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Jeffrey Sachs, e End of Poverty: Economic Possibili- ties for Our Time (New York: Penguin, 2005). 416 pp. $29.99 (cloth), ISBN: 9781594200458; $17.00 (paper), ISBN: 9780143036586. Paul Collier, e Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It (New York: Oxford University Press, 2007). 224 pp. $28.00 (cloth), ISBN: 9780195311457; $15.95 (paper), ISBN: 9780195373387. John Mathiason, Invisible Governance: International Secretariats in Global Politics (Sterling, VA: Kumar- ian Press, 2008). 288 pp. $24.95 (paper). ISBN: 9781565492202. Steve Berkman, e World Bank and the Gods of Lending (Sterling, VA: Kumarian Press, 2008). 256 pp. $24.95 (paper), ISBN: 9781565492592. Poverty correlates so strongly with diminished op- portunity for individual and societal development that its eradication has become the primary objective of many international development institutions. e United Nation’s Millennium Development Goals call for a 50 percent reduction in the number of people living in extreme poverty—less than $1 per day—by 2015 (UNDESA 2006). World leaders continually reaffirm their commitment to eradicating poverty and promoting sustained economic growth, sustainable development, and global prosperity (UN 2004). ey urge action, including more international support and more ambitious national development strategies. Moreover, new strategies for combating persistent poverty emerge constantly: e poverty reduction strategy paper (PRSP) approach has taken centre stage in development assistance over the past five years. International endorsement of the approach has led to im- portant gains in government focus on poverty reduction, civil society participation and donor behaviour. Yet PRSPs also potentially offer a much greater contribution to aid effectiveness, good governance and poverty reduction in de- veloping countries. . . . Emerging issues include how to respond to political transitions, alterna- tive design approaches, how to assess financing needs, and ways of enhancing the predictability of aid. (Driscoll and Evans 2005, 5) e problem is that these new poverty reduction strategies emerge because the old ones have not always worked very well. Today, 1 billion people around Donald Klingner University of Colorado at Colorado Springs Reducing Poverty: Do We Have the Means to Reach is End? Donald Klingner, a professor in the School of Public Affairs at the University of Colorado, is an internationally recognized expert on public personnel management, public management, Latin American public human resource and public management, and international public management capacity building and technology transfer. He is an elected fellow of the National Academy of Public Administration and was president of the American Society for Public Administration in 2008–9. He is the coauthor of Public Personnel Management (6th ed.), which has also been published in Spanish and Chinese. E-mail: [email protected] 1178 Public Administration Review • November | December 2009

Reducing Poverty: Do We Have the Means to Reach This End?

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Page 1: Reducing Poverty: Do We Have the Means to Reach This End?

Jeff rey Sachs, Th e End of Poverty: Economic Possibili-ties for Our Time (New York: Penguin, 2005). 416 pp. $29.99 (cloth), ISBN: 9781594200458; $17.00 (paper), ISBN: 9780143036586.

Paul Collier, Th e Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It (New York: Oxford University Press, 2007). 224 pp. $28.00 (cloth), ISBN: 9780195311457; $15.95 (paper), ISBN: 9780195373387.

John Mathiason, Invisible Governance: International Secretariats in Global Politics (Sterling, VA: Kumar-ian Press, 2008). 288 pp. $24.95 (paper). ISBN: 9781565492202.

Steve Berkman, Th e World Bank and the Gods of Lending (Sterling, VA: Kumarian Press, 2008). 256 pp. $24.95 (paper), ISBN: 9781565492592.

Poverty correlates so strongly with diminished op-portunity for individual and societal development that its eradication has become the primary objective of many international development institutions. Th e United Nation’s Millennium Development Goals call for a 50 percent reduction in the number of people living in extreme poverty—less than $1 per day—by

2015 (UNDESA 2006). World leaders continually reaffi rm their commitment to eradicating poverty and promoting sustained economic growth, sustainable development, and global prosperity (UN 2004). Th ey urge action, including more international support and more ambitious national development strategies. Moreover, new strategies for combating persistent poverty emerge constantly:

