The Real Economic Crisis

Today I want to highlight an example of remarkably good and important journalism, namely, a story in the Washington Post
by Karin Brulliard that opens the door, a crack at least, on the
effects of the worldwide economic crisis on the most vulnerable: people
who live in Africa and other "least developed" countries.

The story is called: "Zambia's Copperbelt Reels from Global Crisis."

It's important because it points out that the effects of the crisis,
while bad here at home, are magnified a hundred-fold in many poor
countries, which are being pushed over the brink toward societal
disintegration.

First a quote:

Mines here in Zambia's Copperbelt region drive this
poor nation's economy, but a plunge in global trade has slashed demand
for the copper used to construct electronics and houses in the United
States and Asia. That is prompting mines here to slow and shut,
limiting tens of thousands of Zambians' access to schooling, health
care and regular meals.

And it's continent-wide:

Africa's resource-fueled economies have grown steadily
in recent years, improving the lives of millions of people. Now, as
prices drop for Botswana's diamonds, Chad's oil and Tanzania's cotton,
a crisis that began in the rich world is threatening to drive millions
more into poverty, according to the World Bank, and raising the specter
of unrest.

The article points out that the IMF has identified 26 countries as
"highly vulnerable" to the crisis, half in Africa. (Of course, that
understates the problem, since the entire Third World is suffering
enormously. Even Iraq, oil rich, can't pay the army and police it needs
to guarantee the peace as the US withdraws.) The article continues:

The problem is not just a collapse in commodities
prices. Foreign investment is receding in countries such as South
Africa and Kenya. Remittances are dropping in Liberia. Aid flows from
economically stressed donor countries might retreat. Much will depend
on how quickly advanced economies recover, according to experts and
African leaders, who warn that a prolonged downturn could stir turmoil.

At the IMF's website you can read the entire report,
in a .pdf document, which is depressing indeed, and scary. The point
is, while the United States is spending literally trillions to bail out
banks and insurance companies and to build infrastructure, etc., the
needs in the Third World are measured in billions, not trillions. But
the lives at risk are measured in billions, too.

Some quotes from the IMF report:

The study finds that the global crisis is squeezing
exports of low-income countries severely, while also curtailing inflows
of foreign direct investment and remittances, which had become
important sources of financing in recent years. As a result, many
countries will face sharply lower fiscal revenues and some may also
experience pressure on their foreign exchange reserves.

And:

The IMF analysis identifies 22 low-income countries
that face the most acute financing constraints. To keep their external
reserves at safe levels (around 3-4 months of imports), at least US$25
billion in additional concessional financing is needed in 2009. This
represents about 80 percent of annual aid to all low-income countries
in recent years.

If global growth and financing conditions deteriorate further, the
number of vulnerable countries could almost double, while additional
financing needs could approach US$140 billion.

It seems to me that adding $140 billion to the multi-trillion dollar stimulus effort is pocket change, now.