Inclusive crises and exclusive recoveries?

Ronald U Mendoza , 9 June 2010



It has now been about two years since the first international food price shocks erupted in 2008. Even as recent news reports have begun to celebrate the first tentative signs of global economic recovery, a growing number of analysts have begun to warn of its fragility. Some point to the far more tenuous nature of a public-sector-led recovery (Calvo and Lu-Koong 2010), while others note the rising risks of debt problems in the horizon, notably in the Eurozone (Baldwin 2010, Cabral 2010, Reinhart 2010).

Clearly the economic aftershocks from the complex crises of 2008-2009 are still playing out. But what about their social implications?

The answer to this question lies not just in the presence of a recovery, but also in its nature. Evidence from protracted crises and difficult economic adjustments in the past show that their most pernicious effects on human development unfold over time – especially if economic recovery is tepid and not inclusive (Cornia et al. 1987, Lustig 2000). There is a risk that history will repeat itself, as millions of poor and low income families find themselves at their weakest and most vulnerable point in the aftermath of the crises. In a recent UNICEF policy research working paper (Mendoza 2010), I surveyed the emerging evidence on household coping strategies in 2009, based on field reports, community based monitoring, and surveys by governments, the UN family of agencies, and other development organisations. I find that in many developing countries and regions, there is evidence of reduced human capital investments and other harsh family coping strategies, notably among the bottom quintile (Figures 1, 2, and 3).

Figure 1. Turkey: Share of households turning to certain severe coping strategies

Source: TEPAV, UNICEF and World Bank (2009:1).

Figure 2. Philippines: Share of households struggling to cope by lowering expenses, tapping funding, and looking for additional income

Source: Lumbe and Msiska (2010:24).

Figure 3. Malawi: Household perception of the time to recover from income decline

Source: Lumbe and Msiska (2010:24).

Children and the future

Many of these harsh coping strategies were precursors of detrimental child outcomes in past crises. The emerging evidence is thus a premonition of a recovery process that is likely to be protracted and is not necessarily inclusive for the poor. Ironically, the very same coping strategies that the poor turn to in order to survive and weather the crises – taking on more debt, working longer hours and extra jobs (and thus investing less time in care activity), pulling children out of school (and sending children to work), eating less (or less nutritious) food, and selling productive assets – are often also among the causes for their inability to recover quickly.

Promoting a more inclusive social and economic recovery requires robust social spending and investments. Part of these resources could also be used to boost and develop social protection systems. These are investments that would channel resources to child and maternal nutrition, education, health, and other human capital investments. These types of policies are not only critical in protecting the most vulnerable, they will also be crucial in underpinning open market economies that will likely be subject to recurrent bouts of crises and instability. Markets need these public goods to maintain social and economic cohesion and stability. By boosting the capabilities of those at risk of being marginalised in the market economy or excluded in social and political discourse, they are also critical in promoting a more inclusive social, political and economic development trajectory for countries.

Fiscal stimulus falling short

Yet initial fiscal stimulus responses to the crises appear to fall short of these policies. At least one study by colleagues at the United Nations Development Programme covering about 50 stimulus packages revealed that only about a quarter of each, on average, is allocated to the social sectors (Zhang et al. 2009). Infrastructure investments dominate, while gender responsiveness appears minimal – a mismatch with the high risks faced by women who are among the worst affected by the crises. Further, what governments do allocate to the social sectors are now also at risk, as public budgets across the world are squeezed by declining tax and other revenues. If the food crisis, fuel crisis and financial crisis were the first three waves of crises – then the fourth wave is an impending public finance crisis now sweeping across developing and even some industrialised countries.

Stronger social budgets need to be carved out even under these tighter fiscal conditions. Countries still have options to mobilise resource for investing in children, such as raising natural resource and luxury taxes, reallocating resources towards social sector spending and drawing down on reserves. Often, the problem is not an absence of options – it is rather one of prioritising social spending when these options are being explored. Because of the political economy challenges of budget work, transparent, participatory, and technically informed processes outlining concrete policy options will be critical in the months and years to come.

The high cost of inaction

Of about 175 countries for which data are available, only about 14 exhibited an increase in average real growth between 2007-2008 and 2009-2010. Numerous developing countries with already high youth populations suffered dramatic declines in real growth, weakening the prospects for social and economic advancement for millions of youth (Figure 4).

Figure 4. Cross plot of youth (% national population) in 2010 vs. percentage point difference in GDP growth between 2007/8 and 2009/10

Source: Komarecki, Mendoza and Murthy (2010:9)

Tomorrow’s youth – today’s children and infants – are at risk. Roughly about half of the developing world faces imminent or anticipated youth bulges within the next 20 years. By 2030, about 90% of the world’s youth – well over a billion young people – will be living in the developing world. They are infants and children in some of the poorest countries today – many of the very same countries struggling to cope with the aftershocks of the food and fuel price crises, as well as the global slowdown.

Stock markets will bounce back; but children who miss an important window of nutrition, education, and care will shoulder the scars of the recent crises for the rest of their lives. Stronger social budgets, more nuanced and gender responsive policies, and where necessary support from the international community, could help to ensure that social and economic recovery from the most severe crises in recent history will be much more inclusive than in the past. Policymakers face an important challenge – their actions today could mean the difference between an educated, healthy, and dynamic youth cohort fuelling innovation and consumption in the world economy, or the next generation plunged into poverty.

Disclaimer: The views expressed here are the author's and do not necessarily reflect those of UNICEF.


Baldwin, R (2010), “A re-cap of VOX columns on the Eurozone crisis”,, 13 May.

Cabral, R (2010), “The PIGS’ External Debt Problem”,, 8 May.

Calvo,G and R Lu-Koong (2010), “US Recovery: A New Phoenix Miracle?”,, 12 April.

Cornia,GA, R Jolly, and F Stewart (eds.) (1987), Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth, New York: Oxford University Press.

Komarecki, M, RU Mendoza, and S Murthy (2010), “When the global downturn hits the youth bulge: Challenges and opportunities for (female) youth employment”, Paper presented at the UNICEF-New School University Conference on “Adolescent Girls, Cornerstone of Society: Building Evidence and Policies for Inclusive Societies, 26-28 April, Theresa Lang Student Center, The New School University.

Lustig,N (2000), “Crises and the Poor: Socially Responsible Macroeconomics”, Inter-American Development Bank, Sustainable Development Department, Poverty and Inequality Advisory Unit Working Paper No. 108.

Mendoza, RU (2010), “Inclusive Crises, Exclusive Recoveries and Policies to Prevent a Double Whammy for the Poor”, UNICEF Policy Research Working Paper, New York.

Reinhart, C (2010), “From financial crash to debt crisis”, Vox Talks with Romesh Vaitilingam,, 9 April.

Zhang, Y, N Thelen, and A Rao (2009), “Social protection in stimulus packages: Some evidence”, UNDP Working Paper, New York

Topics: Poverty and income inequality
Tags: economic aftershock, fiscal stimulus, recovery

Ronald U Mendoza

Associate Professor of Economics, Asian Institute of Management

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