What do a confident young Australian woman from Oxfam and two Andrew Bs with long experience in economic analysis (one at the WB and one at the IMF) have in common? All three think the economic crisis could have been far worse if it weren’t for the fact that many developing countries were in decent fiscal shape when the crisis hit. They also agree that volatility is here to stay and that welfare programs and schemes for the newly jobless should be well targeted and easy to scale up. That way, when the next downward cycle hits, there will be a cushion for vulnerable people.
May Miller-Dawkins, Oxfam’s head of research Down Under, is making the rounds gathering feedback on a draft Oxfam report, “The Global Economic Crisis and Developing Countries: Impact and Crisis.” May made a strong case for keeping the human impact of the crisis foremost. In the words of the draft report:
That conclusion is no surprise coming from Oxfam, a group that vocally presses the WB and the IMF to be more generous in social spending and more forgiving of debt. What was refreshing was that Oxfam was in listening mode—a departure from the usual dynamic where the group often critiques policies of the international financial institutions as too hard -nosed.
Encouragingly, the three institutions exchanged what was clearly complementary knowledge. Oxfam’s findings were rich in human detail and spoke through the voices of affected people; the WB and IMF speakers—Andrew Burns and Andrew Berg—presented a strong macroeconomic perspective on the crisis.
Oxfam would do well to add to their draft report the finding from GEP 2010 that, in the medium term, the rate of growth of potential output in developing countries may be reduced by between 0.2 and 0.7 percentage points annually as economies adjust to tighter financial conditions. Overall, the level of potential output in developing countries could be reduced by between 3.4 and 8 percent over the long run, compared with its pre-crisis path. This implies that efforts must be made to build up stronger domestic financial sectors and more greater regional cooperation in terms of South-South financial flows to buffer poor countries from the continuing fall-out of the worldwide slump.
While Oxfam is spot-on in highlighting that conditional cash transfer programs, more attention to the informal sector and to family networks buffers in time of crisis merit attention, the reality is that the macroeconomic and financial understanding of the crisis is as important as the human dimension. Small scale farming, remittances and informal networks are unquestionably lifelines in lean times, but in our globally integrated world, they are not a panacea.
Finally, everyone who attended the lunchtime event, myself included, should squirm just a bit and recall that most of the world rarely gets a free meal.