Global meltdown hits world's poor hardest

The Age

Andrew Hewett
March 18, 2009

BURIED on page 10 of a World Bank background paper prepared for last weekend's G20 finance ministers' meeting was a sober but profoundly distressing statement:

"Preliminary analysis shows that … infant deaths in developing countries may be 200,000 to 400,000 per year higher on average between 2009 and … 2015 than they would have been in the absence of the (global financial) crisis. Unless reversed, this corresponds to a total of 1.4 to 2.8 million excess infant deaths during the period."

The significance of the 2015 date is that it is the target year for the achievement of the United Millennium Development Goals. These universally agreed goals set down benchmarks for the improvement of the lives of many of the world's poor. But it is increasingly clear that these goals are becoming mere pipedreams in the face of the devastating impact of the economic meltdown.

It's a truism that in any crisis those hit hardest are those already on the bottom of the pile. They have the least resources and little ability to chart another course.

The economic crisis is just the latest blow for people living in developing countries. It's on top of big increases in food prices and the increasingly evident impact of climate change, which are affecting livelihoods and exposing communities to more volatile weather patterns. A triple whammy, or indeed, a perfect storm.

The World Bank predicts that the average GDP growth rate of developing countries will fall this year to less than half the pre-crisis rate. This will have life and death consequences for the poor.

Developing countries, according to the bank, are being hurt by five negative trends:

■ Declining commodity prices. Non-energy commodity prices plunged 38 per cent in the second half of 2008.

■ Collapsing global trade. The International Monetary Fund expects a fall of 1 per cent in exports from emerging and developing countries. The Cambodian garment industry has laid off 30,000 workers, 10 per cent of the workforce. In India, more than 500,000 jobs were lost in the last three months of last year in export-oriented sectors.

■ Disappearing private capital flows. Net capital flows to emerging markets are estimated to have declined in 2008 to half their 2007 level. There have been no international bond issues by African countries in 2008 compared with $US 6.5 billion in 2007.

■ Dropping workers' remittances. Global remittance flows reached $US 305 billion ($A463 billion) in 2008, a 9 per cent increase on the previous year. But there was a marked slowdown in the second half, and the World Bank is expecting that remittances to developing countries will fall this year.

■ Squeezing aid flows. Even before the crisis hit, the rich countries were reneging on their promises to the world's poor, with a bank-estimated shortfall of $US39 billion in development assistance.

So what is to be done?

First, recognise that this crisis is affecting the poorest. The coming G20 leaders' meeting needs to prioritise helping developing countries. We need to look beyond our own backyard.

Second, aid budgets need to be protected. It's gratifying that Prime Minister Kevin Rudd has reaffirmed his Government's pledge to boost aid spending to 0.5 per cent of gross national income by 2015. Other donor countries are already backing away from similar commitments. Developing country governments are going to need funding for social protection programs and other help for their most vulnerable populations.

Third, resist rich country protectionism. It's inevitable that pressures to protect rich country industries will increase as this crisis continues to unfold. But they should be fought. A truly development-friendly Doha trade agreement is needed now more than ever.

The World Bank estimates that 46 million more people will be living in desperate poverty as a result of the crisis. And this is on top of the 44 million more people estimated now to be suffering from malnutrition as a result of the food crisis. As the World Bank's own analysis shows, what is done to resolve this crisis literally has life and death consequences.

Andrew Hewett is executive director of Oxfam Australia.