Th e poverty reduction strategy paper (PRSP) approach has taken centre stage in development assistance over the past fi ve years. International endorsement of the approach has led to im-portant gains in government focus on poverty reduction, civil society participation and donor behaviour. Yet PRSPs also potentially off er a much greater contribution to aid eff ectiveness, good governance and poverty reduction in de-veloping countries. . . . Emerging issues include how to respond to political transitions, alterna-tive design approaches, how to assess fi nancing needs, and ways of enhancing the predictability of aid. (Driscoll and Evans 2005, 5)

Th e problem is that these new poverty reduction strategies emerge because the old ones have not always worked very well. Today, 1 billion people around

Donald KlingnerUniversity of Colorado at Colorado Springs

Reducing Poverty: Do We Have the Means to Reach Th is End?

Donald Klingner, a professor in the

School of Public Affairs at the University of

Colorado, is an internationally recognized

expert on public personnel management,

public management, Latin American public

human resource and public management,

and international public management

capacity building and technology transfer.

He is an elected fellow of the National

Academy of Public Administration and

was president of the American Society for

Public Administration in 2008–9. He is the

coauthor of Public Personnel Management

(6th ed.), which has also been published in

Spanish and Chinese.

E-mail: [email protected]

1178 Public Administration Review • November | December 2009

Page 2: Reducing Poverty: Do We Have the Means to Reach This End?

Book Reviews 1179

the world—three-quarters of them in Africa—live amid war, disease, and ignorance. Th e percentage of sub- Saharan Africans suff ering extreme poverty has increased from 44.6 percent in 1990 to 46.2 percent in 2005 (CQ Researcher 2005, 737). Most of the developing world will probably meet the Millennium Development Goal; sub-Saharan Africa and Latin America will not.

As often happens with policy issues for which our reach seems to exceed our grasp, responses are predictable. First, activists urge greater eff ort. With considerable justifi cation, they claim that the world’s leaders seem to placate the weakest states and those who advocate for them for yet another year by mere pledges. Th ree years after their leaders promised to double aid for Africa, nearly every G8 country is behind on its targets (Blustein 2005). Th e second response has been a fl ood of publications on poverty and international development. We would expect consultant reports and academic research articles. Th e surprising popularity of books written for both specialists and a more general audience of informed and intelligent adults demonstrates the importance of these policy issues.

Poverty Reduction: Books by Sachs, Collier, Mathiason, and BerkmanJeff rey Sachs published Th e End of Poverty in 2005 after two decades of increasing prominence in development economics. As head of the UN’s Mil-lennium Development Project, advisor to political leaders, frequent contributor to professional journals and syndicated newspaper columns, and a jet-setting celebrity with Bono and other icons of popular cul-ture, he is our era’s economic wunderkind. Like most academic celebrities, he has a gift for clearly framing issues and articulating cogent, if not necessarily origi-nal, solutions to policy problems that may have lain dormant for years, but are now on everyone’s radar screen. His central thesis is that most desperately poor countries have key disadvantages. First, geographic characteristics such as drought and fl ooding restrict agricultural productivity and increase susceptibility to malaria and other tropical diseases. Second, their geo-graphic boundaries owe more to nineteenth-century cartographers’ renditions of European colonialist am-bitions than to Africa’s historic or current natural or cultural boundaries. Th ird, they missed the infusion of development capital—from the United States to South Korea and Taiwan, and from the Soviet Union to China and India—that spurred development in Asian and Southeast Asian countries.

As a diagnosis, Sachs fi rst posits a development ladder, and then asserts that countries need to establish a foothold on it before they can develop on their own initiatives. As solutions, he recommends that we fol-low classical economics’ recommendation of a massive

jump-start of outside capital, albeit while keeping structural variables and past failures in mind. We can end extreme poverty if the rich nations of the world contribute at least 0.06 percent of their gross national product annually for the next 10 years. Th is invest-ment would not only overcome immediate crises of disease and famine, but also provide the investment necessary to set these poorest nations on the road to joining the rest of the developing world.

