The Global Sociology Blog

Kemal Dervis, the head of UN Development Program, gave an interview to Le Monde regarding the impact of the financial crisis on the poor (yeah, while we were busy writing checks to banks, we kinda forgot about them) and the gist, of course, is that the poor will be hit more harshly by all this than people in core countries.

Dervis states that developing countries know that, even though they are not at the origins of the crisis, they will have to suffer its consequences anyway, with less means to deal with them than rich countries. The speculative crisis of the core will hit hard the real economies of Global South. There is a decrease in demand and growth and lower access to credit. In other words, they will receive less foreign investment, less revenues, and will see a decline in their exports. The failings of the core financial sector will hit the hardest in these countries.

Not all countries will be similarly affected, though. China and the Asian tigers will retain their high growth because their development is partially independent from core countries’ economies… good thing too, otherwise, it would be a worse mess if we had to expect a Chinese collapse.

At the same time, the G24 has warned that they will not be able to deal with the crisis on their own. Global public aid is roughly $100 billion per year. Defense budgets represent $1,300 billion and the different bailouts that rich countries will implement to salvage the financial system will be even more. On the other hand, in 2005, in Glenneagles, rich countries committed to $25 billion more per year to halve poverty in Africa by 2015. This is a moral issue: will rich countries use the crisis to get out of their much much more limited commitment to Africa?

When it comes to solution to the crisis, Dervis, unsurprisingly, advocates for a new regulatory apparatus for the global financial system strong enough to anticipate and prevent the next crisis. If there is one benefit from the crisis, it is the realization that we are indeed in a globalized world, all in the same boat and there multilateral governance mechanisms are needed though global cooperation.

The question then becomes who decides on global governance? The G7, the G8, a new G14 so desired by World Bank President Robert Zoellick? The IMF (that is, if DSK can extirpate himself from his current troubles)? What of the countries of the Global South? This is a debate that needs to happen and Dervis thinks that America’s attitude toward such multilateral cooperation will be central in this process.

Dervis closes his interview with a plea for supranational organizations that correspond better to our integrated and interdependent world (someone has read David Held and his Global Covenant… damn, another book review I should really get around to writing) rather than nation-based regimes.