How Bad Will the Crisis in the Developing World Get?
Project Syndicate's "Big Question" Addresses a Challenge That Shouldn't Be Ignored
Americans are grousing about gas prices, food costs, airline fares and much more as inflation takes its toll on most everything else that hits their pocketbooks. It’s understandable but they should also count their blessings. If they lived in the developing world, where economic challenges are mounting even higher, they’d be worried about where their next meal would come from, or worse.
Project Syndicate, an international service that delivers original, quality content to a global audience, asked me, along with several others, to address the question, ‘how bad can it get?’ in their periodic feature “The Big Question.” Here’s the link. You can sign up to P-S, where I write as a contributor, for free. Their roster of other writers won’t disappoint.
Here’s my contribution courtesy of Project Syndicate. Click on, or copy the link, sign up for Project Syndicate, and read the other contributors and more on PS as well.
https://www.project-syndicate.org/bigpicture/how-bad-will-the-developing-world-crisis-get
Forecasters may differ on the forces shaping the developing world in 2022, but all agree that vulnerable countries face an unprecedented set of crises. From declining global growth, rising energy costs and looming debt default to food shortages and the pandemic, the predictions highlight the potential for social and political instability. And yet they understate the magnitude of the problems ahead, because the complexity of the challenges belies attempts to calculate their effects.
Consider the connections between energy, war, and agriculture. Natural gas is the primary feedstock in producing nitrogen fertilizers. Severe weather in 2021 drove plant closures on the US Gulf coast even before gas prices spiked and Russia invaded Ukraine. The war and sanctions on Russia – a leading nitrogen, phosphate, and potash producer – have disrupted fertilizer exports, threatening global agricultural output.
The political complexity comes next. Rising fertilizer costs and supply shortages mean higher food prices. According to the UN, the developing world accounts for 40% of global food imports; in 53 countries, households spend nearly two-thirds of their income on food. Poorer countries obviously will be hit hard. The FAO warns that price hikes in 2022-23 raise the risk of famine. Added to food shortages, the spike in the cost of living already is a powerful catalyst for unrest.
So are the social repercussions of the pandemic. IMF economists last year presciently flagged the risk of post-pandemic instability. Private-sector analysts have focused on middle-income countries that boosted social-welfare spending during the pandemic as the most vulnerable. Their budget cutbacks as economic growth falters will mobilize populations that have depended on the subsidies. Sri Lanka and Kazakhstan are two examples of unrest producing regime change, and more are likely.
Instability also may bring to power governments that make problems worse. Leftist or populist leaders, such as those elected in Chile, Colombia, and the Philippines already are creating uncertainty among investors as well as international institutions and governments abroad. Whether the issue is unsustainable policies, human rights, or the environment, their actions can hurt their economies, including impeding needed help this year and beyond.