Thursday, January 8, 2009

Abandoned Christmas Trees

It's the time of year in New York where the lamp posts on every street corner are piled high with discarded christmas trees.
The distinct pine scent makes it downright pleasant to walk down the street! By the way, there is an entire website dedicated to discarded christmas trees. Check out the one of the tree being crushed by an SUV. As a series these are hilarious! Or maybe I've proven to be even more easily amused than usual.

This year's holiday season has been peppered by comments about the "global financial crisis" which is a result of the "US economic downturn" catalyzed by the "collapse" of the "subprime mortgage market." These catch phrases are on everyone's lips now, and being back in the US after being completely removed from the major events of Lehman Brothers, the major bailouts, etc, it quite startling. It's like I've landed into a society with a completely different mindset. Sure, based on the economy I revised my short term investment strategy, but because I'm not about to retire, and do not own a home, and am not in an industry where I am in danger of being imminently laid off, all of this recession business was not a daily topic of conversation.

Well for the past few weeks it has been.

What will the impact be on the funding for international development programs in developing countries? The verdict is still out, but many of the guesses are pessimistic. The general consensus is that it will probably take about a year to catch up, based on how budgets are drawn up and how money is allocated, both in the US Congress and other governments. But the Global Fund for AIDS, Tuberculosis and Malaria will be affected because their funding is based on pledges from other countries, foundations, etc. Will these entities be able to honor their pledges? Maybe this year, but what about next year? Will the US experience another period of backlash from people asking the question why should money be flowing out to support other people while we have plenty to do here at home?

With money becoming tighter, donors will be even more focused than in the past on accountability to the aid recipients, whether they are NGOs or governments. It will be even more important to make sure funds are allocated and used wisely. This is a good thing. However, countries have pledged to meet certain milestones, Millennium Development Goals, to measure progress. The vast majority of the world is already behind on these, and will now have to try to meet them with fewer resources.

This past year we caught a glimpse of how the World Food Program (WFP) was affected at the sharp increase in cost of food. The same amount of money purchased less food, so in many areas they were forced to either limit the kind of nutritional supplements they provided to people enrolled in their program, or leave areas all together. Millions and millions of people moved below the poverty line as a result of the increase in food prices.

With increasing scrutiny on the types of loans being given, many micro-lending institutions will be threatened and small business loans will be much harder to obtain (this can be positive or negative - people will no longer be pushed by lenders to take on risks that they cannot afford, but then again these same lenders will be more paranoid about extending credit to those people who may not have a credit history).

The World Bank has pledged "several" billion dollars over the next three years to help temper the impact of the crisis around the world. This is based on the premise that, among other things, as the wealthier investors and countries have less wealth to invest, they will cut out the portions that are invested in infrastructure, natural resources, etc in Africa. Apparently commodity prices are falling, which hurts the poorest countries who are the ones exporting the goods and therefore receiving less for their goods.

As for health, there is no greater investment than investing in the health and social sectors. Here are some reasons:
1. Investing in human capital/resources can increase productivity and stimulate economies.
2. You want social stability? Provide equitable access to basic health care. In most developing countries, access to health care tops people's lists of concerns that include food and shelter.
3. Ignorance, stigma and discrimination on the parts of governments and employers against people living with HIV and AIDS in the 1980's and 90's meant that a large part of the workforce in sub-saharan Africa was healthy. Employers were hiring 2 people for every 1 place in their companies because it was likely that 1 of the 2 would be working at limited productivity and eventually pass away from AIDS-related illnesses. Failure to focus funds on HIV prevention now means that countries will spend exponentially more money on care and treatment when people are already infected and affected.

These are my thoughts anyway, I am by NO means an expert on anything related to economics, so I'd be interested to hear your opinions and ideas.


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