The financial crisis is only one of multiple crises that will affect every country, rich and poor alike.
There's also the global poverty crisis. Tens of millions of people across the developing world are expected to fall into extreme poverty and joblessness as a result of an economic mess originating in the United States. This is bad news for workers everywhere, as it means even more brutal competition in the globalized labor pool.
And then there's the climate crisis. If we don't do something about that one, we could find out what a real meltdown feels like.
Yet the richest nations in the world appear fixated almost entirely on the financial crisis, and specifically, on propping up their own financial firms.
A new report by our organization, the Institute for Policy Studies, finds that the approximately $4.1 trillion that the United States and European governments have committed to rescue financial firms is 40 times the money they're spending to fight climate and poverty crises in the developing world.
And as officials head to two upcoming global summits, there's strong reason for concern that rich country governments may backtrack even further on their aid and climate finance commitments.
On November 29, the Middle East nation of Qatar will host a Financing for Development conference, where governments will review aid obligations made six years ago. On December 1, international negotiators will convene in Poland to hammer out commitments to fighting climate change, including climate-related financial assistance for developing countries.
The financial crisis has overshadowed both of these major summits. When bank failures escalated in September, the United States and European governments moved with lightning speed to mobilize those $4.1 trillion in resources to aid struggling financial institutions.
For the United States, the total so far comes to about $1.3 trillion, including the $700 billion bailout bill as well as rescues for individual firms, deposit insurance for failed banks, and purchases of banks' short-term debts. In Europe, countries have pledged about $2.8 trillion for bank loan guarantees and cash injections.
More Than Development Aid
The combined $4.1 trillion is more than 45 times the sums the U.S. and Western European governments spent on development aid last year.
Some individual companies have enjoyed bailouts that dwarf the size of country aid packages. For example, the U.S. government's $152.5 billion rescue plan for AIG greatly exceeds the $90.7 billion U.S. and European governments spent on aid to all developing countries in 2007. And remember when AIG executives headed off to a luxury resort a few days after getting their taxpayer bailout? The tab for that junket — $440,000 — came to roughly the equivalent of U.S. food aid last year to Lebanon, a country struggling to recover from conflict.
The biggest company-specific bailout — the $200 billion for Fannie Mae and Freddie Mac — comes to nearly 1,000 times U.S. economic aid to Haiti, the Western Hemisphere's poorest country. The $29 billion for investment bank Bear Stearns was far more than the U.S. government's total aid bill of $23.2 billion.
Short-changing countries in such extreme need will only boomerang back to the United States in the form of greater global insecurity and reduced export markets.
Likewise when it comes to climate finance, the U.S. and European governments appear to be a penny wise but a pound foolish. Europe's new and additional funding commitments for a variety of climate-related efforts in developing countries over the next several years add up to only $13.1 billion, and very little of this has been disbursed.
The Swiss government has committed $60 billion to rescue the ailing bank UBS, which invested heavily in U.S. subprime mortgage debt. That's more than five times Europe's total commitments to climate finance for developing countries.
The U.S. Congress has not approved a single dollar of contributions to the developing world's climate change efforts. This is in part because the Bush Administration insisted that such financing be channeled through the World Bank, an institution with a poor environmental track record.
All three crises — financial, poverty, and climate — underscore the inter-connectedness of every nation on the globe. Thus, such extremely lopsided spending priorities, if continued, will only come back to haunt the United States and the rest of the global North in the long run. The richer countries not only have an obligation to clean up the messes they've made abroad. It's also in our own interest.