Daily chart: More pain than gain

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How the financial crisis made everyone poorer

THE financial crisis tore through economies and shattered lives. Only now are we starting to see the full extent of the damage. The economic hardship fell disproportionately on the poorest, according to figures released today by the OECD. An insightful metric is the extra spending-money people have (officially known as household disposable income). Between 2007 and 2011, the poorest in society saw their money either fall more during the crisis, or gain less during the recovery, than the wealthier people.

In Spain, for example, the richest in society suffered a modest decline in disposable income, while the poorest were heavily stung. By contrast, in egalitarian Germany, everyone’s spending money increased slightly. In the US and France, the rich got richer and the poor got poorer—which may explain recent unrest, from the “Occupy” movement exclaiming “We are the 99 percent” to demonstrations across France. And the data leans in favour of Thomas Piketty’s thesis that wealth inequality is increasing: certainly the period of the financial crisis upholds that depressing view.

bampbs Jun 19th 2014 18:46 GMT

A very sad waste; people not working and businesses going under. It didn't have to be so bad if governments had run fiscal policies whose primary objective was to keep up economic activity. When times are bad, you borrow. When times are good, you pay back the loans.

But politicians don't want to hear about pay-back time. Poor Keynes, who wanted a balanced operating budget over the cycle, gets blamed for the sins of the ridiculously misnamed "Keynesians" and gutless pols.

Nuijel Jun 19th 2014 16:10 GMT

The chart is hard to interpret. By and large, it seems that the poor are the hardest hit by the crisis, but also the first to benefit when the economy picks up.

Moreover, countries with big safety nets (say Greece, Italy, Spain versus Ireland, Britain, Japan) do not seem particularly efficient at cushioning the effects of crisis on the poor. Maybe because social benefits are cut significantly to balance budgets.

Its another ridiculous argument as always from TE when it comes to so called inequality.
Household income is nonsense precisely because households differ in time in size and vary from one income level. And neither do people stay in the same income brackets. Many of the people in the bottom 20% are the offspring of the top 20%, people move in and out of income brackets all the time.
Succinctly put, we are looking at abstract categories here, not individuals. What is fundamentally assumed is that the top 10% and the bottom 10% are the same groups or even number of people, when they are not.

In France the 5 mn civil servants (plus dependants), thanks to the SFIO Govt, got richer. Their level of life increased as they only enjoy preferential tariffs on any kind of insurance, cars, houses, travel, including health complements. Same remark for Obamian civil servants in the US, probably.
Same remark also applies for Sweden: The Swedish Socialist families turned crypto-capitalist, like the French ones, still enjoy leftist parapublic orgs’priviledges; their children go to vacation places in islands -in France, in castles confiscated from the wealthy by the fisc and then reserved to the political clan-. All those public and parapublic employees received automatically indexed i.e. adjusted wages, in both countries. Most riots in Paris streets are a political fake show, with gentle accompaniement by police, as a compliment to the government after it gave them the increases.
Poor South Europeans and Mexicans may at least enjoy what cannot be degraded by the recession: Free pleasue on their numerous beaches. Greek girls learn there the ABC of prostitution trade (Do you need photos as proof?), and boys learn how to become pimps or gang drug leaders. Mexican parents, tired to fear for life for their grown-up children in the street of the unsecure cities, send them to emigrate in Canada, thanks to the money of their parents - required by CDN government -. Poor ones try the desert on the Texas border.
Piketty, whose book on inequality has been financed and reviewed before edition by the party in power, forgot to tell those infos - le “fumier”!-.

Southern European welfare states are pretty much rudimentary welfare systems, which still emphasize the protection of "insiders" in the job market (pensions attached to individual contributions, etc) versus more across the table redistribution. Taking the four "legs" of welfare states (education, healthcare, pensions, and social services), Southern Europeans suffer from:

- Universal but low-quality education systems (with lots of disparities in school quality),
- Decent universal healthcare services (but with long-term moderate inefficiencies and exponentially growing pharmaceutical bill due to market oligopolies and weak internal controls),
- Pensions attached to individual contributions (i.e. previous wages), which reinforces inequality. In addition, non-contributive (taxpayer-provided) pensions (for the very poor) are comparatively low, and job unstability hit hard the poorest, affecting their future pensions and making inequality persistent over time,
- Social policies and social services are still in its infancy, in comparison with other parts of Europe. Very underdeveloped, politically opportunistic (cash for babies programs, etc), under-evaluated (probably often ineffective).

If you want examples of fully operational welfare states, look to the North of Europe (Netherlands, Denmark, Sweden and the like...).

Unfortunately, unlike Mexico or Chile, Brazil is still not an OECD country. That's why Brazil is not in this list.

However, in 2007 Brazil and the other BRICS were invited to participate in "enhanced engagement", which could make it easier full membership in the short run. More: http://www.oecd.org/brazil/brazilandtheoecd.htm