Global Economic Crisis and Global Development: Reflections on the Emerging Panorama

Global Economic Crisis and Global Development: Reflections on the Emerging PanoramaAuthor(s): Nicola PhillipsSource: Irish Studies in International Affairs, Vol. 21 (2010), pp. 17-28Published by: Royal Irish AcademyStable URL: http://www.jstor.org/stable/41413171 .

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Global Economic Crisis and Global Development:

Reflections on the Emerging Panorama*

Nicola Phillips

Politics/Political Economy Institute, University of Manchester

ABSTRACT

The task of this essay is to reflect, necessarily tentatively and speculatively, on the actual and potential implications of the global economic crisis of the late 2000s for global development. Using a conception of development which centres on poverty, inequality and vulnerability among groups of people across the world, the essay explores two key areas in which the consequences of the global crisis are clearly apparent: on the one hand, trade and production, and, on the other, global migration. The discussion emphasises the very mixed picture which is emerging, such that bald statements that the crisis is either 'good' or 'bad' for development are misleading. Rather, careful distinctions need to be drawn between different social groups in different social and territorial contexts, such as between the urban and rural poor, between formal-sector and informal- sector workers, between migrant workers and native-born workers, or between different kinds of national economies and societies.

INTRODUCTION

The midst of a crisis is always a poor vantage point for considering and speculating on its implications. The midst of this particular crisis is an even poorer one, in the sense that there are few historical lessons that could guide such an enterprise, or indeed inform appropriate policy responses to it. This crisis is in many ways unique in the contemporary period, both for its origins - beginning not in emerging markets but in the nexus of markets and states that comprise the political economy of Anglo- America, and for its nature - crystallising in property and financial markets and subsequently engulfing last parts of the global productive economy. Over the second part of the twentieth century, other financial and economic crises have been far more contained within particular regions or countries, even if some of the 'contagion' effect might have been felt elsewhere in the global economy. While some might object to labelling the current context a 'global' crisis, in view of its very particular

*This essay is the text of a presentation to the annual conference of the Committee for International Affairs, entitled 'International politics and the global economic crisis', which took place at the Royal Irish Academy Dublin, on 5 November 2009. 1 am grateful to the RIA for this invitation.

Author's e-mail: [email protected] Irish Studies in International Affairs, Vol. 21 (2010), 17-28. doi: 1 0.33 1 8/ISI A.20 10.21.17



18 Irish Studies in International Affairs

origins, it is nevertheless a crisis of global consequence, with significant implications for global development.

The task of this essay is to reflect, necessarily tentatively and speculatively, on what these implications have looked like thus far, and what we can say at this stage about the likely medium-term panorama for a range of arenas and processes associated with global development. To do so, it is necessary first to set out a particular perspective on the very vague term 'global development', which can enable and orient this task. Succinctly stated, focusing in our discussions of global development on 'countries', or somewhere called the 'developing world', is both misleading and unproductive - in general and for discussions about the nature and implications of the current crisis. The problems of this kind of classification are in any case well known.1 Where, in such a schema, would one locate China or Brazil, for example? Where would one fit in the implications of the crisis for the welfare of the people targeted for sub-prime loans in the United States, who have subsequently lost homes, jobs and livelihoods? Where would one fit the millions of migrants from poorer (parts of) countries who are living and working across the world? It is therefore far more instructive to orient our discussions around a notion of development, centred on questions of poverty, inequality and vulnerability among groups of people. That is, I deploy here a conception of development in which what 'develop' - or what are affected by the current crisis - are understood to be social groups, which are linked not solely by geographical location or nationality, but also by particular sets of material and social circumstances that cut across territorial boundaries.

On this basis, I approach the implications of the crisis for global development through the key question of what it means for poverty and inequality across the world, and what are the mechanisms through which its impact emerges. I explore two areas: on the one hand, questions of trade and production, and, on the other, trends relating to global migration.

