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Martin Khor on the Global Economic Meltdown: “We Could Have One Billion More People in the Developing World Plunging into New Poverty Because of this Crisis”

StoryFebruary 17, 2009
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President Obama is scheduled to sign the $787 billion economic stimulus plan into law at a ceremony in Denver today. Tomorrow in Phoenix, Obama is expected to tackle the home mortgage crisis and roll out a plan to stem the huge rise in foreclosures. While there has been much discussion in the media on the state of the US economy, what about the rest of the world? From Greece to Guadeloupe, from Italy to Indonesia, from Chile to China, from Egypt to India, countries across the globe are feeling the heat of the recession that started over a year ago in the United States. We speak to economist Martin Khor of the Third World Network based in Malaysia. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: President Obama is scheduled to sign the $787 billion economic stimulus plan into law at a ceremony in Denver. Tomorrow in Phoenix, Arizona, Obama is expected to tackle the home mortgage crisis and roll out a plan to stem the huge rise in foreclosures.

While there has been much discussion in the media on the state of the US economy, what about the rest of the world? From Greece to Guadeloupe, from Italy to Indonesia, from Chile to China, from Egypt to India, countries across the globe are feeling the heat of the recession that started over a year ago here in the United States. Japan, the world’s second biggest economy, announced Monday it’s facing its worst economic slump since World War II. Speaking in Tokyo today on her first trip abroad as Secretary of State, Hillary Clinton called for a coordinated response to revive the global economy.

An estimated 50 million workers around the world could lose their jobs by the end of 2009, according to the UN’s International Labor Organization. Skyrocketing unemployment rates, rising prices have led to a worldwide wave of protests and strikes.

More than a million people took to the streets of France earlier this month. Now, protesters in the French overseas territory of Guadeloupe are blocking major roads and have stepped up their month-long strike demanding higher wages for low-paid workers. This is Elie Domota, the spokesperson for an alliance of over fifty unions there.

    ELIE DOMOTA: [translated] We are still calling for a general mobilization. We call for shopkeepers, petrol station managers, supermarkets to close their stores. We ask government buildings to shut their doors, so that we get what we are asking for.

AMY GOODMAN: Meanwhile, as leaders and bankers of the G7 countries met in Rome over the weekend, thousands of metalworkers and public sector employees gathered outside to protest factory closures and job cuts. This is Silvio Marconi.

    SILVIO MARCONI: [translated] We can’t relaunch the economy, because the economy means consumerism. And if people can’t make it to the third or fourth week in a month, if people don’t have a strong contract and are losing their jobs, how can you hope to relaunch the economy? It’s a huge swindle.

AMY GOODMAN: The G7 talks ended Saturday with a pledge to “avoid protectionist measures” and “refrain from raising new barriers.” Protectionism was intensely debated at the meeting, including the “Buy American” clause in the US stimulus package Congress passed Friday. US Treasury Secretary Timothy Geithner responded to concerns at the meeting.

    TIMOTHY GEITHNER: All countries need to commit to sustained open trade and investment policies. This is absolutely critical to confidence.

AMY GOODMAN: The devastating effects of the financial crisis on the global south were outlined in new World Bank data released last week. Just ahead of the G7 talks, the World Bank warned that the crisis could push an additional 100 million people into poverty and send child mortality rates soaring. This is the World Bank Vice President for Poverty Reduction and Economic Management, Danny Leipziger.

    DANNY LEIPZIGER: We think that given the depth of the recession, that it’s inevitable that it’s going to spill over into the developing world. We’ve identified at least forty countries that have pre-existing very high poverty rates and expected drops in their growth, which makes them highly vulnerable. Even those that are below the poverty line will be pushed further below the poverty line. We know that after the food and fuel crisis of a year ago, the estimates were that we could see an addition of about a hundred million people to the ranks of the poor, and we think that this crisis, in its severity, will top that.

AMY GOODMAN: Meanwhile, here in the United States, the Director of National Intelligence Dennis Blair expressed concern last week about the global fallout of the financial crisis. He told Congress the economic crisis had become a greater security concern than terrorism.

