Surlethe wrote:Patrick Degan wrote:Funny, but the World Bank agrees with my model, Surlethe, not yours. As stated from Chapter 5 of their 1998 report East Asia: The Road To Recovery (1998, World Bank Books, ISBN 0821342991) detailing the economic contraction suffered in the region in the late 1990s:
About time! Why did it take you three fucking pages to put up evidence from a credible source? You are beginning to persuade me, but have hardly produced the sort of solid evidence I would like. (Note the non-statistical nature of the evidence, although the source is far more authoritative than your potentially cherrypicked examples. Also note that it is not evidence for your original claim, that 'social breakdown' induced by high inequality is the same regardless of culture, and it is hardly a comprehensive [again, non-statistical] test of your hypothesis against all situations of high income inequality, controlling for demographic and cultural factors.)
Moving the Goalposts will not save you in this thread, no matter how much you wish to believe it will. As underlined in this study of the social impacts induced by the Thai financial meltdown of the late 1990s:
.pdf link
The economic slump which was ignited by weaknesses in the financial system, unexpectedly caused the whole economy to deteriorate. It also had a significant impact on the social sector. Despite signs of economic stabilization as of June 1999, the adverse social impact still remained, and will take a long time to recover. The social impact of the crisis had become a high policy consideration, but till mid 1999, there was still little evidence of effective social measures to alleviate the impact on vulnerable groups. Therefore, this study attempts to highlight the social impact of the Thai crisis, especially on vulnerable groups. The study begins with an examination of the channels by which the economic crisis was transmitted into a social crisis. The impact of the crisis on various areas such as unemployment, education and health will be discussed. The policy effectiveness of measures to mitigate the impact, such as through Social Safety Nets will also be explored.
Transmission of Financial Turmoil into Social Costs
The channels by which the financial and economic crisis affected people and their families, in turn leading to social problems, are outlined in Figure 1. The initial capital flight triggered currency depreciation, domestic credit shortages, widespread corporate financial difficulties and severe contractions in demand and output. The second round of contagion effects led to falling export demand (through a fall in other currencies), which further dragged down income and output levels. This led to more drops in employment and wages. Lower output led to lower government revenues, which in turn negatively affected government budgets, including social sector programmes. Unemployment, reduced wages and price rises had already placed a strain on vulnerable groups and their family members. Insufficient social safety nets to offset these effects further added to the tension, and even led, in some cases, to family breakdown and created social problems
. . .
The linkages of the economic crisis to social effects are as follows - the exchange rate changes since the baht flotation affected the earnings of tradable goods and external debt repayment, as well as the cost of living. Costs of tradable inputs were higher. The baht devaluation was expected to benefit export sectors, but it did not lead to positive exports and economic growth largely because production markets, mainly in Asia, were reeling under unstable currencies and the economic recession. The depreciation of other currencies compromised the benefits of the Thai baht devaluation for demand for exports. In addition, the economic crisis was much more complicated than the situation of baht devaluation in 1984, particularly given the adverse impact of the financial collapse and regional turmoil on exports and other sectors of the economy. Also, there was greater dependence on imports, as the export-oriented manufacturing sector had been shifting away from labour intensive production towards more capital intensive, and therefore import-dependent production. Nonetheless, some tradable sectors did benefit from the baht devaluation; for example, agricultural exports (such as rice and tapioca), tourism, and some labour intensive manufacturing for export, but overall, the effects were negative. The depreciation of the baht also led to a deterioration in the balance sheets for the corporate sector, particularly for those who borrowed in foreign currencies. Big losses from the change in the exchange rate were borne not only by large companies and conglomerates, but small and medium scale enterprises (SMEs) were also affected by the lack of liquidity. Industrial and business operations experienced difficulties in accessing credit and in debt management because of market contraction.
The manufacturing sector (especially those firms having high import components), was seriously affected by the economic turmoil and some companies scaled down production. The overall output of the manufacturing sector declined to –15 per cent at the end of 1998, accompanied by a drop in the manufacturing production index. During the first seven months of 1998, the percentage changes in private investment indices were also negative. The decline in the overall manufacturing sector led to a fall in demand for labour and output. This resulted in an increase in unemployment in some sectors, or a decrease in wages and incomes. Job losses or income reductions caused an increase in poverty, particularly for vulnerable groups. At the same time, government revenue declined because of the economic contraction. The government ran a cash deficit of 114.97 billion baht for the fiscal year 1997-98. Despite the rise in revenues from value added tax or VAT (18.7 per cent) and personal income tax (6.9
per cent), the Revenue Department collected only 499 billion baht, 3.8 per cent down from the previous year’s collection. The reasons for this were the declining profits of private companies, and thereby, decreases in corporate income tax (down 38.8 per cent). The Excise Department’s income fell by about 13.7 per cent to 155.55 billion baht, largely due to the falling sales of cars and durable goods.1 The response to the fiscal deficit was to initiate government budget cuts, which included a number of social sector programmes.
