Experts Fear Financial Crisis Will Hurt World's Poor The financial crisis stands to have a significant impact on poorer nations that are largely dependent on foreign aid. Instead of cash contributions, one expert says that other means, such as lowering trade barriers, could be a feasible solution.
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Experts Fear Financial Crisis Will Hurt World's Poor

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Experts Fear Financial Crisis Will Hurt World's Poor

Experts Fear Financial Crisis Will Hurt World's Poor

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LIANE HANSEN, host:

This is Weekend Edition from NPR News. I'm Liane Hansen. The turmoil in the global financial markets could have a devastating effect on the world's poorest people. Development experts worry that wealthy countries will cut back on foreign aid, and slower growth in rich nations may lead to a downward spiral in the developing world's economies. NPR's Michele Kelemen explains.

MICHELE KELEMEN: As head of a Washington-based aid advocacy group called Women Thrive, Ritu Sharma is hearing a lot these days from women's groups in poor nations worried about the implications of the global financial crisis.

Ms. RITU SHARMA (Co-Founder & President, Women Thrive): This is going from the frying pan into the fire because so many women have already been hit very hard 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-skilled jobs, which are the ones that women in poverty have.

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

Ms. SHARMA: We really need to see this kind of modernization of our international programs, you know, right now more than ever. And the financial crisis, I think, just makes it all the more urgent to fix it.

KELEMEN: 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. Nancy Birdsall runs the center which promotes policies to fight poverty.

Ms. NANCY BIRDSALL (Founding President, Center for Global Development): When a country is hit by a crisis, there will be a decline in its aid in the subsequent couple of years. There has been a return to trend in the past. Say, 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.

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

Ms. BIRDSALL: 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. And so that's really about what's called voice. At least give the Africans a little bit more voice in the board of directors, which is important where there are policy decisions made.

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

Mr. ROBERT ZOELLICK (President, World Bank): This has been a manmade catastrophe. The actions and responses to overcome it lie in all our hands.

KELEMEN: 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 the 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. Michele Kelemen, NPR News, Washington.

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