The Current Economic and Financial Crisis: A Gender Perspective

Working Paper No. 562
The Current Economic and Financial Crisis:
A Gender Perspective
by
Rania Antonopoulos
May 2009
* This is a draft of a paper commissioned by the Bureau for Development Policy, Gender Team, United
Nations Development Programme, and is currently under revision. The views expressed in this paper are
those of the author and do not necessarily represent those of the United Nations.
Copyright © 2009 United Nations Development Programme. All rights reserved. No part of this publication
may be reproduced or transmitted in any form or by any means, electronic or mechanical, including
photocopying, recording, or any information-retrieval system, without permission in writing from the
publisher.

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ABSTRACT

Widespread economic recessions and protracted financial crises have been documented
as setting back gender equality and other development goals in the past. In the midst of
the current global crisis—often referred to as “the Great Recession”—there is grave
concern that progress made in poverty reduction and women’s equality will be reversed.
Indeed, for many developing countries it is particularly worrisome that, through no fault
of their own, the global economic downturn has exacerbated effects from other crises
manifest in food insecurity, poverty, and increasing inequality. This paper explores both
well-known and less discussed paths of transmission through which crises affect
women’s world of work and overall wellbeing. As demand for textile and agricultural
exports decline, along with tourism, job losses are expected to rise in these female-
intensive industries. In addition, the gendered nature of the world of work suggests that
women will see an increase in their share among informal and vulnerable workers
worldwide, and will also supply more of their labor under unpaid conditions. The latter is
particularly important in the context of developing countries, where many production
activities take place outside the strict boundaries of the market. The paper also makes this
point: examined through the prism of gender equality, the ability of the state to
implement countercyclical policies matters greatly. If policy responses at the national and
international levels end up aggravating inequities, gender equality processes face many
more barriers, especially among the poor.

Keywords: Economic Crisis; Gender; Employer of Last Resort; Unemployment,
Poverty; Policy Objectives; Development; Fiscal and Monetary Policy in Development;
Agricultural Policies; Female Employment in Textiles and Crisis; Agriculture and Food
Security

JEL Classifications: B5, E24, E61, E62, E64, G10, H1, J16, J21, J38, J48, O23, O24








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I. INTRODUCTION

What began as a subprime mortgage debacle in the United States has by now become the
worst global financial crisis since the Great Depression. As of February 2009, all
advanced countries were in recession, with a job crisis intensifying across the board. IMF
and DESA world economic growth projections now stand in negative territory. ILO
estimates warn that the ranks of the unemployed will expand by as much as 52 million
within the year, up from a previous figure of 20 million. In the meantime, international
financial and trade flows are contracted at rates not seen in the past fifty years. Statistics
thus far also show that, for developing countries, not only export demand and tourism,
but also worker’s remittances, have been declining at alarming rates, all of which imply
reversals of financial flows. In addition, given that the U.S. government has effectively
guaranteed the solvency of financial institutions, financial capital reversals are also
accounted for by highly sought after safe havens from throughout the world in U.S.
government bonds.
In the midst of this crisis, there is grave concern that progress made in poverty
reduction and women’s equality—two key developmental goals—may come to a halt and
reversals may be on the horizon. Although economic growth in and of itself is not a
sufficient condition for equitable sharing of prosperity or for improvements in human
development, nonetheless, widespread economic recessions and protracted financial
crises have been documented as setting back gender equality and other development
goals in the past.1 Indeed, it is particularly worrisome that this crisis is unfolding at the
very moment efforts to scale-up interventions to meet the Millennium Development
Goals (MGD) were underway. In this regard, adhering to the increased commitments of
the 2005 Gleneagles Summit in a timely fashion acquires more urgency, as it would also
be providing a crisis-mitigating function for many countries.
Periods of such economic upheavals are always destabilizing and, as such,
outcomes are uncertain. At this juncture we are therefore faced with both a great danger
and a great opportunity. The great danger is that the new rules and “recovery” efforts

1 See the Report of the Fourth World Conference on Women, Beijing, 4–15 September 1995 (United
Nations publication, Sales No. E.96.IV.13), chap. I, resolution 1, annex II, para 16.


