Impact of the 2007-2008 food and financial crises on developing economies

¶ … Strategic Multidimensional Analysis of the impact of the World Food

Crisis and World Financial Crisis on vulnerable economies on the Developing world."

Increase in variability and strong upwards trends in global food and financial crisis over the past 5 years have led to hunger and poverty across the world. Nearly one billion people globally are living in poverty with additional 115 million people living with hunger due to the impact of combined global economic recession and rising food prices. Between 2007 and 2008, the food prices doubled across the world making the number of people living in hunger to increase to one billion. However, the food riot is particularly noticeable in developing countries where billions of people in developing countries are living in the abject poverty. The global financial crisis that started in 2008 further deepened the world food crisis where approximately 98% of world's undernourished people are living in the developing countries. The prevalence of undernourishment is particularly significant in the sub-Saharan Africa with 30% of the population living in poverty.

The global food crisis emerged in 2008 in the United States following the collapse of housing prices that triggered the global financial crisis. Although, many developed countries are affected by the impact of financial turmoil, however the developing countries are significantly being affected. The capital inflow into the developing countries has declined significantly and dried up in many developing countries. The impact of the global financial crisis has led to the decline in the FDI (Foreign Direct Investment) inflow into the developing countries, which consequently leads to the decline in bank lending.

"Towards the end of 2008 (around October) the global recession started to manifest itself in international trade. The fall in global demand and the slowing-down in economic growth translated into a substantial reduction in international trade that has affected the cross-border trade of virtually all countries and economic sectors." (Trade and Development Board, 2009 P. 7).

The global economic crisis has led to increase in the prices of the staple food, and the price volatility in food is likely to remain in the future. Recent poverty updates published by World Bank (2010) shows that more than 1.4 billion people in developing country live on less than U.S.$1.25 per day. Christian (2009) also points out that the present global financial crisis has significant effect on the food prices leading to the widespread impact on the health and nutritional status of population in the developing countries.

Despite the vulnerable impact of the World Food Crisis and World Financial Crisis on the developing world, there are still scanty of literatures investigating the strategic multidimensional analysis on the impact of world food crisis and world financial crisis on developing countries. This study will fill the gap created with scanty of literatures on the research study. Typically, this study will use the strategic multidimensional analytical method to explore the research topic from different dimension. The technique will assist in providing the greater insight into the research study and the findings will provide the greater picture on the impact of the world financial crisis and world food crisis on the developing economy. Following the research findings, this study will provide the following contribution:

First, the study will provide greater understanding on the impact of the world food crisis and world financial crisis on developing countries. Since 2008, the global financial crisis has escalated into the global food crisis where there is a galloping increase in the global food prices. The most vulnerable are people in developing countries where billion of people in developing countries are living below $1.5 per day. Typically,

"Developing countries are currently seriously hurt through falling commodity prices, demand-driven drops in exports exacerbated by the deficit of credit and trade finance, capital outflows, declining remittances, and contracting investment." (Trade and Development Board, 2009 P. 7).

The crisis has also been accompanied by serious increase in unemployment rate in developing countries where 1 out 4 people is unemployed.

Moreover, the study will enhance greater understanding on the method the global financial crisis has escalated into the unemployment problem in the developing countries. Since the issue of the global financial crisis started in 2008, many firms have disinvested from the developing. There is also a decline in the FDI inflow into the developing countries leaving billion of people unemployed and underemployed. Report by Aykut (2010) reveals that the FDI outflow from the developing countries reached $208 billion in 2008. Although, the FDI declined in 2009, however, FDI increased again in 2010. However, FDI outflow continues increase in Africa. As being revealed in Fig 1, the FDI outflow from developing countries increased significant following the occurrence of global financial crisis in 2008. Large number of firms disinvested from the developing countries leading to the increase in the unemployment rate. Based on the data collected, this study will provide the correlation between the FDI outflow from the developing countries and the unemployment rate.

Fig 1: FDI Outflow from Developing Countries

The proposal will also enhance the greater understanding of policy makers in developing countries the risks they are facing by continuing depending on the advanced countries. While the globalization has led to the economic interdependence among countries around the world, the developing countries continue to depend on developed countries for loans and products and services with little export to developed countries. The developing countries have still not benefited from the globalization where many developing countries still rely on the traditional method of conducting business. Developing countries need to desist from overdependence on developed countries and engage in mutual business relations with developed countries in order to create win-win business relationships. The report will show that overdependence of developing countries on developed countries is risky and could further deepen the food and financial crisis in developing countries.

