Far away from the turmoil on the high streets of global finance, Ms. Kry Chamnan faced a crisis of her own. Not long after the Wall Street meltdown in 2008, the Cambodian worker first lost a portion of her salary and eventually her job. As the financial contagion engulfed the global economy, 30,000 or so mostly female garment workers were laid off in Cambodia. Like many of the dismissed workers, Ms. Chamnan allegedly did not receive severance pay or any other benefit. âSince I lost my job sometimes we eat once or twice a day. I donât know what to do, we are just camping outside the factory gates, waiting for the company to pay us,â she told Oxfam International (Emmett 2009, p. 4).
In Africa, Mr. Karamba DramĂŠ allegedly met with a violent death around the same time (Amnesty International 2009). Soldiers wearing red berets, according to Amnesty International, hounded and shot dead the Guinean youth activist on suspicion of organizing public protests against dire socioeconomic conditions brought about by the combination of the global financial crisis and a food price increase. Across Africa, in Benin, Burkina Faso, Cameroon, CĂ´te dâIvoire, Mali, Mozambique, Senegal, Somalia, and Zimbabwe, governments purportedly quashed sometimes-violent demonstrations over economic hardship with an iron fist. Numerous people were allegedly injured, killed, arbitrarily arrested, or sentenced to prison without a fair trial for asserting their âright to an adequate standard of livingâ (p. 1).
As the two vignettes indicate, there is more to systemic banking crises, such as those witnessed in the late 2000s, than the loss of economic output. Financializationâthe role financial actors, financial markets, and financial institutions play in the economyâimpacts every aspect of contemporary society.1 A financial crisis, the former top human rights official of the United Nations (2009), Navi Pillay, had reminded a high-level UN conference, can turn into a crisis of development and human rights.
This book proffers a human rights perspective on systemic banking or financial crisis vis-Ă -vis low-income and least developed countries (hereafter low-income countries) between 1981 and 2010. Do womenâs economic rights and basic human rights typically recede amid systemic banking crises in low-income countries? If so, why does financial turmoil perpetuate a human rights crisis? Moreover, what forces counteract the downward pressure on government human rights practices during financial shocks? These are the questions I seek to answer in the book.
The global financial crisis of 2007â08 is the most recent in a long string of financial calamities befallen since the rise of money and financial markets (Ferguson 2008; Reinhart and Rogoff 2009). Just as Wall Streetâs clever financial engineering amplified the United Statesâ subprime mortgage trouble into the so-called Great Recession, so had Scotsman, John Law, triggered the worldâs first stock market crash in the 1700s, known as the Mississippi Bubble, with his financial wizardry.
Financial crises have come in all shapes and sizes. One form of financial crisis is a currency or exchange rate crisis, such as the Mexican peso or the Asian financial crash in the 1990s. A countryâs currency comes under speculative attack, and its value erodes swiftly during a currency crisis. Another class of financial crisis is a sudden stop of a capital account or a balance of payment crisis that entails a sharp decline or reversal of capital flow into a country. The third type of financial crisis is a sovereign debt crisis that impacted many emerging economies in the 1980s. It occurs when a government fails to service its external or domestic debts, or both. And, finally, there are banking crises, as witnessed in the late 2000s. In a systemic banking crisis, a section of the banking sector becomes insolvent because of significant losses, bank runs, or both. Different forms of financial crises seldom occur in isolation. A combination of a currency crisis, a banking crisis, and a sudden stop that eventually turns into a sovereign debt crisis has been common in developing countries (Claessens and Ayhan Kose 2013). I will, therefore, use the terms systemic banking crisis, financial crisis, and economic crisis interchangeably throughout the book.
With the removal of barriers to global capital flow since the 1970s, systemic banking crises have become a recurring problem afflicting every region of the world. An estimated 147 episodes of systemic banking crises have occurred between 1970 and 2011 around the world (Laeven and Valencia 2012). As banks occupy a unique position in the modern economy, a system-wide failure in the banking sector often imposes a considerable economic and social cost on society (Lindgren et al. 1996). Normal economic activities are extremely difficult to resume when crisis grips the banking sector (Claessens and Ayhan Kose 2013; Reinhart and Rogoff 2009). Financial crises amplify economic downturn. The decline in consumption, investment, industrial output, and employment is far greater during a recession following a financial crisis than during a recession without a financial crisis.
Human rights have been largely absent from the common discourse on financial crisis (Nayyar 2012; Saiz 2009). Mainstream macroeconomics and finance remain divorced from the normative discourse of human rights and human development. Nayyar notes that human rights and human development have been marginal at best, and irrelevant at worst, in typical macroeconomic analyses. For their part, human rights scholars and activ...