3. Policy responses
For the first year after the baht float, policy priorities were focused on stabilizing the exchange rate and maintaining high interest rates. Following the IMF conditions in the earlier Letters of Intent, the government adopted strict monetary and fiscal policies, such as increasing the VAT (from 7 per cent to 10 per cent in August 1997), decreasing the government budget, and maintaining high interest rates. Consequently, the real sector was seriously hurt by credit crunches, and many businesses and industries filed for bankruptcy and closure. Downsizing,
cost reduction and budget cuts in programmes led to a sharp increase in unemployment, changes in working status, and a reduction in employees’ work opportunities and welfare. Investors lost confidence in economic prospects, and GDP growth dropped to negative values.
Budgeting
The drop in government revenue adversely affected government expenditure in a number of crucial areas such as human resource development, technology development and other social services (see Table 1 for the percentage cut in programmes over 1997-1999). Although the government budget cuts in 1998 were made under IMF advice that priority programmes such as education, health and social services should be protected , budget cuts for these programmes were significant, particularly for social services. In fact, the largest decline in fiscal expenditure in 1998, compared to 1997, was in social services. The limited supply of social service programmes inevitably affected the welfare of the poor. Agriculture, energy and the environment were also considerably affected as they too experienced high levels of budget cuts. Budget constraints also led to a delay in many infrastructure projects in the areas of transportation and telecommunications, commerce and tourism, energy and the environment, which experienced significant decreases in expenditure in 1999. However, by 2000, the government had abandoned these cuts, and instead moved towards fiscal expansion. In comparison to 1999, sectors such as commerce, tourism, energy and the environment gained the most from this fiscal expansion while expenditure on social services continued to decline.
. . .
The survey results have important implications for policy makers. These findings suggest that the unemployed need assistance in order to find new jobs rather than welfare for being unemployed. This is also confirmed by the response of the urban unemployed to the crisis, as outlined in Table 11. The majority of the urban unemployed were looking for jobs in response to the effects of the crisis. Those who had no responses to cope with the impact of the crisis, or were being supported by family or relatives comprised less than 5 per cent of the survey respondents. While family played an important supporting role, the low numbers of people who cited this as their response to the crisis indicates the limitations of family safety nets during the crisis. As there were limits to family support during the crisis, support from formal systems (from both the public and private sector) was necessary to partly compensate the reduction in family income. However, the majority of those vulnerable to being laid off did not receive compensation because most workers were engaged in small and medium scale operations. A survey of benefits received by laid-off employees or former employees during the crisis revealed that 74 per cent of those surveyed did not receive any benefit, while only 13.1 per cent received 1-3 months’ salary as compensation (Table 12).
. . .
Other Social Effects: Education, Health, Family Breakdown, Drugs
Government budget cuts, which led to a decline in the supply of public and social services, such as social insurance funds affected the poor directly. The effects of such cuts on the poor were reflected in a deterioration in their welfare. In addition, falling private investments in facilities such as hospitals, schools, and other infrastructure pushed more people to use the limited supplies of government services. This placed further pressure on government facilities, the impact of which was felt most by the poor and underprivileged groups who were in general less able to access those services.
Social service programmes during the crisis were particularly affected by budget cuts in government programmes, as shown in Table 13. In particular, in 1998, among the largest cuts were in social service and development, especially rural development. The budgets for social and public welfare, mainly social security, as well as urban and environmental development, also decreased significantly. However, by 1999, the budget for social welfare had increased, especially for social security, and further expanded in 2000. Such increases were part of the government’s expansionary policy for the social sector. The budget allocated for special target group development also increased considerably for 1999, especially for labour welfare administration and development, which could be interpreted as a response to the problem of lay offs and unemployed labour.
. . .
Community and Family Problems
With the continuation of the crisis, laid-off and vulnerable persons began migrating back to their rural hometowns as a coping mechanism. As they migrated back to their hometown and became unpaid family workers, this led to an increase in average household size, in turn lowering average household income. A socioeconomic survey indicated an increase in average household size from 3.6 to 3.74 during the second quarter of 1996 and 1998 (Pongsapich and Brimble, 1999). As many of the returned migrants could not find jobs in rural areas, where agricultural employment was already high (Kittiprapas, 1999), they waited for job opportunities to re-enter the non-agricultural labour market. Limited job and income opportunities increased pressures on the unemployed, and affected relations within the family and community. Social capital in communities was affected, both negatively and positively. In some ways, social capital deteriorated. The limited opportunities in income and jobs weakened the network of relationships in the long run, as people had less ability to support each other. As people become more concerned with individual problems, the contribution to social activities declined. Weakened social capital was possibly due to a breakdown in community trust: increased competition for jobs among neighbours who once cooperated; and increased incidences of theft, violence, crime, drug dealing, and higher dropout rates among school children. Frustration and psychological stress all led to heightened household and community tension. However, this crisis also created an opportunity to increase social capital -- the relationship of trust and cooperation within a society. Social capital may be referred to as social infrastructure which, similar to physical infrastructure, can increase economic productivity and considerable positive externalities (Unger, 1998). If networks of individuals are strengthened, this would imply an increase in cooperation and an increase in social capital. During the height of the crisis, supporting networks of families and communities absorbed vulnerable groups. Hence, supporting networks of family and community members were strengthened as members came back and shared ideas of how to cope with the crisis. The youth (with more exposure) increasingly came back home and became valuable human resources for communities. This contributed to an increase in social capital.
