Overview: Social and Political Dimensions of the Global Crisis: Possible Futures

Abstract

Soon after the collapse of the capital markets in the United States (US) and the United Kingdom (UK) in 2007 it became clear that the crisis had spread not only to global financial markets but also to the ‘real economy’. While most developing countries were not exposed to subprime debt due to limited direct financial linkages between many low-income countries and those at the epicentre of the crisis, the financial crisis spread through their economies by three main transmission channels: first, the limited availability of credit for working capital; second, cautious spending decisions, leading to lower output, employment and prices, in turn, affecting confidence among consumers and investors; and third, international trade and investment linkages with falling export revenues and remittance flows (ILO 2008). Though not having significantly contributed to the crisis, many developing countries suffered severely from the indirect impacts, and these economic impacts were magnified as a social crisis unfolded. The economic impacts and social consequences, however, differed, depending on the level of integration, size of economy and structural conditions in individual countries (ODI 2010; Sumner and McCulloch 2009).