CGD Policy Blogs

Eldis, the online aggregator of development policy, practice and research at the Institute of Development Studies in Sussex, is conducting a survey to identify "the most significant new piece of development research of 2008." This strikes me as having roughly the same statistical validity as American Idol does for when it comes to finding new singing talent. Still, as with Idol and other talent shows, the entertainment value of a popularity contest is hard to dispute!

If the worst happens, all bets are off; otherwise I expect the "macrofinance" convulsions will have minimal repercussions for microfinance. In Indonesia during its crisis in 1997, while large companies and rich people defaulted left and right, the 2.6 million microcredit borrowers of the Bank Rakyat Indonesia hardly skipped a beat. And few at this point are predicting that the U.S. seize-up will trigger a recurrence of such severe economic trauma for developing countries.

For many developing countries, the U.S. credit crisis will mean slower growth and rising inequality. The effects will be protracted, and not all will show up at the same time. And the nature and degree of impact will vary widely. Some countries, notably those with extensive foreign exchange reserves and strong fiscal positions, will be much better able to cope than others. But overall the crisis is very bad news for developing countries and especially for the poor.