Council for the Development of Social Science Research in Africa
Conseil pour le développement de la recherche en sciences sociales en Afrique
Conselho para o Desenvolvimento da Pesquisa em Ciências Sociais em África
مجلس تنمية البحوث الإجتماعية في أفريقيا

The Global Financial and Economic Crisis and the South: Impact and Responses

May 17-18, 2012Dakar, Senegal

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In 2008, the world witnessed one of the most severe financial crises since the great depression of the
1930s. The global financial crisis that started to show its effects in the middle of 2007, and running
into 2008, led to the fall of stock markets, and the collapse and eventual demise of large financial
institutions in the United States and Europe. In response, governments in even the wealthiest nations
have had to come up with rescue packages, including the bailout of their financial systems. Due to
the critical role banks play in the current market system, crises in the larger banks led to a situation
where not only the wealthiest, but literally everyone else, suffered,. With a globalized system, a
credit crunch rippled through the entire real economy very quickly, turning a global financial crisis
into a global economic crisis. What many saw as a temporary imbalance of the international financial
system eventually became a real crisis of the world capitalist system; or, as Samir Amin puts it, “part
of the unfolding of the long crisis of an ageing capitalism”. With the financial meltdown, all other dimensions of the crisis – the energy crisis, the food crisis and the environmental crisis – of the
system came to the surface.

The most important development that took place in the wake of the banking crisis is the transmission
of the crisis to the rest of the economy, resulting in a more general and deeper economic crisis. The
critical issue here is the onset of recession. Economic problems emanating from recessions and crisis
usually leave social and structural impacts on important sectors of the society. They affect living
standards and constrain the requirements of people in those sectors. The social repercussions of the
global financial crisis are also widespread and often lead to deterioration in the living standards of
millions of people, especially in poor countries. The Food and Agricultural Organisation (FAO) has
indicated that close to 1 billion people are affected by hunger. Also, the International Labour
Organisation (ILO) has reported that more than 200 million people are unemployed.
Even in countries or regions that have shown some signs of positive development, recovery from
global financial crisis remains an enduring challenge. Many Asian nations have witnessed rapid
growth and wealth creation in recent decades. This has led to enormous investment in Western
countries, as well as increased foreign investment in Asia, mostly from the West. However, this crisis
has shown that in an increasingly inter-connected world, there are always knock-on effects and, as a
result, Asia had more exposure to problems stemming from the West. Asian products and services
are also demanded worldwide, and a slowdown in wealthier countries means increased chances of a
slowdown in Asia, resulting in job losses and associated problems such as social unrest. Persistent
problems related to economic crisis include high unemployment, more debt and low growth in
developed countries, as well as greater difficulties in having access to finance for developing
countries. In addition, food prices in 2011 were volatile and nearly reached their 2008 peak, and
millions of people in the Horn of Africa and in the Sahel region are in urgent need of assistance as a
result of devastating drought, conflict and displacement.

The consequences and effects of the economic crisis have varied from one country to another, and
from one region to another, depending on a whole range of factors, including financial capabilities
and demography. For instance, in the Arab world, these negative effects, along with other factors,
have played a major role in the political events that have swept the region since 2010.
In the first years of the economic crisis, some scholars argued that because of their weak integration
with the rest of the global economy, African countries might not be affected by the crisis, at least
initially. Recent developments have, however, shown that earlier hopes were short-lived. Africa’s
economic growth plummeted because of the world economic downturn. The International Monetary
Fund (IMF) had predicted that growth in sub-Saharan Africa would come down to 1.5% in 2009, a
figure that is far below the rate of population growth. Africa’s largest economy, namely South Africa,
has entered into recession for the first time since 1992, due to a sharp decline in the key
manufacturing and mining sectors.

Despite the fact that Africa currently has the world`s lowest shares of regional trade and investment,
there is a strong possibility that the imbalance in the capital flow in the last couple of years has
affected the continent in terms of what it has been receiving from outside, in terms of both official
development assistance (ODA) and foreign direct investments (FDIs). The IMF has promised more
loans to the region, this time round with less stringent conditionalities, which in the past have been very detrimental to Africa. In the long run, it can be expected that foreign investment in Africa will go
down as the credit squeeze takes hold. In spite of such a situation, African countries may face an
increasing pressure for debt repayment. As the crisis gets deeper and the international institutions
and Western banks that have lent money to Africa need to shore up their reserves, they could
demand more debt repayments. This could, in turn, cause further cuts in social services such as
health and education, which have already been reduced due to the impact of the crises and the
dismal policies of the previous eras.

Much of Latin America depends on trade with the United States, which alone absorbs half of Latin
America’s exports. Then comes the question: How does this region feel the effect of the global
financial and economic crises, more particularly the financial crisis in the US? Furthermore, concerns
of fragmentation are increasing, because a number of South American countries are raising trade
barriers against their neighbors as the crisis starts to bite harder.
There is a need for countries in the South to examine the available options for national and regional
redress on each aspect of the economic crisis and to come up with appropriate policies. The
challenge remains how to find appropriate and differentiated responses to the disastrous impact of
the crisis, while keeping in mind the global common interest of the South. Only some policy
measures can be taken at national level, especially if the country is too small to rely on boosting
domestic-led growth. Given this situation, region-specific and South-South measures are important,
of which reforms, actions and cooperation at the international level are the most critical ones.
An analysis of the impact of the financial and economic crises on the South is a pre-condition for
defining development policies. The analysis should be holistic in the sense that it has to incorporate
all dimensions that might play a role, namely political, social and cultural dimensions. The conference
will therefore encourage papers on alternative thinking on the financial and economic crisis. In this
regard, a relevant research question, from the point of view of the countries of the South, relates to
the role of the state in overcoming the social crisis which has been worsened by the global economic
crisis. A holistic analysis of the impact of the crisis should look at its impact on poverty and issues
related to social exclusion, the reponses from the social movements, as well as the issue of global

April 16 2012