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(and funds) will favor those in positions of strength, reinforcing existing inequalities
between and within countries. If this occurs, we will see an accentuation of existing
disparities and hardening of social exclusion with grave social, economic, and political
repercussions. The opportunity, on the other hand, lies in the fact that leadership and bold
policy action may emerge that could reduce inequalities among nations and across
poverty and gender lines.
This paper is written in the hope that the latter will emerge; it takes the view that
macroeconomic and institutional arrangements are of paramount importance for gender
equality. Rather than asking exclusively “how will women be impacted upon,” we find it
urgent to also address a different, but interlinked, question: “what macroeconomic
conditions must prevail for gender-equality processes to take root?” In this sense,
women’s rights can only be guaranteed if development is broadly shared. Hence, women
in this analysis are not featured as passive recipients of gender-equality policies, but
rather as full citizens participating at all levels of economic, political, and social life. As
active members of the community, women have a stake in putting forward
comprehensive, coherent, and consistent proposals instead of being content with a
piecemeal agenda that targets the “poor” and “women.”
Accordingly, the paper is organized as follows. Prior to turning to a discussion of
gendered impacts and policy responses that carry potential to redress them in section II, I
will describe the trajectory of the crisis and current responses, as it is crucial to point out
“lessons learned.” This diversion is important because, in designing and implementing
roadmaps to take us out of the current global mess, mistakes of the past must be avoided.
Section III highlights the rationale for a gender-aware analysis. Important as it may be for
the proper assessment of gender-differentiated impacts, such a framework is also useful
for setting policy targets and instruments that address the full extent of the crisis on the
entire economy. In developing countries many of the daily needs of people are met under
unpaid work arrangements which, therefore, also need to be made transparent to
policymakers. Sections IV and V discuss the gendered paths of transmission of the crisis
in the world of work and social reproduction. Section VI explores gender dimensions that
need to be taken into account in policy responses to the current crisis; section VII
concludes.

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II. THE CURRENT ECONOMIC CRISIS: ISSUES AND RESPONSES

Around the world there are two key concerns at the moment. The first is the containment
of the immense financial sector crisis. Infusion of massive liquidity and other measures to
prevent a worldwide financial meltdown by “unfreezing” the banking/financial sector are
ongoing and remain challenging. The second key challenge is containing a meltdown of
production and employment.
While the first problem originated in the United States and affected mostly
developed countries, the second type of “contagion” has reached every single nation, for
no fault of their own. Some countries have felt the full blow already, while for others, the
crisis is still unfolding. To prevent the worst from happening, there exists only one
plausible intervention: a classic and massive Keynesian response. Governments must
enact fiscal stimulus packages to fill in the gaps the private sector’s demand slowdown is
creating. While developed, and a few developing, countries are in a position to put in
motion such expansionary policies, many middle- and, especially, low-income countries
are stranded.
Growth, employment, food security, and fiscal space positions are expected to
continue to deteriorate through several channels, each bringing distinct pressures per
country. These include: waning demand for exports (such as textiles), co-production
(consignment), and required purchase manufacturing (especially in terms of global
production chains), agriculture and tourism; declining commodity prices for countries
dependent on exports of extractive industries/primary sectors; food security issues due to
exchange rate and price adjustments for imported foodstuff; declining volume of
remittances and reverse international migration; fluctuations in financial foreign direct
investment, as well as official development assistance (ODA) and unpredictability of
donor-countries official assistance, including agreed-upon MDG commitments. All of the
above issues render the fate of communities, removed from the center of the crisis,
dependent upon events and policy decisions taking place thousands of miles away.
From a (developmental) gender point of view, there are also two main concerns.
In the immediate term we must bring to the forefront the visible, but, nonetheless,
differentiated impacts of the crisis in the world of work. In addition, for policymaking

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purposes and to safeguard the progress made, we must also make transparent the
consequences that remain invisible only because there is a tendency to assume that the
economy is gender neutral. This requires an expanded vision of the constituent
components that comprise the structure of the macroeconomy. To this end, besides
markets, production activities that take place outside the marketized part of the economy
or have weaker linkages to it must be made apparent. In other words, the impacts on
household production and subsistence parts of the economy must be fully acknowledged
as well.
Second, we are concerned in regards to the policy space developed countries are
going to be afforded and the specific macroeconomic policies that will be put in place.
For, if we are to keep moving along the path of gender equality, going back to domestic
policies and international agreements that privilege exclusively the financial sectors of
the global economy and putting in place conditions similar to those of structural
adjustment in the 1980s (and implementing mediation initiatives and strategies that took
us nowhere) will be devastating.
Given the unpredictability of the duration and the unprecedented severity of the
crisis, the connection between the two gender concerns is of immense importance. It is
clear by now that only a few countries will be able to avoid heavy pressures on their
fiscal and external positions. The crisis is threatening balance of payments positions, even
of countries that have been running primary surpluses for several years and had
accumulated high levels of external reserves. The challenge for the international
community and its policymakers is to show strong leadership and urgently put a
mechanism in place for coordinated countercyclical policy action around the world.
Clearly, effective interventions require that policies and mechanisms put in place
are consistent internally (policy coherence) and aligned with medium- and long-term
objectives; yet, in many ways, this crisis is forcing us to engage in new thinking and has
opened up policy space for fresh ideas. It is instructive at this point to devote a bit of time
to describe some of the underlying factors that precipitated the current global turbulence.
In that, it is urgent to engage in some rethinking about the goals and targets of
policy. There are many lessons learned already in the past two decades and some new