IMPLICATIONS FOR POVERTY AND INEQUALITY

Early speculation about the likely implications of the crisis for world poverty has been alarming. Taking the Latin American region as an indicative example, the Inter- American Development Bank (IDB)2 estimates that the number of people living below the poverty line in Latin America will have increased by 7% - equivalent to 12.7 million people - by the end of 2010. Worse still, the numbers of people living in conditions of extreme poverty, or indigence, are likely to increase by 9% - equivalent to 7 million people. These are figures reached by averaging out the per capita output performance of the region over the six world financial crises that have occurred since the 1980s. However, if performance during the debt crisis of the early 1980s were to be replicated during the current crisis, poverty in Latin America and the Caribbean would in fact be likely to increase by 34 million people. These figures are held to be significant, inasmuch as the Latin American region as a whole has been making some striking progress in poverty reduction - since 2003, around 48 million people have been lifted above the poverty line.3

Anthony Payne, The global politics of unequal development (Basingstoke, 2005). 2Inter- American Development Bank (IDB), 'Fact sheet: poverty scenarios and the crisis', IDB Web

Story, 2009, available at: http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum= 1885962 (5 August 2010).

3United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Social panorama of Latin America: briefing paper (Santiago, 2008); Nicola Phillips, 'Poverty reduction and the role of regional institutions', in Gordon Mace, Andrew F. Cooper and Timothy M. Shaw (eds), Inter- American cooperation at a crossroads (Basingstoke* forthcoming 2010).



Phillips - Global Economic Crisis and Global Development 19

Staying with Latin America and the Caribbean, the IDB4 goes further in exploring the implications of the looming food crisis for the region's poor. The impact of food prices remaining high is likely to put 26 million people at severe risk of falling into conditions of extreme poverty. Chronic poverty would also be deepened substantially, particularly in food-importing countries like Haiti, Peru and Nicaragua. Individual country profiles would show significant alteration - IDB simulations indicate for Mexico an increase in poverty of around one-third of present levels, to no less than 27.5% of the population.

Calculations such as these would lead us to believe that the impact of the crisis on the world's poor and poorest people is likely to be of catastrophic proportions. Yet the picture is rather more mixed than these aggregate figures suggest. Although the effects of the food crisis will operate largely independently of the generalised economic crisis, the impact of the latter appears to be substantially variegated across countries, sectors and social groups. Let us explore this variegation through two lenses: those relating to trade and production, on the one hand, and those relating to migration, on the other.

Trade, production and investment

The impact of the crisis on economies and societies outside the epicentre of the world's financial markets is felt primarily in trends in global production, trade and investment. It is consequently held that those economies, sectors, producers and workers that are integrated into global networks of production and trade (GNPT) are apparently the most affected by the crisis in the short term, and the most likely to feel its long-term consequences. The high levels of orientation to export production and the pronounced dependence on trade in both Latin America and East Asia consequently have made these countries particularly vulnerable to falling demand across export sectors, and the social consequences of falling growth and output are likely to be most profound in parts of those regions. By contrast, economies, sectors, workers and producers that are most reliant on aid and remittances, as well as foreign direct investment (rather than on portfolio capital flows), are likely to be much less affected by the global trends associated with the crisis. These economies are clustered predominantly in sub-Saharan Africa and South Asia - precisely those where Paul Collier's 'bottom billion' are predominantly concentrated.5 According to this characterisation, then, impacts on the world's poor are associated with their integration as producers and workers into GNPT. The areas in which the world's poorest are concentrated are relatively less integrated into these networks, and consequently less vulnerable to the slow-down in demand emanating from the 'centre' of the global economy.

Yet, there are a large number of 'buts' which complicate this generalised picture and need to be brought to the fore. First, the above picture would lead one to imagine that the low-income parts of the global economy where the world's poorest people are concentrated are likely to be hit less hard by the current crisis, and, by extension, that medium-and high-income countries are likely to be the most affected. The underlying assumption appears to be that the former are less integrated into GNPT than the latter, which is true only in some cases. If we think about production in both

4IDB, 'Countries need to spend more to prevent food crisis from deepening poverty', IDB Web Story, 12 August 2008, available at: http://www.iadb.org/NEWS/detail.cfm?Language=En&parid=4&artType =WS&artid=47 1 8&id=47 1 8 (5 August 2010).

5Kunal Sen, 'The financial crisis and development', Mimeo, (University of Manchester, 2009); Paul Collier, The bottom billion: why the poorest countries are failing and what can be done about it (Oxford, 2007).




sub-Saharan Africa and South Asia particularly, the reality is one in which vast numbers of workers and producers are integrated into GNPT and world trade at the lower and lowest ends of the value-added scale, engaged in production of both agricultural and manufactured goods at the 'top' (that is, least specialised) end of global value chains.

