Gadani shipbreaking yard , near Karachi (image by Michael Foley)
We had a wonderful lecture in class last night from the CEO of the US Studies Centre, Prof Geoffrey Garrett. The topic was “Why study the United States”, and Prof. Garrett chose to frame his answer to the question in the financial crisis, and what it indicated about the role of the US in the world. One of the things he spoke about is how the last wave on the financial crisis will be the developing world.
He specifically mentioned this article by Niall Ferguson (whom I am fairly certain I’ve watched on Bloggingheads a few times). In it, he outlines the dangerous combination of factors that often lead to political upheaval, and how all three are present in abundance around the globe right now.
Prof. Garrett said “If you were worried before [about political unrest around the globe], you really need to be worried today.” He explained that others have predicted a 90% reduction in investment in the developing world.
That’s right. 90% reduction.
You can imagine the consequences of this. Already unstable governments will be faced with even greater levels of poverty, and declining opportunity.
The effects of this crisis on the first world are fairly clear. The trajectory may be debatable, but we have some notion of how it might be.
But the developing world?
He gave the case of Pakistan. Their economy is plummeting (his word, not mine), and they are on the brink of Civil war, if not already.
Regimes that were being held together by thin threads risk coming apart entirely.
This is pretty much just scary. There’s not much we can do, except buy, buy, buy, especially imported goods, and hope others around the globe do the same. And even that may not be enough.