Even in normal economic times, the poor as a group do not affect public policy. Why then would it be different during a financial crisis, when saving the elites and saving the ‘financial world’ is of paramount importance?
The financial crisis originated in the USA and Western Europe and spilled over to the relatively poorer countries in Emerging Europe, Asia and Africa and to a lesser extent the Latin American countries. The middle and low-income countries were better prepared in 2009 to address the social fallout of the financial and economic crisis than in 1997, but available information from household and labor surveys still find that the people below the poverty line in developing countries have been disproportionately impacted due to the crisis.
To wit, this crisis initially led to credit crunch, lowered export and output growth and increased unemployment and poverty, lowered flow of remittances, reduced fiscal space as revenues fell sharply (due to lower business profits, fall in stock prices, lower commodity prices, lower output) while ‘bailout’ spending increased dramatically (support to industries, fiscal stimulus). The crisis of 2008-09 could be dubbed the ‘Great Reversal’ for when it is ultimately over, it will undoubtedly show that decades of poverty reduction has been eroded. The World Bank estimates that 53 million new poor may have been added to about 2 million already poor in the world.
Within countries, there is uncertainty about which groups will be impoverished during this crisis. Not only have the poor and vulnerable been adversely affected, but also those in middle class, working in export manufacturing and services. As such more people in urban industrial areas may have been affected than rural folks.
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