    DENNIS BLAIR: And I’d like to begin with the global economic crisis, because it already looms as the most serious one in decades, if not in centuries…Economic crises increase the risk of regime-threatening instability if they are prolonged for a one- or two-year period. And instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways into the international community.

    There are some silver linings. With low oil prices, Venezuela will face financial constraints this year. Iran’s president faces less-than-certain prospects for re-election in June.

AMY GOODMAN: That’s the Director of National Intelligence Dennis Blair.

I’m joined now in the firehouse studio by Martin Khor, economist, director of the Third World Network. It’s based in Penang, Malaysia.

Welcome to Democracy Now!

MARTIN KHOR: Thank you. Thank you.

AMY GOODMAN: You’re with the South Centre, as well.


AMY GOODMAN: Talk about the global crisis.

MARTIN KHOR: Well, if the US is being hit by this crisis, the developing countries are beginning to be hit even much worse. For example, in the last three months of last year, the US economy went down by about four percent, but in Asia, we found the GNP, quarter to quarter analyzed, you know, fell by 21 percent in Korea, 17 percent in Singapore, 13 percent in Japan. And even in China, the economy hardly grew at all. If you look exports, we find that in December the exports in Taiwan fell by 42 percent; in Japan, by 35 percent; in Singapore, by 20 percent; and in China, by three percent.

So we are seeing the beginning of a very serious crisis in the developing countries, and if this crisis is going to last for another three to four years, as many economists predict, then we are going to see devastating increase in joblessness, in poverty, and in the decline in the economy in many developing countries that will have effects that are much worse in United States.

AMY GOODMAN: Your thoughts on Hillary Clinton? Her first foreign trip as Secretary of State is to Asia.

MARTIN KHOR: Well, I hope Hillary will not be lecturing to Asia, but will be listening very intently, because the Asian model of development, which is based on a free flow of capital and of dependence on exports, was something that was taught to us by the United States and by institutions like the World Bank and IMF. And now this model is suffering a major setback. She should allow Asia to think through the crisis itself and to come out with its own solutions and not to be lectured about currencies or about how Asia should tackle the crisis and so on.

AMY GOODMAN: Can you talk about the connection between the financial crisis and food?

MARTIN KHOR: I think that the food crisis that we had, you know, last year, the shooting up of prices, the shortages of food and so on, were caused partly by speculation, as now you see that the prices are now shooting down. So we had the financial markets that actually led to this crisis in housing and in joblessness also affecting food through the mechanism of financial speculation. So we have to really regulate and stop this financial speculation.

But secondly, the food crisis in many parts of Africa, for example, or even in Latin America, was also partly caused by the wrong advice given by the International Monetary Fund and the World Bank. They went to Africa and told the African governments to stop investing in agriculture and to reduce their subsidies in agriculture, to stop buying products from the farmers on the ground, that subsidies are bad for the Africans. And what happened was that the tariffs were also reduced. The tariffs for food products was also reduced in many African countries, and as a result of which cheap rice, which was subsidized in the United States, or cheap chicken that is subsidized in Europe, flooded the markets in Ghana, in many parts of West Africa, and so on, decimating the agricultural sector.

So this is the period where we have to review the entire way in which we view food. President Clinton in the United Nations last month actually said — he admitted that “we blew it,” including himself, that we gave the wrong policies to Africa, we imposed on them, and we have to rethink all our policies.

AMY GOODMAN: Martin Khor, you’ve been a longtime anti-corporate globalization activist, have been at forum after forum all over the world. The protectionism was intensely debated at the G7 meeting, including the “Buy American” clause in the US stimulus package. Can you explain what that is? I mean, you just described how the US, how these international financial institutions fought for poorer countries over these years to stop being protectionist, and yet they’ve included this protectionist clause in this stimulus package to protect Americans.

