The likely effects of the financial crisis on foreign aid? Pretty massive, if history is any guide, says David Roodman at CGD:
After the Nordic crisis of 1991, Norway’s aid fell 10%, Sweden’s 17%, and Finland’s 62%–from peak to trough after adjusting for inflation. Finland’s plummet apparently owed to a deeper economic contraction: its economy at the time depended heavily on timber exports to the former Soviet Union, whose own economy was collapsing. Those were the days when a forest products company named Nokia saw the writing on the wall and went into mobile phones.
You’ll recall the one thing that Biden said he’d cut during the VP debates: aid to Africa.
See the full set of CGD posts on how developing countries will be affected by the crisis.
3 Responses
Hi Chris,
After the Global Financial Crisis Comes the Global Humanitarian Crisis is a post that might confirm what you state in this post.
The aid agencies surely are concerned!
Peter
More of the efect will be from the Diaspora being hit in their pockets and remitting less funds to, or directly investign less in their mother countries. Most of the existing foreign aid packages, are Titanic self-sustaining ships and it will take years to adjust (tinker with their funding)
Chris — interesting correlation. The real question is how Africa will be affected by reduced this reduced aid. Are you aware of any stats that suggest that African countries’ growth (or other economic indicators) worsen when foreign aid decreases?