This article argues that although under a normal economic environment the allocation of resources to education may not be influenced by economic conditions, a deterioration in such conditions, like the recent world recession, does adversely influence educational development. It is further argued that under worsening economic conditions, primary education suffers more than higher education, and that popular socio‐political pressures result in the quality of education being traded off for quantitative expansion. Evidence on Latin America and the Caribbean region is presented in support of these arguments.