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ones that this crisis has made clear. It will be an unforgivably missed opportunity if these
lessons do not inform current actions and we turn to a discussion on these issues first.

A. Real (macro)Economy Issues
In the past decades, policy has been largely based on the belief that sound
macroeconomic frameworks should rest on stabilization, privatization, and inflation
targeting, so as to mobilize domestic and international investment.2 Macroeconomic
policy then was targeting balanced government budgets, even if this meant austerity and
the selling of public assets, as well as inflation targeting at very low levels, which now
even the IMF believes to have been beyond what was necessary. These were
contractionary policies in the short term, but it was hoped that as sound conditions were
put in place, investment and growth would take off. Poverty, income inequality, and
severe job deficits were trusted to gradually disappear via a trickle-down effect. But, as
we have known for some time now, investment was not always channeled where it was
most needed and, when it did, the promised outcomes of job creation, poverty reduction,
and reductions in income inequalities proved elusive.3 Simply put, global prosperity was
not widely shared and the tide did not lift all boats. For several countries, “lost decades”
have resulted in social upheavals and loss of confidence in the ability of democratic
societies to include all citizens in economic, political, and social life. As a recent ILO
(2009) publication has pointed out, the functional distribution of income on a world scale
has resulted in less and less of productivity gains and growth of output going to labor
income and more being received by capital.

The lesson learned is that markets alone do not deliver broad-shared prosperity;
besides the blatant injustice and economic exclusion of large segments of the world
population, from a global perspective, this raises concerns of peace and security. From a
macroeconomic point of view, this also raises a fundamental global demand constraint.
The trends in worldwide capacity to produce (and its productivity) have been growing,
but have moved in a direction that underutilizes a resource the majority of the population

2 Ultimately, this reasoning is based on the idea that growth is driven by investment, itself constrained by
savings. A development model that would be based on any variant of demand-driven growth, endogeneity
of money supply, and functional finance stands in diametric and irreconcilable opposition to it.
3 See Wade (2004), Cornia (2004), Milanovic (2003), and Islam (2006).

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relies upon to earn a living—labor. As a consequence, while productivity has been
increasing, less of world income (as mentioned above) is allocated to wages4 and more of
it goes to profits. The term “jobless growth” (which has been used to describe the
declining labor intensity of production) entered the development discourse, but also
wages for many workers in the labor force stagnated and more precarious and insecure
conditions of work emerged; this was all part and parcel of what allowed a skewed
distribution of prosperity.

Even prior to the recent crisis, policymakers and advisors to governmental and
international nongovernmental institutions, including the Bretton Woods Institutions,
were already refocusing on ideas that lay dormant for over two decades, an example of
which has been the renewed emphasis on pro-poor growth, the importance of public
sector investment,5 and the centrality of promoting employment-generation strategies.6
Direct job targets, pro-poor growth, and an emphasis on increasing agricultural
productivity in some regions of the world are terribly important. These can lead to new
types of “structural adjustment” requirements that, in turn, will generate novel engines of
growth and more broadly shared prosperity. With appropriate changes in institutional
arrangements,7 this is certain to benefit women (and men), especially those occupying the
most vulnerable of spaces.

B. Financial Sector Issues
The financial crisis is not disconnected from the above-mentioned trends. As profits
grew, healthy market-system dynamics dictated that new investment opportunities must
arise. Yet, the systemic limitations of slower demand growth created tensions and the
search for profitable opportunities intensified. In the sphere of production, a number of
bilateral and multilateral agreements were gradually put in place to create mitigating

4 This is due to a general trend for lower employment coefficients of production; overall stagnation or
slowdown in remuneration of wage labor; increasing wage gaps between (the few) skilled jobs and (vast
majority) of unskilled labor.
5 See Sacks et al. (2004), Roy (2006), and Jahan (2006).
6 ECOSOC (2005) and various documents from UNDP, ILO, and others.
7 For example, free-trade rules are not applied symmetrically. It is estimated that for Africa, the cost of
reduced agricultural exports due to protectionist U.S. policies in favor of their nationally based agribusiness
far exceed the value of donated food aid (of U.S. produced foodstuff transported by U.S. shipping
companies).

