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.

1. The Global
Economic Crisis
Lecture given by Duncan Green
Head of Research at Oxfam GB
Notre Dame University, September 2009
Part of a series of From Poverty to Power lectures.

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. 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. 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. Social Impact
 Interwoven with food price crisis: food riots etc.
5,000 Kwacha in Zambia buys you……

6. Social Impact (continued)
 ‘Signs of strain’: fears of conflict, crime,
abandoned children and old people; kids dropping
out of school (Bangladesh)

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. 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. Crisis = Danger + Opportunity

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. 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. 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. 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. 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. 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. Further Reading from the Blog
 The rise of the G2 (US + China),
www.oxfamblogs.org/fp2p/?p=482
 UN response to the crisis,
www.oxfamblogs.org/fp2p/?p=377
 How governments are responding in poor
countries, www.oxfamblogs.org/fp2p/?p=308
 Is the global crisis big enough? Shocks and
change, www.oxfamblogs.org/fp2p/?p=309

17. Further Reading and Links
 World Bank crisis website,
http://www.worldbank.org/financialcrisis/
 International Labour Organization ‘global jobs
crisis’,
http://www.ilo.org/pls/apex/f?p=jobcrisis:1:118843
9453829401
 Stiglitz Commission report on crisis and response,
http://www.un.org/ga/president/63/interactive/finan
cialcrisis/PreliminaryReport210509.pdf