Paul Collier is an economist who has long been trou-bled by the failure of neoliberal economic policies to reduce poverty in the world’s poorest countries. Like Sachs, his quest leads him to identify the causes of failure in conditions outside the realm of classi-cal economics. He identifi es four traps that prevent economic growth in the poorest countries: confl ict and poverty generate more confl ict; being landlocked makes economic development more diffi cult; the existence of natural resources makes controlling government attractive; and bad governance is destruc-tive and self-perpetuating. He asserts that developed countries can adopt economic and noneconomic solutions to help the “bottom billion” countries break these traps. Th ey should shift from direct foreign aid to more long-term technical assistance, including building road networks to open trade opportunities for landlocked regions (108–23). Th ey should use selective intervention and sustained military pres-ence to break cycles of confl ict (125–31). Th ey can give internal reformers extra leverage by developing international standards or charters to clarify what governments and aid agencies should do in various situations—require Western banks to report deposits by kleptocrats, regulate the exploitation of natural resources, uphold media freedom, and prevent fi scal fraud (140–56). Most surprising for a classical econo-mist, he urges that they off er sub-Saharan countries protection for up to 50 years against competition from Asia and India (166–72). Without this, they will never be able to use economic development to break the poverty trap.

Two other books describe the organizational and ad-ministrative mechanisms that international fi nancial institutions (IFIs) use to maintain global economic policy and fund development. John Mathiason’s Invis-ible Governance: International Secretariats in Global Politics describes these organizations based on his 25-year career in the United Nations. Th eir job is to “navigate the complex external environment in a way that leads to results, and . . . manage the administra-tion so that member states are convinced that the resources they provide are being used properly” (76). Th is includes the following:

Creating regimes, or sets of agreements by states to provide order in an area that they have decided needs international governance (94–101), such

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as women’s rights, law of the sea, climate change, verifi cation of disarmament, and international criminal law.

Mobilizing information into reports that can be used to drive global policy making (e.g., the World Bank’s Global Development Report).

Norm enforcement through fact-fi nding, con-structive dialogue and shaming, referral to an in-ternational judicial system, and alternative dispute resolution (e.g., GATT enforcement through the World Trade Organization Secretariat).

Peacekeeping operations involving both nation-states and anti-terrorist activities.

Humanitarian relief for refugees, internally dis-placed persons, and victims of natural disasters and complex emergencies.

International economic management: maintaining fi nancial stability through the International Mon-etary Fund, and steering multilateral investments in development through the World Bank.

International secretariats’ central problem is ac-countability, established formally through audits and informally through results. Achieving transparency is problematic, for their very existence depends on acceptance of the fi ction that they are anonymous, insignifi cant, and at best tangentially important to nation-states’ global interactions. Yet Mathiason hopes that as Internet-based information becomes more available, public scrutiny will help international secretariats maintain their credibility by demonstrat-ing their competence and transparency (255).

Instead of echoing Mathiason’s conceptual and analytical perspective on international secretariats’ structure and functions, Steve Berkman draws on his career as a World Bank staff member and consultant to pen a passionate and detailed critique of this IFI’s lending practices and organizational culture. In Th e World Bank and the Gods of Lending, he documents how mismanagement and hypocrisy have allowed kleptocratic governments to steal billions of interna-tional aid dollars in the past half century. He blames this ongoing “shrinkage” on the World Bank’s need to lend money and to wholesale looting at every step along the aid chain. Th is induces Bank offi cials to accept reports that demonstrate progress when in fact little exists, and to continue lending for dubious projects despite their awareness of mismanagement and corruption. Th e real losers are the very poor, who receive few benefi ts and live in countries with large external debts due to profl igate borrowing by regime leaders. Yet the Bank also loses, in that its leaders are either “not as bright as they claim to be” (158), or hypocrites who in public give lip service to the goal of poverty reduction while privately countenancing wholesale mismanagement and corruption to salve their own egos and save their own jobs. Berkman quotes former World Bank president James Wolfen-

sohn: “Poverty has doubled in Africa over the last decade and half its population is below the poverty line.” Berkman adds, “and this from an institution that had provided roughly $38.0 billion to Africa during the previous decade, of which $8.3 billion was for ‘governance’ and ‘economic management.’” He concludes by asking, “What are we to make of that?” (227). He buttresses his argument by detailed accounts of fraudulent currency exchange, shoddy procurement practices, and inadequate documenta-tion of expenses related to specifi c projects in Nigeria and Gambia. His conclusion is that the World Bank’s failures far outweigh its successes and that “even when successful, the price of these successes has been exorbitant. Mindless squandering of donor funds has placed an unbearable debt burden upon present and future generations of the Th ird World” (222). He hopes that the World Bank can “get back on track” by focusing on corruption as a serious and endemic problem, exercising due fi duciary responsibility for funds entrusted to it, using knowledge to act on issues rather than just continue to study them, accepting personal responsibility for the veracity of negative reports, and ending the pressure to lend for lending’s sake (225–27). However, he is not optimistic:

