OECD (2013) documents an increase in market income inequality over the period 2007–2010 across developed countries, and reports with respect to the top and bottom 10% of the income distribution that “lower income households either lost more from income falls or benefitted less from the often sluggish recovery.” In general it is likely that adverse income and employment shocks hurt the poor the most, for example because they lack the ability to hedge against these shocks and may lack access to credit markets to smooth them. Even if crises have a neutral effect on income inequality, the poor are much less able to absorb a cut in income (Honohan 2005). 15  For an assessment of the distributional effects of the Bank of England’s asset purchases, see http://www.bankofengland.co.uk/publications/Documents/news/2012/nr073.pdf. 16  See Oreopoulos, von Wachter and Heisz (2012). 17  See Abel, Deitz and Su (2014). 18  Yellen (2012). 4  BIS central bankers’ speeches  the system as a whole. That is now reflected in the Bank of England’s responsibility to bring a macroprudential perspective to financial stability policy. Financial reform and rebuilding social capital Central banks’ greatest contribution to inclusive capitalism may be driving financial reforms that are helping to re-build the necessary social capital. In doing so, we need to recognise the tension between pure free market capitalism, which reinforces the primacy of the individual at the expense of the system, and social capital which requires from individuals a broader sense of responsibility for the system.
Tourist arrivals declined by 8.4% in 2009 while the manufacturing industry’s gross value added fell by more than 18%. On the upside, several service activities that have expanded thanks to access to the Single Market have proved quite resilient to the global recession and their performance helped the external balance on goods and services to move into surplus for the first time since 2002. As a result, the domestic recession was less severe and shorter than elsewhere. Malta’s GDP fell by 1.9% in 2009, compared to 4.1% in the euro area, while the peak-to-trough drop in GDP is estimated to have been similarly less pronounced, 3% against 4.7%. A sharp decline in investment acted as a major drag on demand in 2009, but private consumption held up. The reduction in exports was less marked than might have been expected given the severe contraction in world trade such that, together with a steeper drop in imports, net exports contributed positively to GDP. This limited slowdown in economic activity was in turn reflected in labour market trends. The unemployment rate rose moderately in the first half of the year from 6% at the end of 2008 and has stabilized at around 7% since then. On the inflation front, consumer price trends in 2009 again did not fully mirror those in the euro area, converging only during the second half of the year when energy and food prices, which had risen sharply in the early part of the year, decelerated substantially.