The study will also enhance greater understanding of the academic community on the impact of the World Food Crisis and World Financial Crisis on vulnerable economies in the Developing world. This study will provide the strategic multidimensional analysis on the impact on the world food crisis and world food financial on developing. The study will analyze from different dimensions on the impact of both world food crisis and world financial crisis on developing countries. The findings of this research will fill the gap created with the lack of research study on the "Strategic Multidimensional Analysis of the impact of the World Food Crisis and World Financial Crisis on vulnerable economies in the Developing world."

The study develops the research questions to achieve the research objectives.

3. Research Questions

1. What are the impacts of the World Food Crisis on vulnerable economies on the Developing world?

1.1: What are multidimensional impacts of the World Food Crisis on the economies on the Developing world?

2. What are the impacts of the World Financial Crisis on vulnerable economies on the Developing world?

2.1: What are multidimensional impacts of the World Financial Crisis on the economies in the Developing world?

3: To what extent 2008 global financial crisis affect the economies of developing countries?

4. To what extent the 2008 global financial crisis translates to the world food crisis?

5. To what extent the 2008 global financial crisis lead to the food crisis in developing countries?

The study collects primary and secondary data to answer the research questions as well as achieving the research objectives. The data collection method will assist the researcher to provide valid and reliable research findings.

4. Methods

The section discusses the method that the proposal will employ in carrying out the data collection. The study will also provide details of the proposed samples of primary and secondary and justification for the choice.

4.1: Data Collection Method

The study will collect data using primary and secondary research. The study will use both quantitative and qualitative (mixed) methods as a method of collecting primary data. The study provides the rational of using the mixed methods in the next section.

Benefits of using Qualitative methods

The major benefits of using qualitative research for data collection are that a researcher will be able to collect rich data from the experience of the people being interviewed. The technique will assist in producing valid and quality research findings. Moreover, qualitative research will assist a researcher to collect data from the in-dept interview which will provide the holistic view of the phenomenon under investigation.

Despite the advantages that this study will derive from using qualitative research, there are still shortcomings with the qualitative research.

Weaknesses of Qualitative Methods

The major weakness of qualitative research is that the method is time consuming. It may take lot of days, weeks or months before a researcher secures interview appointments with interviewees.

Moreover, qualitative research is not cost effective. A researcher will need to spend lots of money on phone calls and transportation before finally secured an interview appointment with interviewees. (Bradley, and Devers 2007).

Benefits of using Quantitative methods

One of the major benefits that this study will derive from quantitative research is its cost effectiveness. A research could collect large amount data using lesser amount.

Moreover, there is high level of reliability from the data collected using quantitative method. The data collected will assist in testing the hypothesis as well as arriving at objective conclusion. Despite the benefits that this study will derive from using quantitative research, there is still weakness identified with quantitative research method.

Weakness of Quantitative Method

The quantitative research fails to provide the researcher the rich data from the natural context of the phenomena. The quantitative method is also unable to control the environment where the respondents provide the answer to the survey questions.

Based on the benefits and shortcomings identified with both quantitative and qualitative research methods, the study will use the mixed methods to integrate the benefits of both research methods as well as addressing the shortcomings identified with both qualitative and quantitative research methods.

Mixed Methods

Mixed methods encompass the procedure of combining both qualitative and quantitative methods as method of data collection. This study will derive several benefits from using the mixed methods approach. The study will integrate both benefits of quantitative and qualitative research in the research study, which will assist in providing valid and reliable research findings. The mixed methods provide the strengths as well as offsetting the weakness identified in both quantitative and qualitative research.

Moreover, mixed methods provide the comprehensive method of studying the research problem than using either of the qualitative or quantitative research alone. Typically, the researcher will be permitted to use different tools for data collection and data analysis.

Moreover, the mixed methods will assist a researcher to answer the research questions which a researcher may not be able to answer with either qualitative or quantitative research alone. Typically, the mixed methods are practical in the sense that a researcher will be able to solve research problems and answer research questions using combination of numbers and words as well as deductive and inductive thinkings.