[T]he prevailing culture of “see no evil, hear no evil, speak no evil” serves to protect Bank man-agers from being held accountable. Th erefore, with their heads in the sand, they continue to pretend that they are on the cutting edge of all things and that all is well in their world. Hubris suits them well. (227)

Poverty Reduction: The Destination Is Clear; The Way Forward Is Less SoWhile poverty reduction is a laudable goal and a useful outcome measure for global development, its achievement depends on the effi cacy of the tools (i.e., laws, institutions, policies, and practices) we can apply. We can assess these from three perspec-tives: (1) the disciplinary preeminence of economics in international development, (2) IFIs’ institutional capabilities and limits, and (3) the behavioral eff ects of organizational culture and human nature on IFIs’ organizational knowledge management and organiza-tional learning.

Disciplinary: The Preeminence of EconomicsEconomists and economic theory have been central to international development for the past 60 years. Immediately after World War II, structural economists identifi ed deterministic factors—geography, culture, former colonial status, and underdevelopment—that they claimed prevented markets from functioning eff ectively. Th e solution was to jump-start economies affl icted with these conditions on the path to develop-ment through massive capital infusions, with outside aid targeted toward investments in infrastructure and

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Book Reviews 1181

industries calculated to exert a multiplier eff ect on national economies. Th e key players were developing countries’ central governments and IFIs such as the World Bank.

By the 1980s, despite some macroeconomic and social indicator improvements, economic thought swung from state-centered to market-based develop-ment strategies. IFIs began to focus their third-world development eff orts on structural adjustments (i.e., reducing public expenditures to free up capital for use by the private sector), repayment of international debts, and aid contingent on recipient governments’ adoption and implementation of policies (e.g., free trade and balanced budgets) designed to allow markets to function more effi ciently. IFIs often urged national leaders to impose these so-called shock treatments quickly to head off internal political op-position generated by the human misery that these macroeconomic mandates caused, particularly in Latin America and sub-Saharan Africa (Woods 2006, 158). Neoliberal reform policies arguably succeeded in some countries such as Poland but did not lead to economic revitalization in others such as Russia and Argentina. While neoliberal economists continued to believe in these economic policies, by the mid-1990s, they began to conclude that “market-based policies had a fatal fl aw: they assumed that economic reforms can create effi cient markets without simultaneous reform of the political institutions” (Haber, North, and Weingast 2003).

Having diagnosed the problem as failed institu-tions, IFIs then began to focus aid programs on building government capacity and achieving “good governance.” Th ese institutional strategies some-times combined political reforms such as legislative staff assistance and transparent elections with public management capacity building (i.e., human resource management, information systems, and budget and fi nancial management). However, even some countries with good economic policies and good institutions failed to grow their economies. Out of both despera-tion and optimism, by the beginning of the millen-nium, economists came to favor multifactor poverty reduction strategies (Easterly 2002).

Th is summary of the past half century of economic development theory also describes the career trajecto-ries of economists such as Jeff rey Sachs and Paul Col-lier. Both have achieved global prominence after hav-ing been neoliberals in the 1980s, institution builders in the mid-1990s, and supporters of good governance by the present decade. Today, both support poverty re-duction policies that combine elements of these three evolutionary stages. Th ey both also call for the same massive infusion of capital from developed nations that characterized international development thinking a half century ago.