The nature of global production is such that the value chain consists of a large number of 'tiers', which encompass diverse forms of activity and work that remain largely 'invisible', as do the workers who perform these activities. At the same time, the inability of smaller and poorer producers in key sectors to achieve a more advantageous and competitive insertion into GNPT has been well documented and explained, particularly by Raphael Kaplinsky.6 The situation is not, therefore, one in which these economies or producers are less integrated into the global economy through production and trade, but rather one in which they are integrated on unfair and disadvantageous terms - a situation that we can helpfully label 'adverse incorporation'.7 It is for these reasons that these economies and societies are more reliant than others on overseas aid and remittances, which are flows of capital that have been less affected than some others by the current crisis. In other words, the fact that they are likely to be less affected by the crisis is an indication of greater vulnerability in overall developmental terms, and this is likely to be deepened in the long run by trends in global demand and the associated reorganisation of GNPT. The difficulty of achieving more competitive and developmental advantageous terms of incorporation into the global economy is likely to be exacerbated as the crisis hits producers and workers at points further down in value and supply chains, increasing competition for scarce resources, including market access to some of the world's 'rich' economies.

Second, in the same vein, it would be a mistake to understand the above picture in terms of a distinction between higher- and lower-income countries. For some of the world's largest economies, particularly in the 'middle-income' bracket, the impact of the crisis has been less pronounced by virtue of the position of the domestic market in the overall development strategy. Brazil and China stand out as examples in this respect. While neither has been immune from the effects of the crisis, nevertheless the impact has been much less pronounced than we might expect given the size of the external sector and the importance of trade in the overall economic profile for both countries. In Brazil, much is made of the benefits of the large domestic market, and especially large domestic financial institutions. The merger in 2008 of Itaú and Unibanco has created the largest bank in an emerging market - that is, the largest outside the established centres of financial power.

It is also notable that Brazilian authorities tend to play down the importance of global production networks in favour of promoting a much more 'developmental- statist' kind of rhetoric about the role of the state in promoting development and shielding the economy from the crisis. This is demonstrated in the fact that the Brazilian state has pumped huge sums of money into its development bank, BNDES, for this purpose. In this sense, while export sectors in Brazil or China have certainly been affected by the crisis, the overall 'national' picture for both these countries is one of less vulnerability to the crisis than might often be assumed. The relevant variable seems to be not economic size or overall levels of poverty, but rather the

6Raphael Kaplinsky, Globalization , poverty and inequality (Cambridge, 2005). 7Sam Hickey and Andries du Toit, 'Adverse incorporation, social exclusion and chronic poverty',

Working Paper no. 81, Chronic Poverty Research Centre, June 2007; Stefano Ponte, 'Developing a "vertical" dimension to chronic poverty research: some lessons from global value chain analysis', Working Paper no. Ill, (Chronic Poverty Research Centre, June 2008); Nicola Phillips, 'Formality, informality and the constitution of global production networks', Global Networks (forthcoming 201 1).




extent to which a large domestic market and associated state institutions act to shield the economy as a whole from recessionary trends in the global economy.

Third, it should be noted briefly that the emphasis on trade and production focuses our attention on export production sectors, but overlooks another key area that has become integral to national and local development strategies over recent years - namely, tourism and tourism-related services - which have been significantly damaged by the combination of falling demand (resulting specifically from the crisis) and rising prices associated with air travel. The viability of development strategies based on tourism - particularly pronounced in regions like the Caribbean and Central America - is consequently to be questioned, and the impact of this situation on vulnerable workers who have found formal or informal employment in this sector is likely to be serious. Equally, many migrant workers find employment across the world in tourism-related services, such as in the hotel and hospitality industries, and these are among the sectors that have been most affected by economic recession.

