The Impact of Global Economic Crises on the Poor: Comparing the 1980s and 2000s

This paper contrasts the impact of the financial crisis of 2008 on poor countries and poor people with the debt crisis of the 1980s. The financial crisis of the 2000S affected more regions of the world but its effects on particular countries were more heterogeneous, varying according to countries' dependence on different sources of foreign exchange. The worst affected regions were South and Eastern Europe and Latin America. Because of heavy aid dependence and less integration with financial markets, sub-Saharan Africa was less badly affected, while in the 1980s sub-Saharan Africa and Latin America suffered most. In aggregate terms, the fall in gross domestic product (GDP) was much greater in the 2000s than the 1980s. Yet, taken as a whole, the impact on poverty appears to have been less. One major difference between the 1980s and 2000s was the greater autonomy countries had in policy-making, and lesser dependence on the International Monetary Fund, allowing countries to follow more expansionary policies. Government expenditure as a proportion of GDP was generally sustained in 2000s in contrast to severe cuts in the 1980s. Moreover, there were more extensive social support programmes in existence in the 2000s that acted as mild protections against economic downturn. Like the 1980s, there were no real-time data for poverty in 2008 and 2009 at a global level. Global estimates based on simulations show a slowdown in poverty reduction and no increase in actual poverty rates, yet the limited ‘actual’ data reviewed here show an increase in the rate of income poverty, some with social protection programmes in many places, although mostly the increase was more modest than the 1980s. The crisis of 2000s was shorter than the 1980s, so that people and governments could draw on their savings to protect their livelihoods, but if the global recession recurs, the poverty consequences could become much worse. The need for short-term indicators of poverty remains urgent, if we are to be able to analyse the effects of crises on poverty (natural disasters and conflict as well as economic fluctuations) rapidly and accurately, and to design appropriate protective policies.