Integrating successive developments rather than discarding previous ones can indicate progress and organizational learning, particularly when these are compatible with congruent advances in other disciplines. Th is includes the current international de-velopment model based on massive international aid from developed countries through IFIs, market-based structural reforms, and governance capacity building framed as institutional economics (Haber, North, and Weingast 2003). Nonetheless, Sachs and Collier are fundamentally economists who translate the theories and fi ndings of other fi elds into classical economics. For example, we may credit economists for conclud-ing that political institutions infl uence the outcomes of structural reform and macroeconomic policies, yet still believe that political scientists (e.g., March and Olsen 1984) said it fi rst and better. We may also agree with North et al. that “throughout all of history hu-mans have devised just three social orders: ways of or-ganizing society that are self-sustaining and internally consistent” (2007, 2). After all, we realize that they divide social orders into these three categories—prim-itive, limited access, and open access—in order to present the institutional reforms needed to transform the limited-access orders of many developing coun-tries into the open-access orders needed for unfet-tered development based on free market economics. However, comparative administration scholars may legitimately claim that Fred Riggs (1964) described it earlier, and more authoritatively, through his concept of “prismatic society.” In sum, economists are most reliable when they speak of things central to their own discipline. While we can benefi t by augmenting classical economic theory with insights from other disciplines, it is better to use experts from those fi elds (Sachs 2004) than to read them in translation.

Moreover, because economic development models focus on top-down relationships between IFIs and recipient country governments and emphasize the key role of “star power” economists as international change agents, these models are somewhat at variance with more generally accepted models of eff ective technology transfer and sustainable development. In fact, technol-ogy transfer is reciprocal (Klingner and Sabet 2005; Mavhunga 2003), recipients play a key role in the innovation diff usion and adoption process (Schrage 2004), and Africans are the ones primarily responsible for acting in their own interests and making decisions about their own future (Mkandawire 2006).

Institutional: IFIs’ Capabilities and LimitsAssessing an IFI’s eff ectiveness as a development instrument means looking at its authority, objectives, and internal systems for combating waste, fraud, and abuse.

First, international secretariats’ power derives from sovereign states’ voluntary relinquishment of authority

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to them. Th e 500-odd treaties that John Mathiason notes as examples of regime creation are all negoti-ated “sets of agreements by states to provide order in an area that they have decided needs an international as opposed to a national or market-based process of governance” (88). Th is being the case, IFIs such the World Bank are constrained by the terms of their charters to working with the sovereign governments of client countries. In contrast, bilateral aid agencies such as the U.S. Agency for International Development can engage directly with in-country opposition parties and community-based organizations. In the end, each has advantages. IFIs cannot as eff ectively strengthen the opposition or community-based organizations, but they can more directly infl uence the behavior of national governments because of their deeper pool of expertise in certain issues, often including governance and institutional reform. However, the aid condi-tionality usually required by both IFIs and Western bilateral lenders is not generally eff ective at ensuring institutional reform under the best of circumstances (Ademolekun 2006), particularly when countries such as China use nonconditional aid to open markets and secure access to raw materials in sub-Saharan Africa (CQ Global Researcher 2008).

Second, their charters direct international secre-tariats’ objectives and strategies. While lending is its primary development tool, the World Bank also conducts research, provides advisory services to client countries, and oversees the provision of outside grant–fi nanced investments and technical assistance in client countries. While client coun-tries often restructure debt payments, actual loan defaults are quite rare (Woods 2006, 147). Nor is the Bank under any particular pressure to derive income from risky loans. James Wolfensohn once famously quipped that he didn’t much care if the Bank’s lending program increased or dropped by a billion or so dollars, because, after all, the lion’s share of the Bank’s revenues accrued from its management of its own investment portfolio rather than from the interest on its lending. Nonetheless, focusing on economic development and stability does hinder an IFI from using noneconomic outcome criteria. Th e Bank’s charter prohibits its offi cers from interfering “in the political aff airs of any member; nor shall they be infl uenced in their decisions by the political char-acter of the member or members concerned” (Woods 2006, 26). Bank offi cials may be deeply concerned about corruption and institutional failure, yet they can only fi ght them internally, do what they can to maintain fi duciary responsibility, and lend money where it may do some good.

To its credit, the World Bank has recognized that corruption is a major obstacle to aid eff ectiveness. It established an Oversight Committee on Fraud and Corruption to combat it. It has fi ve major strategies:

economic policy reform, administrative and civil service reforms, legal and judicial reforms, fi nancial management, and public oversight. Th ese are man-aged through its Poverty Reduction and Economic Management network, a clearinghouse for general information about anticorruption activities that also makes policy, and the World Bank Institute, which is responsible for research and education (Marquette 2003, 101).

