Crises and Inequality: Lessons from the Global Food, Fuel, Financial and Economic Crises of 2008–10

This article points to three main lessons for social policy from the global crises of 2008–10. First, there is evidence that the crises and their public finance ramifications could be characterized as ‘anti-poor’. Second, even as the recovery begins to benefit the banking and financial sectors where the financial crisis began, it may also tend to further marginalize the poor, who are likely at their weakest and most vulnerable point, having undertaken a variety of coping strategies that are difficult to reverse quickly (e.g. drawing down on assets and possibly selling productive ones, taking on more debt, pulling children out of school). Third, if the crisis harms the poor and the ensuing recovery excludes them, then this could exacerbate inequity in human development. To prevent this, there is a need for pro-poor countercyclical fiscal policies, boosting social spending and investments, as well as building on and adequately financing social protection systems, not just for poverty reduction but also to boost resilience against future crises.

In order to prevent poor and low-income families from suffering a double disadvantage from crises, and in order to mitigate possibly rising inequality from a world faced with frequent aggregate shocks, policy makers need to consider specific policy strategies that temper the social and economic impact of aggregate shocks, including through countercyclical social spending and boosting social protection systems.
As millions of poor and low-income families have shifted from private to public providers of education, health and other services, straining existing public sector capacities, now is not the time to scale back on public investments in education and health. Especially, child-friendly budgets will be critically needed in the medium term.
Spending on nutrition programs is a particularly important area for action, given that the combined effects of the food crisis and the global economic slowdown are likely to persist in many parts of the world. Indeed international food prices have shot up again in 2011.
For many countries, the global crisis was an opportunity to channel more resources into their social protection systems. These could be dramatically scaled up (covering more components) and scaled out (covering more families and beneficiaries).
In boosting social protection systems, nuanced policy interventions will be required as these need to address the specific vulnerabilities of different groups in society, for example women.