Finally, the dangers of focusing on countries or national economies become particularly striking when we consider the implications of the crisis for different parts of the world's poor population. In the first place, it is unquestionably the case that rural poor populations are likely to be least affected by the crisis, particularly when livelihoods depend not on work within the productive economy, but rather on a combination of agricultural self-sufficiency and/or remittances from migrant family members (although we will discuss the issue of remittances in more detail later). By contrast, the urban working poor have been, and are likely to remain, severely affected by the global crisis.8 Indeed, the consequences for the urban poor account predominantly for the headline predictions on poverty that we noted above. Yet, at the same time, we are seeing a differential impact on poor and vulnerable workers in formal and informal sectors of economic activity. This represents an exacerbation of a generalised global trend towards a widening of the gap between formal and informal economic activity in terms of wages, conditions and rights.9

Let us again take Latin America as an illustrative example. It is well documented by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC),10 that the bulk of progress in alleviating poverty and indigence over the 2002-07 period, to which we alluded earlier, was due to an increase in the average household income, driven predominantly by labour income. In most cases, including in those countries that registered the highest reductions in poverty levels, the increase in labour income was due to a rise in the wages of the employed person(s), whereas in others, including those where levels of change have been negligible, the key factor was the net employment rate, even while wage levels played a part. This indicates that both employment and income levels are crucial in understanding the dynamics of poverty and the means of alleviating it. Yet, the point is that the bulk of employment growth (as opposed to economic growth) has been in low-productivity, low- wage sectors of the informal economy, and both the 1990s and 2000s have seen an arresting expansion of precarious employment and low-quality jobs.

Across Latin America, as elsewhere, there has been a widening gap between formal and informal employment in terms of wages, as well as an increasing number of workers who are incorporated into economic activity without access to social security, labour protections and possibilities for collective organisation. Women and migrant workers are disproportionately represented in figures for employment in the informal sector, as well as significantly more excluded from access to protections and security. All in all, ECLAC reports that labour productivity and levels of

8Sen, 'The financial crisis and development'. 'Phillips, 'Formality, informality and the constitution of global production networks'. 10ECLAC, Social panorama of Latin America.




employment increased for the region as a whole in the 2000s, and poverty among the employed population fell, but the vulnerability of workers (the proportion of own- account workers and unpaid family members) remained stable.11

The high numbers of people working in conditions of precarious employment, particularly in the urban informal sector, are thus disproportionately vulnerable to the impact of the crisis, particularly when those forms of employment are concentrated in the external sector. There is a strong association here with migrant workers, who are often constituted as an ultra-flexible 'parallel' or 'invisible' workforce. In many cities and regions, as well as in rural areas associated with agro- export industries, this migrant workforce not only acts as the primary absorber of commercial pressures on costs that result from competition in GNPT, but also, more specifically, represents the most easily 'disposable' labour.12 Vulnerable groups of workers also encompass native-born, less-skilled workers, non-whites and younger workers, with the precise composition of the vulnerable urban workforce varying in particular contexts. In some contexts, the impact of the crisis among these workers is felt in a shedding of jobs; in others it is felt in wage and price decreases, which may act to 'cushion' the fall in domestic demand,13 but also, again, exacerbate overall levels of vulnerability among the urban poor to transient and chronic forms of poverty, as well as to long-term forms of precarious and insecure employment.

Migration and remittances

The further key point to raise in the context of the above discussion concerns the mechanism of remittances in understanding the actual and likely impact of the crisis. This is best understood within a wider discussion of migration, and specifically the developmental implications of the impact of the crisis on patterns of global migration. Philip Martin14 has offered an interesting outline of the ways in which the possible effects of the crisis might be felt on migration, which, in adapted form, can serve as a useful starting point for our discussion here.

First, the fact that the recession began in industrialised countries and spread outwards has meant that migrants no longer have the ability to move from lagging parts of the world economy to booming parts. In other words, many of the main and secondary destinations for migrants are affected by the current crisis to the extent that there are few economies or sectors remaining with the possibilities of plentiful employment that attract migrant workers. Equally, much of the recession is concentrated in sectors, as noted above, which are sensitive to both economic cycles and trade and simultaneously traditionally characterised by high numbers of migrant workers. These include construction and manufacturing, both in economies like Spain or the UK, or equally in China or Bangladesh. To this extent, some of the primary territorial and sectoral destinations for migrant workers over the last 20 or 30 years appear to be diminishing markedly in the employment possibilities they offer. At the same time, the existing stock of migrant workers is likely to be affected by increased global levels of unemployment.

nECLAC, Social panorama of Latin America. 12See Harald Bauder, Labor movement : how migration regulates labor markets (New York, 2006);

Stephanie Barrientos, 'Contract labour: the Achilles heel of corporate codes in commercial value chains', Development and Change 39 (6) (2008), 977-90; Nicola Phillips, 'Migration as development strategy? The new political economy of dispossession and inequality in the Americas', Review of international Political Economy 16 (2) (2009), 231-59; Phillips, 'Formality, informality and the constitution of global production networks'.