. . .
8. Concluding Remarks
The financial and economic crisis, through a fall in output, employment and incomes resulted in an increase in poverty and social problems. The decrease in government budget expenditure in a number of social programmes during this period worsened the situation by leading to a reduction in the public provision of social services and welfare. The decline in family income as well as public services led to human resource problems, especially a deterioration in education and health. These problems adversely affected child development and therefore, have negative consequences for the country’s development in the long run.
As Thailand has limited ‘formal’ social safety nets covering only a minority of the population, the expansion of government assistance programmes for the vulnerable was necessary. However, government assistance should have been more targetted to certain groups and areas. Programmes (such as job creation programmes) should have been more effective, by taking bureaucratic and political constraints into account. Otherwise, much of public spending (with burdens on taxpayers) tends to become ineffective, distorted and costly. With relatively more importance placed on the ‘informal safety nets’ of families or communities, appropriate government programmes prepared for the future should consider and complement the advantages of local systems as well as draw on the experiences and lessons of particular programmes from other countries.
It's ridiculous that I've had to go to these extremes. The East St. Louis example —a direct historical/contemporary demonstration of the causative relationship between economic and social breakdown— would have sufficed for most people.
And as far as your "unique cultural factors" theory goes, perhaps you would care to explain to the class how it accounts for this parallel story from Northern Ireland describing a very similar societal breakdown due to economic decline as also described in the story from Japan quoted in the OP of this thread: ... So I will put it to you one more time: what makes your culture theory superior to the economic theory for societal breakdown and how does it possibly account for similar social outcomes in different regions with different cultures but both facing similar economic hardships?
(sigh) Can you read? What "unique cultural factors 'theory'" have I been touting? Are you referring to when I said that "This suggests that 'social disintegration' is affected by many different factors, prominently demographics and cultural pluralism, and it is a gross oversimplification to pin it on income inequality in particular", as you quoted previous page? What part of 'suggests' and 'seems to me' make it sound like I'm trying to propose an alternate theory, instead of trying to point out why your simple-minded assertions rang my bullshit detector?
I know how horridly difficult it is to find valid, unbiased evidence for a social scientific model.
You might also better use the article you quoted regarding Northern Ireland to
help (although hardly substantiate) your position by listing the effects of the economic downturn (is greater inequality even one of them? always remember that that is what you are trying to test) and comparing/contrasting with the effects of Japan's stagnation noted in the articles in the first few posts of this thread. Which responses are common? Which are governed by cultural factors?
You keep pinning your whole position on the idea that culture makes a significant difference in the mechanics of social breakdown in the face of an economic crisis as opposed to the observable mechanics of that crisis, and as yet have not offered the slightest justification as to why that theory is superior to the economic theory.
Yet another piece of the picture, which you will doubtless also dismiss as non-indicative of anything. From
Rotterdam:
Port city Rotterdam in danger of social breakdown
Published: 10 April 2009 10:14 | Changed: 10 April 2009 17:11
A high number of less-educated workers, many problem neighbourhoods, a port that has been hard hit economically. Another whole generation is in danger of being lost in Rotterdam. Has the city become a ticking time bomb?
By Mark Hoogstad
Behind the glass of the outer door a note on orange card reads: 'Closed due to circumstances.' But the owner of the sandwich shop across from cafe and gallery 'Anders' on Rodenrijselaan knows better. “That is how Rotterdammers say: we can no longer stay afloat financially and are shutting up shop." And so Rotterdam has one more vacant shop front, he says with some bitterness.
There will be more bankruptcies and redundancies in the city, which is already vulnerable socio-economically, as home to the highest number of problem neighbourhoods in the Netherlands. “What we’ve managed to get rid of over the past years with a great deal of pain and difficulty threatens to come tumbling down upon us again in no time,” sighs Labour Party alderman Dominic Schrijer (employment, social affairs and urban policy) at his office at city hall.
