 Tony Addison asked me, we've had three macro presentations. Tony Addison asked me if I could say something about micro-aspects of economic crises. And so in these words, I want to try and discuss some of the issues. I'm not going to talk about very much specific examples. I'm more going to talk about some of the ways in which crises may have micro-impacts, why people respond or cope, and what policy may or may not be able to do about it. Now there are many types of economic crises. We've heard about the financial crisis, which is of course the biggest crisis that we can think of, but there's many other crises as well, which are also relevant and which people have to respond to. So closely before the financial crisis, there were the increases in food and fuel prices, which was another big impact. The recent commodity price is another crisis affecting countries that are commodity producers. And then other things may not be economic crises in origin, but may have economic consequences. Think of conflict, for example, think of droughts and floods. These are important economic consequences, even if they're not ultimately economic crises. These things almost certainly have major impacts in the countries that are affected. And they almost certainly have important micro-level impacts. Many of these crises are outside the control of the people affected. Sub-Saharan African countries did nothing for the world financial crisis. It was something that was imposed. It was something that happened from outside. And that's often the case with these crises. It's not that the countries themselves are responsible for the crises, but they're affected by them. And the impacts are likely to be, they're likely to have substantial adverse impacts. And there's just some examples. Loss of jobs, loss of livelihoods, loss of income. And it's not just loss of jobs, it's also lack of creation of new jobs. We were talking earlier, Lawrence was talking earlier about work and use and so on. Lack of new jobs is another important aspect of this. The food price goes up, consumption goods get more expensive. That's also important for people that have to buy them. Food can affect all kinds of things, property, life, security and so on. Access to services may be reduced, all kinds of things. Now it's not that everyone is necessarily affected in the same way. If you think about the food price going up, well that matters if you're a consumer of food, but if you're a producer selling food, then the impact is different. Some things may be regional specific or even economic crises may have bigger impacts in more monetized parts of the economy. Conflicts may affect particular regions and so on. So it's not that the whole country is necessarily uniformly affected. Some sectors may lose, some sectors may gain, but there are likely to be substantial micro-level impacts. Now in the literature that looks at the micro-level effects of shocks, the standard distinction is made between covariate shock and idiosyncratic shock. An idiosyncratic shock is something that just affects one or a small number of individuals. If somebody gets injured, if somebody gets a non-affectious illness and so on, those are like, or has death in the family, those are idiosyncratic shocks. But covariate shocks affect many people at once in the same way. And most of what we're talking about here, macro-shocks, they are covariate shocks. They affect many people at once. And these are the ones that are much harder to deal with. The idiosyncratic shocks are generally easier. Now in thinking about shocks, we can go back to some previous wider work, 10 or more years ago, Wider had a project on insurance against poverty and focused on how people respond to shocks basically, recognizing of course the absence of insurance, of formal insurance in most cases. Sometimes people use credit, but typically of course people, have poor people included, have a range of informal mechanisms for responding to shocks. Income diversification, it's a bit like spreading your investments or whatever by getting different sources of income, trying to avoid risk, reducing your exposure to risk, self-insurance and community-based mutual insurance, briefly on those things that will move on beyond it fairly quickly. Income diversification and risk is basically a way of trying to reduce your exposure to risk or minimize the effect of an adverse shock. So if you have several different sources of income, and some are affected and some are not affected, the impact is potentially less. Now the risk of diversifying too much of income sources is you may lose economies of scale from focusing on things that you're good at. So the income diversification, the risk of avoidance, may also come at the cost of a lower income, less variability, but a lower average. But it is a way of trying to reduce the impact of shocks. Now self-insurance is about saving, about assets and credit responding to shocks. So accumulating assets, accumulating savings when you can, when you have a surplus, using up those savings, using up those assets when you're hit by an adverse shock. Now again, there are some points which are relevant in particular to poorer people. They typically have more difficulty saving. They have less to save and it's easy for them to save. They certainly have more difficulty typically being able to borrow. Credit is probably not the optimal response anyway. You know that the cost at which you're going to borrow, the rate of interest at which you're going to borrow is going to be much more than any return you get on savings. And many of the assets that poor people have are productive assets, and they don't really want to sell them. Because if you sell your livestock, what are you going to use in production next period? And you especially don't want to sell them if you're hit by a covariate shock. Because if everyone wants to sell their livestock at once, what's going to happen to the price? It's suddenly not such a good strategy. Then people typically may insure each other within communities, providing sort of support via self-help groups and rotating credit associations, funeral societies, there are many examples of these things, basically working on a principle of reciprocity. Fine, but again with a covariate shock, many people are hit at once. So who's going to insure? If most people are hit by shocks, who's going to provide the insurance? The self-insurance and the mutual insurance are both more difficult for the poor and more difficult in the case of covariate shocks. So what else? Well, there are other ways that people do respond when they're hit by shocks, and one is labor supply. So if people, for example, a member of the household loses a job, or reduces their earnings or whatever, this is maybe the primary household