13Sen, The financial crisis and development'. 14Philip L. Martin, 'Recession and migration: a new era for labour migration?', International

Migration Review 43 (3) (2009), 671-91.




The particular vulnerability of poorer migrant workers to these trends was noted above: both internal and international migrants represent the most easily disposable parts of the workforce, particularly when the workers are either themselves undocumented or are working in precarious conditions without employment contracts or long-term job security. Poor sections of the world's population in general, including the relatively poor in the world's 'rich' countries, are consequently most likely to bear the brunt of lay-offs and redundancies or, indeed, the very sudden disappearance of insecure jobs. They are even more vulnerable to conditions of 'under-employmenť, where employers reduce working hours or cut wages rather than lay off workers, and which are strongly associated with transient forms of poverty. Finally, undocumented workers are rarely entitled to any kind of welfare benefits, to the extent that they are likely to suffer particular hardships during the recession.15

Second, immigration policies in the primary migrant-receiving countries have changed quite significantly in recent years. In countries across Europe, in particular, the emphasis has moved from family reunification to a points-based system oriented to attracting highly skilled migrants based on meeting the needs of the economy at a given point in time. While the US is also moving in this direction, it still gives higher priority to family members - a form of immigration which is 'less sensitive to recession than economically motivated migration to countries that select newcomers based primarily on economic criteria' . 16 The generalised emerging trend in response to the current recession is towards cutting the number of visas available to temporary migrant workers. We can add to this observation a reflection on a long-standing pattern in popular sentiment surrounding immigration, which associates levels of public tolerance of immigration with prevailing economic conditions. Across the world, both public opinion and public policy favour dispensing with migrant workers in order to reserve jobs for native-born populations - the Malaysian and Singaporean governments are examples of those that have sought either to restrict new inflows of migrant workers or else to require existing migrant workers to leave.

The situation in the UK and Ireland, and indeed Sweden, is rather different, as intra-regional migration accounts for a large part of the numbers of people flowing into these economies. As migrants from Eastern European (A8) countries are overwhelmingly economic migrants motivated by employment opportunities, they do not encounter the above concerns about their freedom or the costs of movement. As such, flows of migrants from this region are likely to be more responsive to the economic cycle.17 Yet the trends are unclear. Some evidence from the UK suggests a decline in the numbers of applications approved under the Worker Registration Scheme between 2008 and 2009 (21,275 compared with 46,645) and falling levels of inward migration; however, this evidence offers only very scant support for the notion that we are seeing a significant outflow of migrant workers.18 Other research by the influential Institute for Public Policy Research suggests a peak in outflows of migrants (both onward and return migration), while emphasising that re-migration is not a new trend. In 2006, 194,000 non-British citizens left the UK, and 200,000 are thought to have left in 2008. 19 Similarly, anecdotal evidence suggests an increase in

15Demetrios G. Papademetriou and Aaron Terrazas, 'Immigrants and the current economic crisis: research evidence, policy challenges, and implications' (Migration Policy Institute, January 2009).

16Martin, 'Recession and migration', 689; Papademetriou and Terrazas, 'Immigrants and the current economic crisis'.

17Papademetriou and Terrazas, 'Immigrants and the current economic crisis', 5. 18Janet Dobson, Alan Latham and John Salt, 'On the move? Labour migration in times of recession:

what can we learn from the past?' Policy Network Paper (London, July 2009). 19Tim Finch, Maria Latorre, Naomi Pollard and Jill Rutter, 'Shall we stay or shall we go? Re-migration

trends among Britain's immigrants', Institute for Public Policy Research (London, August 2009).




return migration from the United States to Mexico and some other countries, but data do not yet substantiate these reports in any definitive manner. There is much more solid evidence of a slowing in the growth of the foreign-born population in the US since late 2007. 20

Generally, the available evidence indicates that many low-skilled workers are preferring to remain in their host country, due to the combination of an absence of economic opportunities and the costs of returning to their home country. In Spain, for instance, the further fact that migrant workers are eligible for state benefits means that fewer than 1,400 of 100,000 eligible immigrants signed up for a government scheme in 2008/9 that paid unemployed workers to return to their country of origin.21 Similarly, undocumented workers have traditionally been averse to returning to their home countries as they would not be able easily to re-enter the host country. To this extent, it is safe to assume that the impact in terms of flows of migrant workers will be felt in the levels of inward migration, but not necessarily in increased levels of outflow.

