Experts Fear Financial Crisis Will Hurt World's Poor

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More On World Food Crisis

There is growing concern among development experts that the world's poorest people could be hit hard by the global financial crisis. Wealthy countries are likely to cut back on aid, and slower growth in rich nations could then lead to a downward spiral in economies in the developing world.

Ritu Sharma, head of the Washington-based aid advocacy group Women Thrive, is hearing a lot these days from women's groups in poor nations worried about the implications of the economic crunch.

"This is going from the frying pan into the fire," Sharma says. "Because so many women have already been hit by the food crisis and rising food prices — and now on top of it, we are looking at the loss of potentially hundreds of thousands of low-wage, low-skills jobs, which are the ones that women in poverty have."

If rich nations stop importing goods from low-income countries in Africa or Latin America, those economies will suffer. Another problem is that development aid is likely to slow down — an issue that Sharma is expecting to bring up when President Bush hosts a summit on international development Tuesday. She knows this is not a time to call for more aid, but rather for more effective programs.

"We really need to see this kind of modernization of our international programs now more than ever," Sharma says. "And the financial crisis just makes it all the more urgent to fix it."

The Center for Global Development has been calling for such reforms and digging back into history to predict how this crisis might affect development aid.

"When a country is hit by a crisis, there will be a decline in aid in the subsequent couple of years," says Nancy Birdsall, who runs the center, which promotes policies to fight poverty. "There has been a return to trend in the past: Sweden's aid flows declined after its banking crisis in the early '90s, and Japan's aid flows declined when it had its problems in the '90s, but they have come back."

Birdsall says the United States can help the world's poor in other ways, such as lowering trade barriers. She says it is also time to rethink how the World Bank and other international financial institutions help developing countries.

"In the World Bank, there are about 45 member countries from sub-Saharan Africa and they have just two of the chairs in the 24-member board of directors," Birdsall says. "So that's about what is called voice — at least give the Africans a little bit more voice in the board of directors where there are policy decisions made."

Birdsall would like to see the U.S. and Europe give up, as she puts it, their lock on the presidencies of the international financial institutions. But she did not criticize the current World Bank president, Robert Zoellick, who has called on rich nations not to let the financial crisis turn into a human crisis.

"This has been a man-made catastrophe," Zoellick says. "The actions and responses to overcome it lie in all our hands."

The world's most industrialized countries are planning a summit as early as next month to talk about the global financial crisis and how to reform international financial institutions. French President Nicolas Sarkozy says one of his goals is to make sure the world does not abandon the poorest countries and ruin the benefits of years of promoting development.

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