The Impact of the Economic Crisis on the World’s Poorest Countries

Abstract

When G20 leaders gathered in London in April 2009, they confronted the greatest challenge to the world economy since the Great Depression, as global output was falling, trade flows drying up and jobs disappearing around the world. Yet whereas the failure of world leaders to act together in the 1930s led to terrible consequences, the decisive action taken by the G20 in London – in the shape of the largest global fiscal stimulus ever – prevented the precipitous decline of the global economy into depression (G20, 2009a). Today, while the recovery is not assured, the banking system has been stabilised, industrial output is rising again across major and emerging economies, international trade is starting to recover and confidence has improved. With the process of recovery far from complete and 61 million people unemployed as a result of this crisis (ILO, 2009), we must continue to guard against complacency. Sustained assistance will be vital not only for the G20 economies, but also for the more than 160 countries that lie outside that grouping – particularly the low-income countries that are home to the ‘bottom billion’ (Collier, 2007). Far from being insulated from the financial crisis, as many observers had thought, people in these countries are finding their livelihoods – even their lives – under threat. In this article I examine the impact of the global economic crisis on these low-income countries, outline the impact of the immediate response package agreed by the G20 and suggest three priorities for collaborative global action this year in order to ensure that low-income countries are part of the recovery: reforming the World Bank; completing the Doha Round; and committing to a partnership for development in order to meet the Millennium Development Goals (MDGs) by 2015.