Put together, these conditions point to significant shifts in the panorama of migration and its developmental impact. Migration clearly offers a significant enhancement of earning capacity for vast parts of the world's population, such that much attention is justifiably being devoted to the potential developmental gains of allowing greater labour mobility.22 For example, a World Bank study considered the gains to the citizens of poor countries that would accrue from a relaxation of restrictions on labour mobility to allow an increase of 3% in the labour forces of rich countries.23 The conclusion was that these would be of the order of $300 billion - around four-and-a-half times greater than the gains from foreign aid at existing levels, before one factors in the economic gains to the rich countries themselves. If we accept that migration is potentially very positive in developmental terms, particularly in the ways it offers poorer migrants the opportunity to enhance their economic and social conditions, then a drying up of available jobs in the primary territorial and sectoral destinations, and a hardening of immigration policies to further restrict these opportunities, become significant impediments to development through mobility. At the same time, the often severe economic hardships that compel people to migrate for work in the first place, and also to go to considerable lengths to retain employment, invite the danger that they will be more vulnerable to exploitative forms of employment during times of recession when decent jobs become harder to locate. As noted above, the gap between formal and informal work is likely to widen, and more people are likely to take employment in the informal sector where their rights and well-being are less - or not at all - protected.

We should emphasise that these comments apply as much to internal migration as to international migration. While the issues of immigration law and policy are clearly not relevant, internal migration serves much the same purpose in countries like China, Brazil or India as migration across national borders. The contraction of employment opportunities in construction or manufacturing in the principal urban areas of China, for instance, is of potentially devastating consequences for the millions of migrant workers who had already moved to these areas, or those who saw jobs in such sectors as opportunities for employment.

Third, the issue of remittances is central to understanding the impacts of the crisis on development, inasmuch as remittances have emerged as one of the foundations of

20Papademetriou and Terrazas, 'Immigrants and the current economic crisis'. 21Papademetriou and Terrazas, 'Immigrants and the current economic crisis', 4. 22World Bank, Global economic prospects 2006: economic implications of remittances and

migration (Washington, DC, 2005); Lant Pritchett, Let their people come: breaking the gridlock on global labour mobility (Washington, DC, 2006).

23World Bank, Global economic prospects 2006 .




development strategies, both in terms of individuals' personal projects for seeking employment and income opportunities and in terms of national strategies to enhance inward flows of capital, as well as relieving employment pressures in the domestic context. Staying with Latin America as our illustrative example, the data in Table 1 reveal in very stark fashion the basis for this development strategy in the mid-2000s, when the excitement about remittances was perhaps at its height. It is in this context that increasing attempts have been made to position remittances as a 'bottom-up' form of development financing, ripe for harnessing and co-opting by national states,

Table 1. Significance of remittances in Latin America and the Caribbean, 2005

Volumes of As % As % As % As % As % of aid remittances, of gross of exports of imports of total net (net official US$ millions domestic (goods and (goods and foreign development

product services)" services)" direct assistance or (GDP)a investment official aid)b