In order to cushion the harshest blows of the economic crisis, the city has decided to speed up plans to inject 323.5 million euros into the local economy; no other city in the Netherlands has been so generous. But Rotterdam is desperately in need of this help, say the city authorities. The city is largely dependent on its port and the collapse of world trade in the wake of the economic crisis is taking a heavy toll on the port. As a result, Rotterdam will be harder hit than the Dutch economy as a whole, is the inauspicious message from mayor Ahmed Aboutaleb.
Losers in the credit crisis
And that is just part of the story, says sociologist Jeroen van der Waal of Erasmus University Rotterdam. He is conducting his doctoral research into the social effects of globalisation on Dutch cities. Compared with the regions surrounding other major cities Amsterdam and Utrecht, Rotterdam is lagging behind, he says. “Those two regions have what Rotterdam lacks: a large and advanced services sector, which creates a great deal of employment, both at the top and bottom segment of the labour market.”
Nor is the port the ideal job generator for Rotterdam, says Van der Waal. The “robust economy” consists of heavy port industry and, thanks to advances in automation, that generates few direct jobs. "The port itself mainly creates indirect employment, but that does not benefit Rotterdam all that much,” says Van der Waal, who himself worked at the port for four years. Rotterdam is moreover primarily a city of small and medium-sized businesses: sensitive to the economic cycle, with relatively few jobs.
Van der Waal predicts that “Rotterdam will be among the losers in the credit crisis, from a global perspective.” Amsterdam and Utrecht have a labour potential that will reconnect more quickly and easily with the post-industrial and highly advanced knowledge economy once the economy starts to pick up, he says.
That won’t be the case in Rotterdam, says local executive Schrijer as well. As a port city, Rotterdam traditionally has a large influx of less-educated workers, and consequently to this day supply and demand are not well matched. Further education and retraining is therefore Schrijer’s motto to prevent Rotterdam from once again becoming the city it was in the mid-nineteen nineties: with 60,000 unemployed, one fifth of the working population.
Further social deterioration
Schrijer says he wants to prevent the city from repeating “an old and unforgivable mistake” in which people are enabled not to work. “With the mass redundancies in the early nineteen eighties, people were sent home with a pocketful of money, where they wasted away at the state's expense. That antisocial policy - which is what I call that kind of destruction of human capital - does not merit repeating."
Van der Waal says Rotterdam indeed has little choice. But the city should not expect any miracles from retraining and further educating “people with few skills,” he says. “The archetypal labourer – just fired and in his fifties – is not going to be selling you an iPhone in some trendy electronics shop next week. That is an illusion.”
The question is whether Rotterdam will once again be saddled with a ‘lost generation’ thanks to the recession. Echoing Schrijer, Van der Waal too observes that the lower segment of the labour market will be the hardest hit. "Those who have temporary contracts, most of whom are migrants and live in the infamous disadvantaged neighbourhoods. There is a good chance that you will never get that group employed again, however harsh that may sound."
But Schrijer does not want to dub the city a ‘ticking time bomb'. “That is a very emotionally charged characterisation.” Still he cannot escape the conclusion that especially in the disadvantaged neighbourhoods, the recession could cause ’a breakdown effect.’ In other words: further social deterioration of the already vulnerable parts of the city.
Electoral earthquake
Take for instance a neighbourhood like Bloemhof, in the heart of Rotterdam-Zuid, says Schrijer. “About 15 percent of the residents are on welfare and another 25 percent are collecting disability benefits. Anyone who grows up in the midst of so many inactive people does not have the best prospects for the future. Not working and securing your livelihood in some other way, often in illegal circles, becomes the norm then."
Schrijer spent the dark years of the nineteen nineties as an administrator in the submunicipality of Charlois – also located in the traditionally poorer area south of the Maas river – when despite a thriving economy, crime reigned and refrigerators and garbage bags were thrown on the street from the third floor of housing blocks. That spectre lies deeply engraved in Rotterdam's collective memory. The growing discontent among the population led ultimately in 2002 to an electoral earthquake unparalleled in Dutch history.
The city has paid for its past mistakes, both Schrijer and Van der Waal admit. Especially thanks to its lopsided housing supply (76 percent of the city’s housing is social housing) Rotterdam acts like a magnet for the less educated. Some parts of the city are among the cheapest square footage in the Netherlands. In order to break the vicious cycle, the city is now clinging steadfast to the time-honoured wisdom that states that under pressure, everything becomes fluid.
On the underside of the labour market, a specially appointed Labour market expert, Aad van Nes, is trying to break open the so-called ‘granite stock’ of the chronically unemployed. Though he would rather they were referred to as “temporarily labour incapable." Van Nes: “That term ‘chronically unemployed’ suggests too strongly that this group is neither able nor willing to do anything. The opposite is true, just: give them the chance by simplifying the question."
So, one more time, what makes your culture theory superior to the economics theory?
