The Human Cost of a Global Crisis

The full humanitarian impact of the world economic crisis became clearer this week, as UN and global agencies warned of huge job losses, a rise in the number of people afflicted by chronic undernourishment, and the "extraordinary price" being paid by children and other vulnerable groups as mass austerity programs constrict the developing world.

In a report prepared with the Organization for Economic Co-operation and Development (OECD) for G20 labor ministers meeting in Paris on Monday, the International Labor Organization said the group of developing and developed nations had seen 20m jobs disappear since the 2008 financial crisis. At current rates it would be impossible to recover them in the near term and there was a risk of the number doubling by the end of next year, it said. "We must act now to reverse the slowdown in employment growth and make up for the jobs lost," ILO director general Juan Somavia said. "Employment creation has to become a top macroeconomic priority."

The World Disasters Report, published by the International Federation of Red Cross and Red Crescent Societies, concluded that the number of people worldwide who are undernourished must be at least 1 billion. Of these, around 60% are women.

A total of 178 million children under five have stunted growth as a result of lack of food, it found. The annual report, which this year focuses on hunger and malnutrition, says the rise in basic food prices, the impact of changing climate and a rise in population have led to the increase in hunger.

Meanwhile, a study by the UN children's fund, UNICEF, said there would be "irreversible impacts" from wage cuts, tax increases, benefit reductions and cuts in subsidies that bore most heavily on the most vulnerable in low-income nations. It found that between 2010 and 2012 a quarter of developing nations were engaged in what it called excessive belt-tightening, reducing spending to below the levels before the financial crisis began in 2007.

Both Christine Lagarde, the IMF managing director, and Robert Zoellick, president of the World Bank, said last weekend that their organizations were seeking to build social safety nets to protect the weakest. But UNICEF said: "In the wake of the food, fuel and financial shocks, a fourth wave of the global economic crisis began to sweep across developing countries in 2010: fiscal austerity."

The report looked at IMF spending projections for 128 countries. "While most governments introduced fiscal stimuli to buffer their populations from the impacts of the crisis during 2008-09, premature expenditure contraction became widespread beginning in 2010, despite vulnerable populations' urgent and significant need of public assistance," it said.

The analysis showed that the scope of austerity was severe and widening quickly. Of the 128 countries, 70 reduced spending by nearly three percentage points of GDP during 2010 and 91 planned cuts in 2012. A comparison of the 2010-2012 period with the three years before the financial crisis began showed that nearly a quarter of developing countries were undergoing "excessive contraction", defined as slashing spending to below pre-crisis levels.

The study found governments relied on five main ways to save cash: cutting or capping wages (56 countries); phasing out or removing subsidies, mainly fuel but also on electricity and food (56 countries); rationalizing or means-testing social programs (34 countries); reforming pensions (28 countries) and raising consumption taxes on basic goods (53 countries).

Although the IMF has put a greater emphasis in recent years on ringfencing pro-poor spending, UNICEF said there was a heightened risk of social spending falling below levels needed to protect vulnerable populations.

"Current austerity policies may have major impacts on social spending and other expenditures that foster aggregate demand, and therefore recovery. It is therefore imperative that decision-makers carefully review the distributional impacts, as well as possible alternative policy options, for economic and social recovery."

The report noted that children and poor households were likely to be most affected by budget cuts. "The limited window of intervention for fetal development and for growth among infants and young children means that deprivation today, if not addressed properly, can have irreversible impacts on their physical and intellectual capacities, which will, in turn, lower their productivity in adulthood; this is an extraordinary price for a country to pay."

Zoellick said the risk of a fresh downturn added urgency to the World Bank's work on building safety nets; it was already helping in 80 countries. An IMF spokesman said: "The IMF continues to be supportive of the efforts of low-income countries to sustain growth and to continue strengthening spending on health and education.

"Recent Fund research shows that social spending has increased at a faster pace in countries with IMF-supported programs ... This is true for social spending in relation to GDP and as a share of total government spending, as well as increases in per capita social spending."

This week also saw the launch of a campaign by the Global Alliance for Improved Nutrition, Future Fortified, to help ensure pregnant women, new mothers and young children receive critical nutrients, such as vitamin A, iodine, iron, zinc and folic acid.