Unfettered capitalism as a panacea for global poverty

Finance ministers responsible for overseeing the financial institutions at the heart of the global recession used an international gathering in Washington over the weekend to make amends, promising billions of new lending for emerging markets.

While hardly oblivious to the plight of the poor, economic leaders from the United States, Britain, Japan and other industrial nations have devoted most of their energy over the past year to cleaning up their financial messes at home.

But the risks facing emerging economies in Africa, Asia, South America and Eastern Europe have become so severe that they were impossible to ignore at meetings of the International Monetary Fund and World Bank.

The economies of emerging and developing countries will expand a mere 1.6 per cent in 2009, compared with 6.1 per cent last year, according to the IMF. Already, 50 million people have been thrust into extreme poverty as a result of the crisis, according to the World Bank.

The crisis, rooted in the rampant trading of exotic financial assets by American and European banks, exposed the weaknesses of unfettered capitalism as a panacea for global poverty.

France and Germany teamed up to contribute almost $2-billion (U.S.) to a World Bank program that will finance infrastructure projects in poorer countries that are at risk of stalling because of the crisis, and World Bank president Robert Zoellick said he will be pushing other nations to contribute to the fund. Richer countries’ support of poorer nations isn’t entirely altruistic.

While economic growth in emerging economies has slumped, it still is growth. The economies of the world’s industrialized nations will contract 3.8 per cent this year and won’t grow at all in 2010, according to the IMF.

Source: University of Toronto G8 Research Group