History says foreign aid will fall

In the presidential and VP debates, the candidates have been asked which of their promises would have to go in light of the financial crisis? The answers have been mostly elliptical. Joe Biden did say, “Well, the one thing we might have to slow down is a commitment we made to double foreign assistance. We’ll probably have to slow that down.”

David Roodman says history tells us foreign aid will fall:

Though today’s financial crisis began in the world’s richest nation, there is good reason to worry about how it will affect the world’s poor. A recent series of posts explores the implications. The contagions of freeze-up and slowdown will spread through many channels: trade, investment, migration, and more.

In particular, as governments pour trillions of dollars and euros of aid into their banks, it will be unsurprising if their spending on aid for poor countries–currently about $80 billion/year–falls. (See Saturday’s story in the Washington Post.) After each previous financial crisis in a donor country since 1970, the country’s aid has declined. “Every” in this case refers to four instances: Japan after its real estate and stock bubble burst in 1990; and Finland, Norway, and Sweden after their shared crisis in 1991.

Read it all here.

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