Argentina 780 0.4 1.7 2.2 21.8 857.1

Bolivia 860 9.2 25.3 28.1 -307.6* 112.1

Brazil 6,411 0.8 4.8 6.5 51.1 2249.5

Colombia 4,126 3.4 15.5 15.8 71.7 810.6

Costa Rica 362 1.8 3.7 3.4 40.0 2784.6

Dominican Republic 2,682 7.7 27.5 24.4 262.1 3082.8

Ecuador 2,005 5.5 17.8 17.0 121.8 1253.1

El Salvador 2,830 16.7 61.9 37.0 942.7 1341.2

Guatemala 2,993 9.5 60.1 31.3 1438.9 1372.9

Haiti 1,077 25.9 179.9 63.1 11336.8 443.2

Honduras 1,763 21.1 51.5 34.3 648.4 274.6

Jamaica 1,651 16.7 45.7b 32.1b 283.9 2201.3

Mexico 20,034 2.6 8.7 8.3 160.7 16557.0

Nicaragua 850 17.3 61.9 30.0 352.5 70.0

Peru 2,495 3.1 12.8 16.4 96.7 512.3

Trinidad & Tobago 97 0.6 1.1 1.5 16.2 -9700.0**

Uruguay 110 0.6 2.2 2.4 15.4 500.0

Venezuela 272 0.2 0.5 0.9 19.4 555.1

Source: Own calculations. Primary data on remittances from Inter-American Development Bank (http://www.iadb.org/mif/remittances/); primary data on GDP, exports, imports, FDI and aid from ECLAC ( Statistical yearbook for Latin America and the Caribbean , 2006) and World Bank ( World development indicators, 2006). aAt current market prices. Calculations using 2004 figures. *Minus percentage arises as the figure for net FDI to Bolivia in 2005 was -279.6 (US$ millions). **Minus percentage arises as the figure for aid to Trinidad and Tobago in 2004 was -1 (US$ millions).




and that official discourse has sought to celebrate migrants as 'heroes' in many countries, such as the Philippines or Mexico. The extent to which many smaller and poorer economies have been positioned as 'remittance economies', dependent on transfers of money to households, is also clear.

Because remittances have tended to be much more stable than other forms of capital flows, the assumption, as noted above, is that both 'remittance economies' and households dependent on remittances are likely to be cushioned from the effects of the global crisis. Yet many have also commented on the 'developmental limits' of remittance economies.24 This is not only because the jury is still out on the developmental impact of remittances on poverty and inequality, but also because those who send remittances tend to be concentrated among first-generation migrants, who retain very strong links to families and communities in their home countries. Moreover, we have not had an opportunity to observe the behaviour of remittances under conditions of severe global crisis. Indeed, we are beginning to see a much more fragile picture emerging than the one that is often depicted in claims of the stability of remittances as a form of developmental financing. While this may have been the case thus far in the context of remittance flows to countries like Nepal or Bangladesh,25 we are seeing both declining growth and absolute falls in remittances to many other parts of the world, including the Philippines, Mexico and other economies to which remittances have become central. The World Bank predicts a decline of 10% in Europe, but only 4% in Asia. In global terms, estimates indicate a Table 2 - Remittances to Latin America and the Caribbean, 2005-8 (US$ million, selected countries, descending order based on 2005 figures)

2005 2007 2008 2001-5 2005-8 2007-8 % growth % growth % growth

Mexico 20,034 23,979 25,145 125.2 25.5 4.9 Brazil 6,411 7,075 7,200 146.6 12.3 1.8 Colombia 4,126 4,520 4,842 135.0 17.4 7.1 Guatemala 2,993 4,128 4,315 412.5 44.1 4.5 El Salvador 2,830 3,695 3,788 48.1 33.9 2.5 Dominican Republic 2,682 3,120 3,111 48.4 16.0 -0.3 Peru 2,495 2,900 2,960 168.3 18.6 2.1 Ecuador 2,005 3,085 2,822 40.2 40.7 -8.5 Honduras 1,763 2,561 2,701 283.3 53.2 5.5 Jamaica 1,651 1,975 2,033 70.5 23.1 2.9 Haiti 1,077 1,830 1,870 33.0 73.6 2.2 Bolivia 860 1,050 1,097 734.9 27.6 4.5 Nicaragua 850 990 1,000 28.8 17.6 1.0 Argentina 780 920 955 680.0 22.4 3.8 Costa Rica 362 560 624 352.5 72.4 11.4 Venezuela 272 330 832 100.0 205.9 152.1 Uruguay 110 125 130 **161.9 18.2 4.0 IMnidad & Tobago 97 125 130 136.6 34.0 4.0

Source: Own elaboration, based on data from Inter- American Development Bank (http://www.iadb.org/ mif/remittances/). ** % growth 2003-5.

24Phillips, 'Migration as development strategy?'. J5Sen, 'The financial crisis and development'.




likely fall of up to 8% in total global remittances, which would take them back to 2007 levels.26 Table 2 shows these trends in the Latin American and Caribbean context.

It may well be that remittances will fall less sharply than FDI,27 and that the most devastating impact will be occasioned by the latter. Equally, remittances are predicted to fall in 2009 but then rebound in 2010 and 201 1. 28 Nevertheless, we are seeing clear evidence that remittances are indeed significantly affected by the global crisis, particularly in those economies or sectors that have been hit hardest by slow-downs in economic activity.