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conditions against ever-declining opportunities in trade, foreign direct investment, and
international capital flows. Supreme among these arrangements was the “privileging” of
financial sectors and real estate markets. Temporary respite to profitability was achieved,
but at the expense of different types of “bubbles” (i.e., unwarranted at-the-end-of-the-day
valuation of assets and subsequent collapse in those prices). We now know these proved
to be just that—a temporary, but illusionary, respite.

One manifestation of this tension took the form of a decline in earnings of private
commercial banks in the 1980s. A great pressure was mounted to privatize profitable
public sector banks, but the major shift that occurred was to respond to this “crisis” by
relaxing existing regulatory systems. In the United States, for example, the restrictions on
deposit-taking and short-term lending were revoked to allow a broader range of activities
that could widen sources of profitability. Beyond interest income (namely, margins
earned by banks between deposits and loans), income for banks could now be generated
on the basis of fees and commissions earned via trading. The necessary institutional
reforms followed suit in the repeal of the Glass-Steagall Act (which had dated back to
1933) and the adoption of new U.S. banking regulation in 1999,8 the Gramm-Leach-
Bliley (or Financial Services Modernization) Act.

As a result, banks were now allowed to create trading-desk entities (to trade
stocks, underwrite initial public offerings, etc.) and the so called “bank-holding”
companies were allowed to carry out virtually any and all types of financial activities.9
Simultaneously, at the international level, the extensive application of the Basel
minimum capital standards in 2004 encouraged banks to continue increasing their fee and
commission income by securitizing lending and moving it to unrelated affiliates (special
investment vehicles) and off their balance sheet.

Adding higher leveraging practices on top of these development, the origin of the
subprime mortgage collapse can be traced to structured institutional reforms that

8 The Glass-Steagall Act was setup over 75 years ago by the United States Federal Deposit Insurance
Corporation (FDIC), but was repealed in 1999. Formed by Congress shortly after the stock market
plummeted in 1929 while there was bank collapse across the United States, it essentially separated
investment and commercial banking.
9 For example, create instruments that could be traded (financial products), which represented various kinds
of assets; create securitization instruments (and therefore derivatives) and then securitize the derivatives
and trade them; credit swaps (securing the risk exposure of an instrument), etc.

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deregulated financial markets and not simply to corrupt practices. As Kregel (2008) puts
it,
“This system has produced a new form of bank operations now
known as ‘originate and distribute,’ in which the bank seeks to
maximize its fee and commission income from ‘originating’
assets, managing those assets in off-balance-sheets within
affiliate structures, [being able/allowed to also] underwriting the
primary distribution of securities collateralized with those assets,
and servicing them […] Under this system, the banker has no
interest in credit evaluation, since the interest and principal on
the loans originated will be repaid to the final buyers of the
collateralized assets.”


For a bank, the process of making loans without holding them in its loan book is
made possible by asset securitization. And here is the rub: in order for these financial
instruments (assets which are liabilities for the holding banks) to be sold to institutional
investors (including pension funds held by private, municipal, and state entities), they
must carry an investment-grade rating from a nationally recognized credit-rating
organization. Credit evaluation by credit-rating agencies replaced the evaluation formerly
undertaken by bank loan officers and credit committees. The credit-rating agencies,
which had no knowledge of the faith and credit of the original borrowers, relied on risk
models created by the issuers themselves. The assets (securities) they were evaluating
were complex, bundling together different sorts of collateral for the securitized loans. In
the absence of direct knowledge of the borrower, these agencies appropriated the
methods used by risk arbitragers by seeking statistical correlations between groups of
assets that were selected to meet a particular probability of repayment that would qualify
as good investments (Kregel 2008). Not only has it been difficult for investors to assess
the credit risk of these newly floated structured securities instruments, but also the
investment-grade ratings given to these collateralized securities were comparable with
those assigned to more traditional instruments.

C. Policy Responses So Far
As a result of the financial crisis, several developments have occurred on the policy front.
First and foremost, developed countries’ central banks and treasury departments have
coordinated and infused a large amount of liquidity. Support arrangements, variously

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