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Don't forget the already poor

Edward Miguel, professor of economics at University of California at Berkeley

TEXT OF COMMENTARY

Kai Ryssdal: Leaders of the big industrialized countries had a busy weekend trying to figure out a way to save the economies of the big industrialized countries. Financial shenanigans in those economies got us into this mess, so they should have to get us out. And you don't have to work too hard to see that the damage to the developed economic world could be pretty bad. But commentator and economist Edward Miguel says the world's poorest countries are likely to be much harder hit.


Edward Miguel: We're all glued to Wall Street's implosion and for good reason. We're worried about falling home values and our 401k's. The crisis will also hit the world's poorest people in Africa, Asia and Latin America who are least able to buffer the shock.

For one, in the recent Vice Presidential debate, Joe Biden said that one
consequence of the financial crisis would be a cut in U.S. foreign aid. That's not good for countries, like many in Africa, that rely on bilateral aid for a large chunk of their national budget, to make sure their civil servants, police, and judges keep getting paid.

As American wallets snap shut, charities will also take a hit. We Americans are incredibly generous givers to the developing world, funding everything from primary schools, to maternal and child health clinics, to micro-credit for rural entrepreneurs. Many of these worthwhile projects will wither when assistance from overseas dries up.

The volatility in financial markets has also dragged down many commodity prices from historic highs. While some consumers will gain from these falling prices, agricultural producers in the world's poorest countries suffer a major blow when the price of their main export crop plummets.

Think of coffee producers in poor places like Guatemala, Vietnam or Rwanda. When the price of coffee suddenly falls 50 percent, their income is effectively cut in half. A halved income would shock most Americans, but it's the difference between life and death for a small farmer living on a few dollars per day. A recession in latte-addicted countries like the U.S. will push down demand for coffee even more.

The loss of income could heighten social instability, political violence and mass migration in developing countries. Our unfolding financial crisis may be the most severe downturn we've seen in years. I only hope that we Americans and our leaders don't forget that its consequences are likely to be much worse for the world's poorest countries when deciding how much to donate to charity, and whether to fund a generous foreign aid budget this year.

Ryssdal: Edward Miguel teaches economics at the University of California Berkeley. His new book is called "Economic Gangsters: Corruption, Violence and the Poverty of Nations."

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I can agree that much of foreign aid may never makes it to the people who need it or deserve it the most (i.e. Afghanistan). But to say Africa has nothing to show for all the decades of aid it has received from the West, the West that carved up the continent with little regard for the ethnic ties and tribal rivalries of the African people, which has ultimately led to the violence and corruption that exists in the region today, hampering any chances for stable economic growth, is a bit harsh. China's investments in Africa often come with extreme prices for the labor involved and often lead to, again, money going into the hands of the wrong people. Foreign aid needs to continue, especially as commodity prices drop. It just needs to get smarter.

I for one welcomed the comments of Prof. Miguel. Unless you have traveled to a developing country to walk with the poor, to hear their story of struggle and hope, one cannot comment. Working for an NGO through local partner organizations, we witness every day how gifts, large and small make a huge impact for the most marginalized, most vulnerable families. Is it perfect? Of course not. Can we and should we continue to support such programs? Absolutely. We in the US think it's bad? ... talk to someone who lakcs the very basic of human needs ... food, water, shelter.

Sorry, but I don't trust our government knows what it's doing. Most of foreign aid probably goes to foreign government corruption. How do I know? Look at all those foreign aids to Indonesia after the tsunami. The people of Indonesia got little after the military and the Indonesian government pocketed the aid. Maybe the problem of foreign aid is not because it is not enough, it is because it doesn't get to the poor people.

Africa has nothing to show for all the decades of aid from the West. This is by design, according to authors like John Perkins (Economic Hitman). On the other hand-despite the worldwide economic crisis-China's trade partnerships with African nations are creating infrastructure all over the African continent.

It stands to reason that charitable giving in general will take a hit, not only the charity directed abroad but that which helps the people across the street. As the pastor of a church, I foresee challenging times ahead not only for support within my congregation but, more grievously, for the many charitable organizations that have lately been called to take an increasing role in helping the poor in communities throughout the country.

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