What have we learned from the Global Economic Crisis?

November 12, 2009

     By Duncan Green     

Last week we (Oxfam International) met to discuss a series of studies on the impact of, and response to, the global economic crisis (GEC). Partly because the discussion took place in Bangkok, the research (and therefore this summary) was very weighted towards East Asia and the Pacific, but here are some initial impressions.

concept-resilience-jan06From studies in 11 countries, if one word emerges with enhanced importance from the GEC, it is resilience. Of countries, communities, households, and individuals. Resilience holds the key to preparing for and coping with shocks, and rebuilding lives afterwards.

In many countries the crisis is far from over – not much sign of green shoots there. But in any case, it is vital to learn the wider lessons on how to build resilience, replenish it where it is depleted, and avoid ‘self harming’ forms, such as selling off assets. This won’t be the last crisis, and one of the lessons is that building resilience prior to the shock to a large extent determines its impact. A list of things that help going into a crisis includes

· Free, universal health and education systems
· Social protection systems in place, not confined just to formal sector workers
· Social capital (family networks, social organizations, faith/religion)
· Natural capital – strong natural resource base that isn’t already over-exploited
· Diversified economic activity (national and household levels)
· Good economic management (low debt, low fiscal deficit, good domestic resource mobilization)
· Crisis-proof credit system (state-owned banks and microfinance institutions have had a better crisis than many private banks)
· Labour market regulation (and rule of law to ensure its implementation) reduces mass lay-offs
· Discriminating integration with global trade and finance
· Commodity stabilization funds or other countercyclical measures during boom times

dog_blog_cartoonAs well as many nasty bites, the research revealed several ‘dogs that didn’t bark’ – things that we expected to happen, based on previous crises, but that have happened differently or not at all. In a surprising number of cases, migrants have failed to return to their villages; people have kept their jobs, albeit with lower wages, fewer hours, and worse conditions; families have managed to keep their kids in school; governments haven’t slashed public services and political regimes have avoided major upheavals (apart from Iceland). Much of this was down to improved resilience, both as a result of lessons learned from previous crises (e.g. Asia 1997/8; Latin America 1980s), which prepared people for future shocks, and due to the ways governments’ and donors’ responses to the GEC have reduced people’s vulnerabilities.

The nasty bites that did come were both expected and unexpected: job losses have compounded high food prices and families (especially women) have reduced their food intake and quality; the informal sector (waste-pickers, home workers, street vendors) has been hit by less demand and more competition; farmers have had to deal with less credit and climate variations, have produced less and provided less labour for the landless poor.

I’m now working on a paper summarizing the case studies, trying to include more material from other regions (where I suspect resilience may be more limited than in East Asia). If anyone knows of particularly good case studies (other than the AfDB, World Bank, IDS and ODI work I’ve already talked about on this blog), from Africa, Latin America, South Asia, Central Asia and Eastern Europe, I would love to hear about them. Over the next couple of months we will be publishing the national case studies, regional summaries, and various other crisis-related material – I’ll keep you posted.