Trillions pour into bailouts as the poor get poorer

JOHANNESBURG // Across the world, trading screens have shown seas of red for months, economies have plunged into recession and rescue packages totalling in the trillions of dollars have been announced. But while vast sums are being promised by governments to boost western economies, specialists are warning that it is the world's poor - who played little or no part in the consumer borrowing that contributed to the chaos - who will be worst affected. The downturn, at first focused in the US and Europe, has spread rapidly into second-tier countries such as China and India, destroying the rapid growth they were enjoying and triggering job losses on enormous scales. At the same time, plunging commodity prices threaten the finances of nations further back on the growth track - even South Africa, largely insulated from the global financial system by exchange controls, is now expected to see its economy shrink when the figures are in for the fourth quarter of 2008. Meanwhile, aid agencies fear that funding for humanitarian and development assistance will plunge. Oxfam, the UK-based charity, has already announced cuts of up to 15 per cent in its operations in Britain. "We are trying desperately to avoid looking at cuts to programmes in the field but we are beginning to look at where we need to start looking at the level of our programmes," said Magda Walter, an Oxfam spokeswoman. Few if any nations meet the UN-set target of putting 0.7 per cent of their gross national income into overseas aid and in past recessions such spending has fallen dramatically: in the 1972-73 downturn it dropped 15 per cent and the 1990-3 slump saw it go down by a quarter, not returning to the levels of 1992 for more than a decade. Iraj Abedian, the chief executive of Pan-African Capital Holdings, a South African investment company with a focus on development, said: "Unfortunately the poor are the ones who are always most affected by man-made disasters and the financial credit crunch is a man-made crisis. It immediately increases the plight of the poor and in every society the number of people joining the poorest of the poor has expanded considerably while the overall pool of resources available for poverty alleviation diminishes substantially." The prospect of internal growth improving the living standards of the global poor had almost vanished in the medium term, he said. "The chances of the ones that are in the middle ages pulling themselves out of poverty has diminished to approach zero. "Commensurate with that the forward commitments of OECD countries have become almost unbelievable. The pace at which the UK government is mortgaging future revenues and the pace at which George Bush and America in general has been mortgaging future fiscal revenues is almost breathtaking. "All of that has implications for humanitarian assistance or revenues available generally for humanitarian relief." While aid organisations that rely on public and corporate donations are already seeing the effect, Kelly David, head of the Southern Africa regional office of the UN's Office for the Co-ordination of Humanitarian Assistance said government funding for this year, such as for UN activities, had largely already been allocated before the scale of the crisis became clear. But she warned: "We would expect in 2010 to be really where the impact is. NGOs are suffering immediately and in this region UN agencies and government are often not the implementers, NGOs implement 80 to 90 per cent of programmes. "If they are facing funding problems it's going to have a huge implications for us in terms of humanitarian assistance." Western governments facing and bowing to domestic pressure to concentrate on their own problems was unsurprising, she said. As a result, Ms David said, aid organisations would have to allocate their resources more efficiently and carry out better contingency planning, while governments in the south would also have to reconsider their own priorities. "The global crisis is only going to increase people's vulnerabilities," Ms David said. "It's not fair that the people with the most resources and the least vulnerability and who can and will survive the recession are putting the lives and livelihoods of many hundreds of thousands of people in southern Africa at risk." Françoise Le Goff, head of Southern Africa for the International Federation of Red Cross and Red Crescent Societies, said cutting funding would be short-sighted, even from the view of rich countries' budgets. "The tendency of some donors will be to cut back on humanitarian assistance," she said. There is little doubt about that. But pragmatism justifies continued support for development. Effective development work reduces the need for expensive emergency interventions. To put it simply: money not spent now will be much more money that will need to be spent in the future." sberger@thenational.ae