The human cost of the financial crisis

The last decade has seen significant progress in terms of development, leading to real benefits for millions of the world’s poorest people. But this progress is at risk of being undone, at least in part, by the threat of a global economic downturn. While the financial crisis will hurt us all, it is the world’s poorest who stand to suffer most.

That’s because it is the poorest who are least able to protect themselves. So developing countries, though less affected by the immediate fall-out, are more vulnerable to the second wave of what has been called a “once in a century credit tsunami”.

The full impact of the crisis is now starting to be felt by most poor countries and we can expect the effects to multiply in the coming months. For a start we are likely to see a future fall in remittances, because family members living abroad are less able to send money back to their home countries. Added to this there will be less demand and lower prices for exports and less money available for governments and businesses to borrow.

So what does this mean in real terms for poor people? There are already concerns that in some cases poor households may be taking children out of school to save money. And families, especially women and girls, are eating less or lower-quality food — which could lead to malnutrition.

Longer-term development prospects may also be affected. There will be less money for governments. For India, where a third of the world’s poor live, the expected slowdown in economic growth means that up to 12-million people who would otherwise have escaped poverty will remain below the $1.25 a day poverty line.

Globally, it is estimated that there could be up to 90-million more people living in extreme poverty by the end of next year.

There is a real and immediate human crisis. If we are to take meaningful steps to lessen the cost in human suffering, then a coordinated global response is urgently needed.

The London Summit in April will bring together the leaders of the world’s major economies and global economic institutions to address the crisis.

We are not powerless in the face of these events, there are practical steps that can be taken. That should include a monitoring system so we can know better which regions most need emergency help. There should also be more, faster and better lending from the multilateral development banks, as well as a commitment to maintain existing sources of finance.

There also need to be ways of helping those in real danger — for example through payments with which they can buy food and medicine. And the developed world needs to keep to the aid commitments made in the past few years, to keep markets open and to keep aid flowing. Most importantly, we need to act now.

Douglas Alexander is the UK’s Secretary of State for International Development

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