NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, April 19, 2012

When the global financial crisis struck in 2008, the World Bank’s social development unit and the Institute of Development Studies in the UK set out to examine in “real time” how around 3,000 people in 17 developing countries coped with the shock of higher food and fuel prices.

The joint project has resulted in a book, Living Through Crises. The book, published last week, covers eight countries – including Bangladesh, Cambodia and Kenya – and research is leavened with lots of voices from the ground.

Two of the book’s editors – Naomi Hossein, from IDS and Rasmus Heltberg, from the World Bank – along with Tim Conway, a senior poverty adviser at the Department for International Development, and Duncan Green, head of research at Oxfam, on Tuesday discussed the study and its policy implications to better prepare for the next crisis.

In a foreward to the book, Prof Robert Chambers says it covers what is so often missing in the development discourse: “The personal and emotional cost, the stress, the exhaustion, the tension within families, and the agony of the cruel choices that poorer people at the margins are forced to make.”

As one Cambodian villager said: “My children dropped out of school a few months ago. I did not want them to stop but they stopped themselves. Now they go out to collect wild mushrooms and morning glory to sell to help the family.”

The researchers found a common set of responses from interviewees. The adults worked for longer hours, ate less and bought cheaper and less nutritious food, switched their children from public to private schools or reluctantly took them out of school altogether. Families skipped medical treatment, sold off assets such as jewellery and animals, and sank deeper into poverty. Some people turned to prostitution, selling drugs or – more commonly – to theft and other crime. Women were particularly hard-hit as they continued to bear the burden of household responsibilities despite experiencing long hours in paid work.

An important finding was that the analysis of macroeconomic indicators alone can be misleading. In particular, the resumption of GDP growth in late 2009 and 2010 in many developing countries gave optimism to governments and donors that the impacts of the crises were relatively short-lived and that the poor were not strongly affected.

However, even temporary shocks to the formal economy have long-lasting impacts. The reason is that the initial impact – incurring debt, foregoing healthcare – is followed up by a second round of negative impacts: sale of assets and more competition in the informal sector.