Massive economic
damage has already been caused to 1.5 billion people – half the global labour
force – will become unemployed, with 500 million thrust back into poverty while
250 million could face famine. That’s a reversal of two decades of gains. The
collapse of the global economy will seriously damage chances of recovery,
hurting exports, disrupting supply chains and threaten the global financial
system.
Developing
countries are facing an awesome blow to their economies on three fronts:
1) Domestic
economies and Lockdowns.
The majority –
who work in the informal economy without regular jobs, employment rights or
social benefits – have immediately lost their livelihoods. There are no
government safety nets to pay their wages or prevent destitution. The result
has been a rapid fall in economic output and a massive dislocation as millions who
are forced to return to rural areas.
2) Collapse of
world trade.
Without enough
income from exports, many developing countries are facing a balance-of-payments
crisis. Not enough foreign currency to buy the essential imports needed to keep
their economies running.
In many cases
this also causes a sharp fall in the value of their currency, making imports
even more expensive. Most of the good jobs in developing countries are in the
export industries, and from garment workers in Bangladesh, to copper miners in
Zambia, they are being laid off in large numbers.
3) The world
financial system.
Emerging market
countries owe US$17 trillion to western investors, and many are already on the
verge of default. Capital is fleeing developing countries at a faster rate than
in the 2008 global financial crisis. The emerging sovereign debt crisis could
paralyse foreign investment for decades and cause serious damage to global bond
markets.
This economic
crisis is not confined to one country or one region but is happening globally.
Developing countries need immediate help in the form of a global plan that
would target at least four main areas:
·
External
funding to help pay for the massive economic stimulus packages needed to revive
their economies. This in turn will reduce mass unemployment, poverty and
starvation.
·
Help
stabilise their currencies. The IMF already has requests for such support from
100 developing countries but needs to modify the strict conditions.
·
A
temporary halt to the collection of foreign-held private debt to ensure an
equitable sharing of the burden. Poorer countries, whose debts are mainly to western
governments, need an immediate moratorium on such debt repayments.
·
Immediate
assistance to strengthen health systems (especially public health).
According to
Misha Ketchell (of The Conversation), the cost of all these measures could be US$2.5
trillion. There seems to be little recognition currently in the west of the
disastrous consequences for their own economies in the event of a global
economic collapse.
Global
institutions that could organise the response but need increased resources –
the World Bank, the International Monetary Fund and the World Health
Organisation – are being crippled by western governments. This is especially
the case with the US. Cutting off funding entirely or blocking others from
raising additional funds is not helping anyone. Meanwhile, barriers to world
trade have been rising as countries scramble over access to medical supplies
and limit the export of food.
The unravelling
of the world economy will dramatically increase inequality. A more equitable
model of globalisation is needed, where the gains of trade are more evenly
spread and where poor countries have a greater voice in running the world
economy. The failure to do so will accelerate the decline in trust in
governments both in developing and developed countries and encourage revival of
xenophobia and extreme nationalism. That has devastating effects.
Reference:
Steve Schifferes,
Developing countries are facing economic disaster: four ways western nations
can support them to shore up the global economy https://theconversation.com/
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