Despite the benefits that this study would derive from the mixed method approach, the mixed method is time consuming and the researcher will need to incur more resources with the research approach.

Sample

The researcher will distribute survey questions to approximately 500 participants to collect valid and reliable 100 survey data. The participants will be academicians, government officials and executives of many organizations. The study will sample approximately 5 participants for the in-dept interview.

Secondary Data

The researcher will supplement the primary data with secondary data. The secondary data will consist of research articles, journal articles, published academic materials, and academic books. The researcher will collect secondary data from academic database such as EBSCOhost database, database of Science Direct, Wiley database, and EmeraldInsight. This database contains the scholarly research journals and articles.

The study will also collect secondary data from the academic library and the World Bank database. The major benefits that will be derived from the secondary data are that it is cost effective and is easy to collect. Unlike primary data collection technique which is time consuming, the secondary data is less time consuming and is available in large quantities. However, using only secondary data for the research may not be adequate to answer the research questions and achieve research objectives. Some of the samples of secondary data that will be used for the proposal are as follows:

1. "The financial crisis and its impacts on global agriculture" by J.Y. Lin and W. Martin.

2. "The World's Poorest Nations and the Global Financial Crisis." by: Imparato, Nicholas; Sharma, Shalendra D.

3. "Global Economic Crisis and Nutrition Security of Africa." by: Suresh, B.

4. "The World's Poorest Nations and the Global Financial Crisis" by Imparato, Nicholas; Sharma, Shalendra D.

5. "Global crisis and beyond: Sustainable growth trajectories for the developing world." by: Ghosh, Jayati.

6. "Global Crises and Developing Countries: Financial, Environmental, Resource and Food Perspectives" by van der Ploeg,

7. "Sustainability, Food Security, and Development Aid after the Food Crisis: Assessing Aid Strategies across Donor Contexts." By Essex, Jamey.

8. "The Food Crisis and its Impacts on Poverty in Senegal and Mali: Crossed Destinies." By Boccanfuso, Dorothee; Savard, Luc.

9. "World economic crisis impact on organic products consumption": Costa Rica, 2009 by Gonzalez, Juan Antonio Aguirre.

10. "Global economic crisis: implications for trade and development" by World bank.

5. Reflections

The researcher will try to minimize the potential practical and empirical obstacles that might have occurred during the data collection process. However, the researcher envisages the following potential obstacles during the research process.

First, the researcher may face challenges in collecting adequate data to answer the research questions because the researcher may not be able to control the time the respondents will reply the survey questions. Moreover, the rate of collecting the required survey questions will depend on the number of respondents who are willing to fill the survey questions. However, the researcher will distribute 500 survey questions to participants to collect the required data due to the problem envisaged.

The issue of finance is another potential obstacle that the researcher is likely to encounter. Since the study will collect data through mixed methods, the budget allotted for the study may increase due to the unforeseen circumstances such as inflation, increase in the costs of transportation and telephone.

The researcher will need to adhere to ethical protocol by protecting the private data collected from participants. It is part of the university ethical policy that a researcher needs to protect all the data collected from the participants which include, name address, telephone number and email address.

It is envisaged that the researcher will employ both qualitative and quantitative method for data collection and data analysis; however, the researcher will need to collect valid and reliable data through this approach to generate the research findings. The quality of research findings will depend on the quality of data collected through the mixed methods.

6. Conclusion

The study will investigate the "Strategic Multidimensional Analysis of the impact of the World Food Crisis and World Financial Crisis on vulnerable economies on the developing world." The study will reveal how the world global financial crisis has translated into the world food crisis with major effect on developing countries.

The effects have been the increase in the unemployment rates, increase in the hunger rate and decline in the investment opportunities in developing countries.

The study will use the mixed methods for data collection and analysis and this study will provide the following contributions:

The study will enhance the greater understanding of academic communities on the impact of the World Food Crisis and World Financial Crisis on developing economies.

The study will also fill the gap created with lack of literatures on the research study and this will benefit the overall academic communities. The study will also enhance greater understanding of the policy makers in the developing countries on the impact of the World Food Crisis and World Financial Crisis on developing economies.