The global economic downturn is having fatal consequences for the poorest in the world’s developing countries. An additional 30,000 to 50,000 babies, for example, are expected to die in Africa alone this year because of the crisis, according to a study by the World Bank.
While World Bank chief Robert Zoellick knows well the impact the crisis is having among the poor, he is looking for a solution in developing countries, which have been hardest-hit by the worst economic crisis since the Great Depression even though they had nothing to do with the financial machinations that touched it off.
He sees not only the possibility of a new beginning for such countries but also a potential solution for the problems around the globe: “They are the most vulnerable, but also potential sources of growth.” The crisis has shifted the world’s economic growth mechanism, which has relied on heavily spending developed countries, so this is where the developing nations come in, whose consumers and other economic potential have been largely untapped, Mr. Zoellick said on visit last week in Beijing.
“We can no longer rely on the U.S. consumer to maintain growth,” said the former U.S. trade representative and Goldman Sachs Group Inc managing director. “We need others.” “China is a good example because China’s growth helps the growth of the world,” he said.
With its stimulus measures and economic policies, China has been able to maintain strong, albeit lower, growth, during the crisis. Its economy might expand nearly 8 per cent this year, thereby helping to stabilize the faltering world economy.
Mr. Zoellick also singled out India, Indonesia, Egypt and Mexico but saw potential in many other developing countries as well: “Other developing countries can offer other forms of growth.” Mr. Zoellick’s solution came ahead of the first anniversary of the September 15 collapse of investment bank Lehman Brothers under a mountain of bad home loans, which sparked a series of similar collapses or near-collapses among financial services companies, a plunge in world stock markets, a drying-up of credit markets and a global recession.
Mr. Zoellick is joining other world leaders in looking to prevent similar occurrences. Although he said developing nations could help the world economy, they face difficulties overcoming the current crisis.
While the downturn has brought higher unemployment and lowered credit pools in rich countries, it has brought into question naked survival in many poor countries that were struggling with higher food and oil prices even before the crisis hit.
The World Bank considers 40 countries as especially endangered.
For some, trade has collapsed, particularly for commodity-exporting nations. For others, tourism has fallen off, and workers who have gone abroad to find work are sending less money to their families back home.
Economic growth among developing nations stood at 7.7 per cent in 2007, but this year, their economies were expected to shrink 1.2 per cent. That drop would be 1.6 per cent without China’s and India’s strong performances, Mr. Zoellick said.
Because of the economic fall-off, about 50 million additional people worldwide were expected to fall into poverty. Those people and developing economies must not only be lifted out of poverty but also must be enabled to generate growth for the good of the rest of the world, Mr. Zoellick said.
“We are all in this together”
The Group of 20 summit of the world’s top economies at the end of September in the eastern US city of Pittsburgh, Pennsylvania must set the course and help the developing world so it would be able to return the favour, the World Bank president said.
“I urge the developed countries in Pittsburgh to move beyond financial stabilization and to help the need of the most vulnerable countries,” Mr. Zoellick said. “This can be in the self-interest of the developed countries.” With additional financial resources, poor countries could stoke their trade, expand their social safety nets and invest in infrastructure and manufacturing, laying the groundwork for future productivity, he said.
However, for developing nations to be saved and, in turn, save the world, the rich industrialized countries must reach further into their thin pocketbooks, which appeared highly unlikely. But Mr. Zoellick insisted they shouldn’t mistake an important point: “We are all in this together.” International cooperation is necessary to emerge from the economic crisis and build a foundation for future growth, he said.
“The donor countries not only need to maintain but also increase their commitment,” Mr. Zoellick insisted.