Developing nations are suffering economic disasters: 4 directions to be helped by the international community
Our hopes of growth would be badly impaired by the failure of the world economy, damaging production, disrupting supply chains and weakening the global financial system. Failure to control the worldwide dissemination of the virus would therefore guarantee that an outbreak pipeline that may hop back to developing countries exists.
On three sides, developed nations are experiencing a hammer attack to their economies:
1) The lockdown has negatively impacted domestic economies.
The majority of those who operate without traditional jobs, working security or social services in the informal economies have lost their livelihoods completely, and there are no government safety lines to compensate their salaries or avoid hunger. As millions are driven to move to the countryside, the consequence has been a sharp decline in economic production and major dislocation.
2) This downturn has been exacerbated by the failure of global trading.
Many developing countries are experiencing a balance-of – payments problem without adequate income from exports, as they have not received enough foreign currency to purchase the vital products required to keep their economies going, such as electricity, food and medication.
In certain instances, this often allows the value of their currency to drop dramatically, rendering international purchases much more costly. Many of the successful employment in developed countries are in the export sectors and they are being laid off in huge numbers, from textile workers in Bangladesh to copper miners in Zambia, much as they were in the 2008 crisis.
3) The global financial structure is challenged by global collapse.
Emerging market economies owe western investors US$ 17 trillion (£ 14 trillion) and many are now on the edge of default. Capital is leaving developed economies more quickly than in the global financial crisis of 2008. For decades, the ongoing sovereign debt crisis may paralyze international investment and inflict significant harm to the global bond markets that are still suffering from corporate debt burdens.
World strategy, foreign strategy
Most worryingly, the global recession is not limited to one nation or area, it is taking place all over the planet. The parallel collapse suggests that, after World War II, the global economy is projected to contract more than at any point.
In the context of a global strategy that will address four major fronts, developed countries require urgent help:
Foreign financing to help compensate for the large packages of fiscal stimuli required to revive their economies and reduce mass unemployment, hardship and hunger.
Helping their currencies stable. The IMF already has demands from 100 developed countries for such assistance, so it needs to change the stringent requirements that usually relate to such loans.
A temporary halt to the processing of international private debt in order to guarantee that the responsibility is spread equitably, ensuring that no tiny number of bondholders may be taken captive by a government, as is already the case in Argentina. Poorer nations whose loans are primarily to Western governments are in need of an urgent moratorium on repayment of those loans.
Immediate assistance to improve health services (in particular public health) with a view to further restricting the transmission of the pandemic, ensuring that the vaccine can be utilized as it becomes available and avoiding the renewed outbreak of other infectious diseases such as TB and malaria.
All of these steps could cost US$ 2.5 trillion, but this is just a fraction of the immense sum wealthy nations are currently investing on reviving their own economies. Although unlike the financial crash of 2008, the catastrophic effects for their own societies in the case of a global economic downturn continue to be little known in the West.
The World Bank, the International Monetary Fund and the World Health Organisation, multinational organizations that might mobilize the solution but require additional funding, are being hobbled by Western governments. This is mainly the case for the US, which either totally cuts off funding or prohibits the raising of additional funds through others. Meanwhile, as countries scrabble for access to medical supplies and ban food exports, obstacles to global trade have been increasing.
The unraveling of the global economy would exacerbate inequalities significantly, both inside and across nations. We need to develop a more balanced globalization paradigm, where trading benefits are shared more equally, where poorer nations have a stronger say in operating the world economy, and where we are both concerned with global health and education.
Failure to do so would intensify the fall of government morale in both emerging and industrialized countries and may, with disastrous implications, promote a further resurgence of xenophobia and radical nationalism