MARTIN KHOR: You see, when you’re a poor country, you know, and you don’t have efficient industries, then you have to protect your domestic industries from cheap imports coming in, especially the cheap imports that are subsidized. Now we are finding in the financial crisis a big hypocrisy, in that the rich governments, like the United States, are telling the rest of the world to continue to open up their economies when the US is pumping trillions of dollars of subsidies to their companies which would otherwise have failed.

So if our developing countries are to open up our markets, we will find failed motor car companies, as in Detroit, being able to sell their cars more cheaply abroad because of the subsidies given to them; failed banks like Citibank will be able to invade developing countries, where our banks, our local banks, are also going to fail, but we don’t have trillions of dollars to prop up our failed banks, and we don’t want the failed banks of the United States or Europe or Japan to come and invade our territory.

So this “Buy American” clause in the stimulus package, you know, you are going to spend an extra $800 billion through public expenditure, much of it will be in public works and so on, but if the products, the steel and the manufactured products that go into these projects, have to be sourced from the United States itself, then this will block out products coming from Asia or from Africa or from Latin America, and therefore add onto the gloom that we are already facing with the collapse of our exports.

AMY GOODMAN: President Obama is signing this economic stimulus package in Denver at the Museum of Nature and Science. The site was picked in part because it has 465 solar panels on its roof. You have written, “If the [US] and Europe can come up with so many trillions of dollars to save their financial institutions within a few months, surely there is money to tackle the climate crisis, which is a far bigger problem involving the world’s survival.”

MARTIN KHOR: Well, you know that we are going to have this big Copenhagen conference in December, and we need to have a global deal in order to globally deal with the climate crisis. But the developing world does not have the money or the technology to be able to switch their economies to a low-carbon society and a low-carbon economy. So the gateway to a global deal, as the developing countries are concerned, is to be able to establish a fund within the United Nations Convention on Climate Change, which will be able to fund the technological changes and the economic changes that we have to have in the developing countries.

If we are able to find $4 trillion to subsidize banks and motor car companies in the space of five to six months, surely we can come up with $100 billion for a start to launch a fund within the United Nations to help the developing countries to tackle climate change. If we do not have such a fund, then we will — I believe we will find it very difficult to have a global deal to deal with climate change, and we are going to face an environmental devastation.

So, in a way, the economic crisis has been positive, in that it has shown us that if there is a political will, that trillions of dollars will be possible. And what greater cause can we devote than to come up with helping the developing countries to deal with climate change and poverty at the same time?

AMY GOODMAN: You just heard the Director of National Intelligence, Dennis Blair, saying that the economic crisis has become a greater concern than terrorism.

MARTIN KHOR: I think he is —-

AMY GOODMAN: A greater threat.

MARTIN KHOR: He is right, because when people are economically insecure, when they don’t have jobs, when they are in poverty and there is no hope in the system, then, of course, they will have to turn to whatever means they think they need to do out of sheer frustration and hopelessness. So we need to tackle the problem of jobs and poverty in the developing countries. And unfortunately, with the recession that began in the United States, the economy is going to plunge in the developing world. So we need to rethink the way the global economy is run, and we have to give the freedom to developing countries to have the policy options that they require to rebuild their economies with the help of finance and technology and with -— at the same time, they need to tackle climate change side by side.

AMY GOODMAN: Finally, the World Bank is saying the crisis could push a hundred million more people into poverty and child mortality rates soaring.

MARTIN KHOR: I think this is a gross underestimate. You know, I read in the papers Gordon Brown, the UK prime minister’s chief economic adviser, Ed Balls, saying last week that this depression is going to be worse than the Great Depression, it will be the worst depression in more than a hundred years, and that the effects are going to last for fifteen years.

We have already seen 20 million jobs lost in China in the last few months. And this is only the beginning. I know the trade unions are very worried about China. And you have lost three million jobs in the United States, but in China they have already lost 20 million jobs because of the loss of exports to the United States and the rest of the world. And this is only China. What about Africa? What about so many other countries? We could have one billion more people in the developing world plunging into new poverty because of this crisis.

AMY GOODMAN: Martin Khor, I want to thank you for being with us, of the Third World Network and the South Centre.

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