Sunday, March 15, 2009

When Times Are Tough Locally, It Can Be Easy to Overlook How Tough They Might Be for the Poorest Among Us Globally

This nice article from the Economist highlights the three main avenues through which the global downturn--even though it got started in the high-rent financial districts of Western markets--is hurting the poorest globally. They might not have bought mortgages they can't afford from less-than-moral dealers, but the poor are nevertheless experiencing even greater pain.

The global meltdown affects poor countries in three ways. First, capital: as investors in the West rebuild balance sheets, private capital flows dry up, hurting marginal borrowers like the poor. . . . For the poor, the other kind of external capital is aid. . . .

The second effect of the meltdown is the dive in commodity prices. Most poor states still rely on commodities for big shares of their foreign exchange and tax revenues. . . .

The third area where the meltdown is being felt is labour. Those poor countries that do make things for export are suffering from the fall in world trade. . . . Many countries also export workers who send back remittances. . . . Some countries depend on them.

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