Dealing with the New Social Divides

Around the world – from the U.S. to Europe, from Latin America to the Far East – people are losing their jobs in the aftermath of the financial crisis and the consequent economic downturn. In Europe and the U.S., many of them are joining the ranks of the unemployed; in China, many are returning to the rural areas from which they came. In developing countries millions and millions of workers are being pushed into extreme poverty.

At the same time, as a result of decreasing asset prices, millions of families over the world have lost significant parts of their wealth and life-time savings, and many lost their homes through repossession. The resulting negative consequences could last a lot longer than the crisis itself.

The immediate reduction of income and wealth could generate additional adverse long-term effects, notably through reduced investments in the education of children compounding their vulnerability in the future. Also, there are fears around the world that the crisis may lead to rising protectionism and even social unrest.

While the current financial and economic crisis is global in nature, it is likely to have heterogeneous welfare impacts, with some countries, and some people, more vulnerable than others. The downturn may lead to profound changes in countries’ growth strategies and international trade patterns with potentially far-reaching consequences for certain population groups. Against this background the challenge for national governments and international organizations is to find responses in order to mitigate the longer term social divides created.