Drop in spending will hit Third World producers

March 19, 2009

The economic recession, characterized by billion-dollar corporate bailouts and a suffering housing market, is spreading from North America and spilling into the economies of other countries.

Developing nations are not always associated with North American companies on the edge of bankruptcy, but they are not unaffected by them either.

Far from being detached, the marginalized Third World suffers a little more for every penny lost in the economy of developed nations.

What we are seeing now is only the first phase of the crisis, says York University International Development Studies Professor Eduardo Canel.

Most media reports explain how the economy is affecting workers and citizens in Canada, but it is the long-lasting effects that will be felt in the Third World.

These nations depend greatly on the demand for goods that they export to the First World. If demand goes down, or disappears, their economies could collapse.

Canel gives a good example: for every Starbucks macchiato you skip due to the financial crisis, someone does not get paid for the products that would have gone into it.

In 2001, coffee prices dropped, hitting their lowest in 30 years, according to the Oxfam Policy Papers.

“Now we are taking our children out of school because we cannot afford the fees,” said a Tanzanian coffee farmer quoted in the 2001 report. “How can we send our children to school when we cannot afford to feed them as well?”

According to International Coffee Organization data, prices are again declining after a peak earlier last year.

According to the World Bank, the value of exports from Third World nations will drop as much as $95 billion (U.S.) this year. This amount exceeds what the developing world receives in aid annually.

Financial aid promised by developed nations is also expected to decrease as the growing economic crisis continues and governments are forced to cut back on financial initiatives.

“They are in a straitjacket,” says Canel, “it is the best illustration of their dependency. It is a crisis they did not create, but they are likely to suffer the most.”

Originally published on thestar.com as part of the Global Voices program

Advertisements