Despite this, the U.S. General Accountability Offi ce concluded in 2000 that World Bank monitoring and supervision activities were generally inadequate, and that problems often did not make it far enough up the chain of command. “[T]he Bank is not in a position at th[is] time to gauge the extent to which this is the case due to the weaknesses in its current system of controls” (Marquette 2003, 96). Th e Th ornburgh Re-port (2000) concurred, recommending that the Bank give the renamed Oversight Committee policy-mak-ing responsibility, and that an independent agency reporting directly to the Bank president be responsible for investigative functions. It also recommended that the Bank should continue to strengthen its oversight capability, focusing specifi cally on procurement and auditing. It should strengthen its investigative and reporting procedures through the new Department of Institutional Integrity (Marquette 2003, 101). Silverman (2008) calls upon IFIs such as the World Bank to address corruption by focusing on laws and regulations, ethical behavior, organizational structure, technology, administration, and risk management. According to Berkman et al. (2008), they must inves-tigative more proactively, cooperate more fully, and give their respective investigation units more resources and independence.

Behavioral: IFIs’ Organizational Culture and Human NatureTh e third perspective is behavioral. It involves the relationship between the organizational culture of an IFI such as the World Bank, the motivations and responses of Bank offi cials, and their combined ef-fects on knowledge management and organizational learning. Critics assert that economists’ dominance within the Bank means that this profession’s culture dictates its policy recommendations and program as-sessments. True, the Bank does have something of an economist’s culture. But this culture is based not only on a preference for economic theories and models, but also on economists’ long-standing and extensive program of gathering data on economic phenomena, which allows them to undertake systematic analyses of economic problems and impacts of economic inter-ventions—structural or otherwise—on them. Other perspectives such as public administrative reform also thrive, leading to other program priorities such as “good governance.” For noneconomists in the Bank, the challenge is to develop the same research culture

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Book Reviews 1183

and produce corresponding results in the public administrative reform and governance fi elds in order to give greater credibility to their advice and interven-tions (Reid 2007).

However, the predominance of a culture of economic theory and research has other, less value-neutral im-plications for leaders’ behavior. Th ey may understand that economic models and solutions are not always the most eff ective approach to poverty reduction, and agree that inadequate institutional mechanisms for enforcing fi duciary responsibility open them to charges of mismanagement. Yet they nonetheless seek to realize the potential positive contributions of their profession by conducting more and more background investigations to describe the conditions they con-front, evaluating programs optimistically, and making plans based on these unrealistically rosy program de-scriptions and projections. Memoirs by former Bank offi cials (e.g., Stiglitz 2001; Wolfensohn 2005; and Berkman’s volume) evidence this inherent leadership dilemma.

Yet while we can readily understand why World Bank offi cials believe and act as they do, we must also acknowledge the extent to which perceptions and policies based on the triumph of hope over experience impede eff ective knowledge management and organi-zational learning. As Berkman notes, an organization that justifi es its continued existence by conducting studies rather than taking action will not be a force for change. An organization that ignores, buries, or downplays unfavorable information is not likely to make data-driven decisions. An insulated, self-protec-tive, and self-deceiving organization is not likely to make wise strategic decisions in a complex and shift-ing policy environment.

ConclusionExtreme poverty is a major international development issue. Given the disciplinary limitations of econom-ics, the institutional limitations of IFIs, and the basics of human nature, what means of reducing poverty should we try next? Given the generally negative out-comes of neoliberal economic reforms, it may be time to focus on institution building using a behavioral approach, perhaps using Collier’s recommendations for the sequencing of technical assistance and opera-tional aid. Th is will mean a complete redesign of how donors provide aid and their role in its implementa-tion. Technical assistance must come at the request of the recipient; further assistance only comes when recipients demonstrate results on the behalf of their populations. Th e recipient must design and own any project or reform. Donors should serve as facilitators, not as command and control functionaries (NAPA 2008). Th e real problem, of course, is that the deepen-ing global fi nancial crisis is likely to reduce the fl ow of aid from developed countries, depress exports from

developing countries, and lower export commodity prices.

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