to provide for husbands and children and taking on extra work to prop up the family income.
What was striking in the interviews, focus groups and surveys, however, was the level of resilience that many individuals, families and countries displayed. In a surprising number of cases, migrant workers overseas continue sending money home, households continue to feed themselves from their gardens or farms, and families are keeping their children in school.
Resilience was stronger in countries that had strong social networks (Indonesia, Pacific Islands), diversified economies (Vietnam) fiscal space (the Philippines, Thailand) and had invested in health care and education (Brazil, Indonesia, Ecuador, Botswana) before the crisis hit.
However, resilience had its limits. Assets, once depleted, take years to recoup; working extra hours in second or third jobs leaves a legacy of exhaustion and loans taken on accumulate into crushing debt.
The crisis has highlighted the importance of managing risk and volatility at all levels. It is not enough to pursue economic growth now, and social welfare later – the two must come together in pursuit of improved well-being.
Poverty is not just about income, it is about fear and anxiety over what tomorrow may bring. If one of the lessons from this crisis is that reducing vulnerability and building resilience are the central tasks of development, then future crises may bring less suffering in their wake.
This article was originally published in ABC’s The Drum.