earner, then maybe other people in the household start to work, start to supply labor, sometimes referred to as the added worker effect. Sometimes it may be children that are supplying the labor in response to the loss of income or the loss of earnings. But of course, that only works if there's demand for that labor. Somebody needs to want to hire or somebody needs to want to buy whatever it is that you're selling. And of course, in the face of a macro shock, that may be more difficult. So the likelihood is in this context, what you're able to earn from this extra work is almost certainly less and more uncertain than the situation before you have a shock. What else? Well, migration is a very common response to shocks. Now, people migrate for different reasons. People migrate to try and make their living conditions better and so on. It's a positive decision to try and make people better off. But it's also a common response to an adverse shock. If you're hit by an adverse shock, what can you do? One maybe one member of your household can migrate somewhere else where it's easier to get a job. Or even the whole household can move. This may be temporary. This may be permanent. This may be internal. This may be international. Many different internals of the country are international. Many different forms of migration. It can be a response to conflict and security and all kinds of things. But again, I think we have to think it's typically harder for people from poorer households to do this, because migration costs, you need to, there are some costs involved in moving from where you currently live to wherever you're going. Other responses? Well, more extreme responses with drawing children from school, perhaps for work, perhaps to save money, whatever, reducing levels of nutrition, especially if you don't want to sell your assets and so on. These are some of the responses that people sometimes have to do. These are of course going to have adverse long-term consequences. So there are a lot of terribly good options here. There are many different things that people can do. There are many different ways of responding, but in summary, more difficult when the shocks are covariate, as when we're talking about macro shocks. Will it be difficult for poorer people? Well, that's part of the difficulty, of course, of being poor. You have less flexibility. You have less ability to respond. You almost certainly are not going to get full replacement of the income you had before. And some of what we talked about is quite counterproductive. Now, this is a macro shock. A macro shock has a big impact. It makes things more difficult. People try to cope with it as best as they can. People have considerable agency in how they try to respond to the impact of the shock. There's no doubt about that. But as I say, some of the responses are still difficult. So what about policy? Can policy do anything? Well, the focus really here is about vulnerability. Vulnerability to shocks. It's a key dimension. It's different from poverty, but it's a key dimension of poverty. There are things policy can do. Let's look a little bit at social protection. Let's look at managing shocks at a micro level. Say something about migration, briefly, on each. Now, social protection is an increasingly common response. Developed much more and much earlier and implemented more effectively, generally, in Latin America, but expanding considerably in Sub-Saharan Africa and in Asia. And it takes different forms. So we have cash transfers, we have work programs, sometimes we have credit, and different forms of support. Now if the social protection reaches poorer people, it may help people to cope better with shocks because it gives them some work, which they may not have, or it gives them some cash transfer for income that they may not have. So that may have an impact in terms of reducing the impact of the shock. Now it's fair to say that in many countries, social protection programs are being rolled out, are being developed. The targeting is still being worked out. Is it really reaching the poorest people? Is it always good? Sometimes even the amounts of the payments are not that large and so on. There's mixed evidence and effectiveness, but there's also quite a lot of positive stories. Mexico, South Africa, many other examples in Latin America, some in Africa. Discussion, I think, about the effectiveness of the productive safety net program in Ethiopia, for example. Social protection to work, sometimes it's thought about trying to keep people from falling into poverty. Actually, it also has got to reach the persistently poor as well. These are the people that have greatest difficulty. These are the people that also need to be supported in social protection programs. These are probably the ones who are most likely to engage in the counterproductive strategies. This is just a little example about managing impact of a shock, and this is a price change story in response to the impact of the food price in 2007-08, just about the response of Vietnam to that. Now Vietnam implemented a number of unconventional policies, export well. No, many people were doing it at the time. Export controls, procurement and stocking policies tried to encourage domestic production as well. In fact, the variability of the domestic price of rice was considerably less than the variability in the world price. So it was relatively successful, fun. It was relatively successful. It's controversial. Export bans, of course, cost to other countries and so on, but responses are possible. The migration. Governments are typically, are often frequently scared of migration. They frequently seek to control migration within and between countries. They're concerned about being able to meet the needs of the migration population. They may be concerned about the political consequences of large scale migration. We talked about Brexit and so on before lunch and the relationship to migration in all those discussions and so on, but policies to limit migration are cutting off one of the key channels by which people can respond to shocks and make themselves better off. This is also a key mechanism. This is a key development channel. And then lack of employment, I think is another key issue, particularly an issue in relation to youth and women, subject of a whole nother session here. Finally, I think it's a matter of being better prepared for future crises because crises are going to happen. It's a fact of life that crises will happen. And some of some of those things may be some of the some some factors that are needed, better employment opportunities, higher quality, more higher quality education, social protection, lower inequality, increased roles for women. I think all of these things are important. Thank you very much.