Progress Pond

How do we save the world?

Do we throw money at AIG and help bail out Wall Street? Well, that’s what we have been doing, but other than helping investment banking houses like Goldman Sachs, how effective has it really been? I have another, more modest proposal: Investing in poor countries. You know, that dirty word, foreign aid? See why it might make more sense than you might think to help your neighbor by throwing money into “emerging markets” rather than merely trying to keep the financial levees from crumbling.

First, though, a reality check. Japan imports more than it exports for the first time in 13 years.

Japan’s current account recorded its largest deficit on record in January, reaching 172.8bn yen ($1.8bn; £1.2bn). It was its first deficit in 13 years.

The current account measures the balance between a country’s exports and imports – a deficit means more imports.

Government figures show that exports nearly halved in January, while imports fell by a third.

Ah, the benefits of globalization. Free trade giveth but free trade can also taketh away in a world where everything is entangled, greed rules the roost, and reckless gambling with other people’s money is par for the course.

The global economy will shrink for the first time this year since World War II, the World Bank has said. […]

By the middle of 2009, industrial output could be as much as 15% lower than 2008, while trade may record the biggest decline in 80 years, it said.

Which means the poor get even poorer, i.e., in the language of the 21st Century “developing countries” will come out on the short end:

WASHINGTON (AFP) — Developing countries face a financial shortfall of 270 to 700 billion dollars this year, the World Bank found in a study published Sunday, warning that international institutions alone cannot fill the gap.

The shortfall comes “as private sector creditors shun emerging markets, and only one quarter of the most vulnerable countries have the resources to prevent a rise in poverty,” the Bank said in statement.

In America and other “rich” nations people lose their homes in times of economic crisis and banks go under. In “developing countries, more people starve to death, die from disease, suffer from wars and famine. For them, the apocalypse arrived early. Just ask the people of East Africa, Sudan, Afghanistan, Myanmar, and so on and so forth.

Our beloved Arthur Gilroy has a diary posted here promising a civil war in the United States between rural and urban populations with the military joining the fight on the side of the reds against the blues. I confess, much as I enjoy post-apocalyptic gloom and doom, a civil war isn’t a likely scenario in North America within the near term. However it is already a reality in much of the world: Southwest Asia, Indonesia, The Philippines, Africa, Israel and its neighbors, Iraq, Afghanistan and Pakistan (sparked by US intervention, true, but civil war nonetheless) and Latin America, where drug cartels are close to destroying the legitimacy of national governments.

(cont.)

Much as Pakistan is fighting for survival against Islamic radicals, Mexico is waging a do-or-die battle with the world’s most powerful drug cartels. Last year, some 6,000 people died in drug-related violence here, more than twice the number killed the previous year. The dead included several dozen who were beheaded, a chilling echo of the scare tactics used by Islamic radicals. Mexican drug gangs even have an unofficial religion: They worship La Santa Muerte, a Mexican version of the Grim Reaper.

In growing parts of the country, drug gangs now extort businesses, setting up a parallel tax system that threatens the government monopoly on raising tax money. In Ciudad Juarez, just across the border from El Paso, Texas, handwritten signs pasted on schools warned teachers to hand over their Christmas bonuses or die. A General Motors distributorship at a midsize Mexican city was extorted for months at a time, according to a high-ranking Mexican official. A GM spokeswoman in Mexico had no comment.

“We are at war,” says Aldo Fasci, a good-looking lawyer who is the top police official for Nuevo Leon state, where Monterrey is the capital. “The gangs have taken over the border, our highways and our cops. And now, with these protests, they are trying to take over our cities

These are the places on the globe that we should be most concerned about. Oddly enough, they may also hold the key to economic revival. Provided, that is, we provide them the necessary aid to continue to grow their economies:

In remarks prepared for delivery at the same conference in London today, World Bank Chief Economist and Senior Vice-President Justin Yifu Lin said developed countries should spend some of their fiscal stimulus in developing countries as the economic effect could be significant.

“Clearly, fiscal resources do have to be injected in rich countries that are at the epicenter of the crisis, but channeling infrastructure investment to the developing world where it can release bottlenecks to growth and quickly restore demand can have an even bigger bang for the buck and should be a key element to recovery,” Lin said in his prepared remarks.

Charity for the less fortunate is not just doing a good deed for the sake of a reward in the afterlife. It can be the beginning of a feedback loop of economic growth. For better or worse, Bush the Elder’s New World Order has come to pass. We are all one people now, all subject to the vicissitudes of the grand global economy. And when we help others achieve better living standards we help ourselves. If we will not help those living in these poor countries out of compassion, can’t we at least help them out of simple self interest? Scientists who have studied altruism say that it serves the purpose of survival. That is why altruism, the spirit of sacrifice is strongest among those who identify with the recipients of their sacrifices. Family, tribes, communities, nations. Well, we now live in a world where we really our a single family, the family of homo sapiens sapiens. And if we hope to live up to that name, we would be wise to stop thinking in terms of national interests, and instead recognize that helping our brothers and sisters half way around the globe is also helping the chances that our sons and daughters will survive these turbulent times, and that their sons and daughters, will live to see the 22nd Century.

Investing some of our “stimulus package” in infrastructure overseas, i.e., helping the poorest among us, is surely a better use of those funds then allowing the likes of Goldman Sachs to avoid the consequences of its reckless behavior and greedy schemes, don’t you think? The IMF does:

Aid is controversial. Some say it is often wasted.

But one of the big messages from the IMF is for the rich countries – it’s time to step up, not cut back on aid.

Helping others to help yourself. What a concept.

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