example, studies of Asia and Latin America show that inequality
rates rose as a result of the 2007-08 food price shocks (Save the
Children 2009 and World Bank 2008), and the ADB (2008)
estimates that a 20% nominal food price increase leads to a one
percent increase in the Gini coefficient.
The food price outlook is bleak and further complicated by rising
oil prices. The sharp rise of petroleum prices beginning in early
2011 is likely to persist as political uncertainty inundates much of
the Middle East and North Africa, thus adding more pressure on
employment-generating economic activities and scarce household
resources. As the resilience of poor populations for further
increases in food—or energy—costs is extremely limited, continued
high prices can be expected to increase income inequality during
7.C. Fiscal austerity
Third, while most governments launched fiscal stimulus plans
during the first phase of the global economic crisis, fiscal stimuli
were abandoned during the second phase, and governments are
now scaling back public spending at a time when economic and
social recovery remains fragile. UNICEF analysis of public
expenditures in 126 developing countries (Ortiz et al. 2010) shows
that many governments are planning to remove or phase out crisis
response policies in 2010-11 as part of fiscal consolidation efforts.
In particular, cuts/caps in public outlays on social programmes,
transfers to households, and wages and salaries are being
considered. The ILO (2010a:40) finds that such austerity measures
have been met by severe social unrest and public protest in many
countries, including 16 of 28 countries studied. In terms of
inequality, reductions in government spending on basic education,
health care and social security programmes—the main ways tighter
fiscal policy affects the poor—are associated with falling incomes
and investment for the poorest groups. A recent Economist analysis
finds evidence of this effect in a set of developed countries.^38
Following examination of changes in income levels among regions
within individual countries, The Economist concluded that income
(^38) The Economist, “Internal Affairs: The Gap between Many Rich and Poor
Regions Widened because of the Recession,” 10 March 2011.