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Opinion: Economic crisis puts even more pressure on developing world

Industrialized nations have to provide more aid and open their markets to developing nations to have a chance at limiting increases in the number of people suffering from absolute poverty, writes DW's Karl Zawadzky.

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"When the rich have less to eat, the poor starve." This sentence by French author Alphonse Allais lends itself to the current financial and economic crisis being experienced by industrialized and developing nations.

Unemployment is on the rise in highly industrialized countries, which remain rich despite the crisis. While that's bad for the people affected, they will be supported by a functioning social security system.

No social net

Karl Zawadzky

The situation in developing countries is much worse. Unemployment is increasing faster and there is no security system to help the people affected. As many as 90 million people could be driven into absolute poverty by the economic crisis and the number of people suffering from hunger could climb to a billion, according to the World Bank and International Monetary Fund.

As a consequence of the economic and financial crisis, economic growth in 94 of 116 developing or emerging nations has fallen, dramatically in some instances. While the statistical average may not seem so bad, it does not represent reality. Following 8.1 percent growth in 2006 and 2007, the Third World will achieve an average growth rate of 1.6 percent this year. This average is heavily influenced by the fact that the massive, emerging economies of China and India are included as developing countries.

Though double-digit growth rates are a thing of the past for China and India, their economies are growing at a rate that highly industrialized countries can only dream about even during an economic boom. Due to their growing populations, economic growth of 4 percent to 6 percent is still too low for China or India to free a substantial number of people from poverty.

Pressure from all sides

In many other developing nations, especially those in sub-Saharan Africa, the issue is not low growth rates but massive losses in terms of economic performance. The economic and financial crisis caused by industrialized nations has put more and more pressure on the Third World from all sides.

To name a few examples: Industrialized countries are taking on debts and loans from international capital markets to pay for their bank bailouts and economic stimulus packages, which limits developing countries' options when it comes to determining their own financial situation, as less money is available to them and the commercial lending they could tap is too expensive. Many private lenders are also taking money out of developing nations because they no longer believe in developments there or because the money is needed at home. The economic crisis has also driven down prices and demand for raw materials, which are often exported from developing countries. If that weren't enough, migrant workers are also losing their jobs abroad, leading to fewer remittances being sent to family members back home.

It's the very nations that listened to economic advice from industrialized nations and multilateral development organizations that are now threatened by rising poverty. They had been successful for a long time, but now they are experiencing a brutal backlash seen first by increases in the number of unemployed and then in the number of people suffering from hunger.

Another burden to bear

Last year increases in the prices for food and energy affected many developing nations and now it's the economic crisis that's hurting them. While those suffering from the economic situation in industrialized countries will be caught by a social net, the potential for hunger protests and starvation in developing nations is growing. As is Africans' readiness to try to flee misery at home with a potentially fatal passage across the Mediterranean Sea to Europe.

The global crisis was caused by markets and governments in industrialized nations that failed to oversee their financial markets. The effects of this failure rippled out to the Third World where several countries are threatened not only by the possibility they will go bankrupt, but, worse still, by a humanitarian catastrophe that could affect millions of people. The United Nations will not reach its ambitious Millennium Goals, namely of cutting poverty by 50 percent. Hunger, disease and infant mortality will not decrease but, once again, increase.

Only a massive effort on the part of industrialized countries will limit the worst consequences of the crisis. More development aid is necessary, but, more importantly, industrialized nations - despite the crisis - have to open their markets more to products from the developing world. That would be the best way to prevent an increase in the number of people suffering from absolute poverty.

Karl Zawadzky is DW-RADIO's business editor

Author: Karl Zawadzky/sms

Editor: Susan Houlton

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