CONCLUSIONS

Two arguments emerge strongly from the above discussion, as well as from considerations of other dimensions of the panorama for global development. The first is that the consequences of the crisis are only just beginning to become apparent. It is easier to perceive and understand the consequences in economies like the UK, Ireland or the US, where the crisis took hold some time ago and is by some accounts beginning to diminish in force. But it is still too early to perceive, let alone make confident pronouncements, on its implications in other parts of the world, and indeed among particular social groups. On the one hand, many of the consequences are 'knock-on' effects, which derive from a crisis that crystallised in particular parts of the global economy and spread out to other parts, and was also likely to be of a long- term rather than short-term nature. On the other hand, we still lack the necessary data to help us trace and understand the emerging trends over time.

The second argument is one that we can make with some confidence even at this juncture; namely, that it is impossible to say that the crisis is either 'good' or 'bad' for development. The picture is much more mixed than such a stark characterisation permits us to understand. The discussion above has shown that analyses of poverty and inequality require us to draw distinctions between different social groups in different social and territorial contexts - such as between the urban and rural poor, between formal-sector and informal-sector workers and between migrant workers and native-born workers. This emphasis on social groups also invites us to consider the urban poor in Chicago, Glasgow or Barcelona, as much as in Shanghai, Dhaka or São Paulo. Equally, especially through a perspective on migration patterns and the role of remittances, we have seen that the urban and rural poor are much more interconnected than some of the starker distinctions reveal. The importance of migration (internal and international) in the contemporary panorama of global development likewise necessitates a focus that moves away from 'countries' and instead locates an understanding of development in the context of global networks and flows of production, trade and labour.

National economies and societies do, nevertheless, come into the picture when we consider the likely implications of the crisis for the global order, and specifically for the large emerging markets we sometimes refer to as the 'BICs' or 'BRICs', depending on which combination of Brazil, Russia, India and China one considers to belong to this group. We have seen in our discussion that, again, it is impossible to think of the crisis as 'bad' for all countries we traditionally have thought of as 'emerging' or 'developing'. Current trends seem to indicate that all economies are

26Martin, 'Recession and migration', 674. 27Martin, 'Recession and migration'; Dilip Ratha and Sänket Mohapatra, Revised outlook for

remittance flows, 2009-2011 (World Bank, March 2009). 28World Bank, World Development Report 2009 , Reshaping economic geography (Washington, DC,

2009).




touched and affected by the crisis, but that some are possibly better positioned within it, particularly those with large domestic markets and governments that have resources available to protect those markets in various ways. We noted China and Brazil particularly in this respect: while in many ways suffering serious consequences as a result of the current global recession, which in China have raised real concerns about large-scale social unrest, these economies have nevertheless been able to weather the downturn more successfully than many other economies, particularly those of Europe or the United States. More to the point, some economies appear potentially well placed to profit from the crisis, particularly in terms of opportunities for firms to expand their transnationalisation strategies, for banks to emerge in global financial markets or for producers to meet growing demand for raw materials, and generally in terms of geoeconomic positioning.

This does not mean that the crisis puts us right on the cusp of a fading away of US dominance and the rise of China as the next global hegemon. Indeed, there are reasons to believe that responses to the crisis will put in place the conditions for business as usual, rather than a thorough-going process of change in economic organisation and the locus of economic power. But it does indicate, to my mind clearly, that the crisis may turn out to have favoured and strengthened the emergence and global presence of the newly powerful economies, contributing to a process of gradual, long-term change in the global order through which we are currently moving.

What might be a more immediate result is a loosening of the grip of the global development orthodoxy that has prevailed for the last 30 years or so. This is not to suggest the emergence of a replacement orthodoxy along the lines of the 'Beijing' consensus, which for all sorts of reasons we should think of as something of a flash in the pan.29 Rather, it is likely to involve the validation of the idea that there can be multiple paths to development and advancement, and that viable development strategies can take multiple forms, which do not conform with the tenets of a single, globalised, and now discredited, orthodoxy.

29 Anthony Payne and Nicola Phillips, Development (Cambridge, 2010).



Documents

Global Economic Crisis and Global Development: Reflections on the Emerging Panorama