Will Our Economic Collapse Cause the Death of Millions Abroad?
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While the economic contraction is apparently slowing in the advanced industrial countries and may reach bottom in the not-too-distant future, it's only beginning to gain momentum in the developing world, which was spared the earliest effects of the global meltdown. Because the crisis was largely precipitated by a collapse of the housing market in the United States and the resulting disintegration of financial products derived from the "securitization" of questionable mortgages, most developing nations were unaffected by the early stages of the meltdown, for the simple reason that they possessed few such assets.
But now, as the wealthier nations cease investing in the developing world or acquiring its exports, the crisis is hitting them with a vengeance. On top of this, conditions are deteriorating at a time when severe drought is affecting many key food-producing regions and poor farmers lack the wherewithal to buy seeds, fertilizers, and fuel.
The likely result: A looming food crisis in many areas hit hardest by the global economic meltdown.
Until now, concern over the human impact of the global crisis has largely been focused -- understandably so -- on unemployment and economic hardship in the United States, Europe, and former Soviet Union. Many stories have appeared on the devastating impact of plant closings, bankruptcies, and home foreclosures on families and communities in these parts of the world. Much less coverage has been devoted to the meltdown's impact on people in the developing world. As the crisis spreads to the poorer countries, however, it's likely that people in these areas will experience hardships every bit as severe as those in the wealthier countries -- and, in many cases, far worse.
The greatest worry is that most of the gains achieved in eradicating poverty over the last decade or so will be wiped out, forcing tens or hundreds of millions of people from the working class and the lower rungs of the middle class back into the penury from which they escaped. Equally worrisome is the risk of food scarcity in these areas, resulting in widespread malnutrition, hunger, and starvation. All this is sure to produce vast human misery, sickness, and death, but could also result in social and political unrest of various sorts, including riot, rebellion, and ethnic strife.
The president, Congress, or the mainstream media are not, for the most part, discussing these perils. As before, public interest remains focused on the ways in which the crisis is affecting the United States and the other major industrial powers. But the World Bank, the Food and Agriculture Organization, and U.S. intelligence officials, in three recent reports, are paying increased attention to the prospect of a second economic shockwave, this time affecting the developing world.
Sinking Back Into Penury
In late February, the World Bank staff prepared a background paper for the Group of 20 (G-20) finance ministers meeting held near London on March 13 and 14. Entitled "Swimming Against the Tide: How Developing Countries Are Coping with the Global Crisis," it provides a preliminary assessment of the meltdown's impact on low-income countries (LICs). The picture, though still hazy, is one of deepening gloom.
Most LICs were shielded from the initial impact of the sudden blockage in private capital flows because they have such limited access to such markets. "But while slower to emerge," the report notes, "the impact of the crisis on LICs has been no less significant as the effects have spread through other channels." For example, "many LIC governments rely on disproportionately on revenue from commodity exports, the prices of which have declined sharply along with global demand." Likewise, foreign direct investment is falling, particularly in the natural resource sectors. On top of this, remittances from immigrants in the wealthier countries to their families back home have dropped, erasing an important source of income to poor communities.