An Irony of the Financial Crisis – Action on Poverty Looks Utterly Achievable

Just over a week ago I found myself once again on EasyJet flight EZY6167 heading from Bristol to Amsterdam.  I asked the head of the cabin crew if he knew Dawn, who operated the camera on one of our previous internet videos.  He said he did.  I showed him one of our "Water Connects Us" leaflets, and I asked him if it would be OK if I handed some out to his passengers.  He said that would be fine as long as I didn't get in the way of the cabin crew as they went about their duties.

I handed a leaflet to a guy sat in front of his laptop.  He covered his screen with it! He said that although he was "in civvies" he worked in finance and he was in the middle of writing a report on the impact of rising commodity prices.  His report was confidential. I pointed out that our leaflet was not.  Maybe he could pass it around his colleagues when he got back to the office?

Since then quite a lot has happened around the world related to the third of the three F's – The global financial crisis.

The biggest bail-out so far is the rescue of the largest insurer in the United States, American International Group Inc.  According to the Financial Times:

The US Federal Reserve announced that it would lend AIG up to $85bn in emergency funds in return for a government stake of 79.9 per cent and effective control of the company – an extraordinary step meant to stave off a collapse of the giant insurer that plays a crucial role in the global financial system.

AIG is the biggest domino to topple so far, but according to the Los Angeles Times it didn't fall, it was pushed by financial speculators. So were a number of other financial companies, including Lehman Brothers and Washington Mutual. The Securities and Exchange Commission is now investigating and will demand that hedge funds explain their activities under oath:

Short selling is legal as long as investors follow well-known rules. But as Wall Street’s bear market has worsened this year, short sellers have been vilified as market manipulators. Legally or illegally, the shorts had it right on Lehman, whose shares now trade for 22.5 cents — down from $16 at the end of August.

The $85 billion for AIG sounds like a very large amount of taxpayer's money to me, but it seems as though it is nowhere near enough. As a first step in a battle to prevent global financial meltdown on September 19th the SEC banned short selling of a large range of stocks:

In a move against traders who have sought to profit from the financial crisis by betting against bank shares, the Securities and Exchange Commission issued a temporary ban on short sales of 799 financial stocks, following similar action in Britain on Thursday.

By Saturday the 20th the administration of George W. Bush had decided to ask Congress to approve the use of a total of $700 billion of taxpayer's money to bail out an unspecified list of United States financial institutions:

The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

A lot of commentators, including both presidential candidates, made the point that unconditionally committing that amount of money to the very people whose greed had caused the crisis in the first place was not self evidently a good use of public funds.  According to John McCain:

It has become clear that no consensus has emerged to support the administration's proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time… Every American has a stake in solving this crisis and saving our financial system from collapse.

Barack Obama put it this way:

The era of greed and irresponsibility, on Wall Street and in Washington, has led us to a financial crisis as serious as any we have faced since the Great Depression.

This morning in the United Kingdom the two most senior Archbishops in the Church of England condemned financial speculators. Rowan Williams, the Archbishop of Canterbury, said that the global financial crisis:

Exposes the element of basic unreality in the situation – the truth that almost unimaginable wealth has been generated by equally unimaginable levels of fiction, paper transactions with no concrete outcome beyond profit for traders. The biggest challenge in the present crisis is whether we can recover some sense of the connection between money and material reality. Given that the risk to social stability overall in these processes has been shown to be so enormous, it is no use pretending that the financial world can maintain indefinitely the degree of exemption from scrutiny and regulation that it has got used to.

John Sentamu, Archbishop of York, said to an audience of bankers yesterday that:

We find ourselves in a market system which seems to have taken its rules of trade from Alice in Wonderland. To a bystander like me, those who made £190m deliberately underselling the shares of HBOS, in spite of a very strong capital base, and drove it into the arms of Lloyds TSB, are clearly bank robbers and asset strippers. One of the ironies about this financial crisis is that it makes action on poverty look utterly achievable. It would cost $5bn to save six million children's lives. World leaders could find 140 times that amount for the banking system in a week. How can they tell us that action for the poorest is too expensive?

As I was returning to South West England from Amsterdam yesterday I was reading last week's edition of the New Scientist on the plane. In a letter to the editor Henry Northover from WaterAid pointed out that:

The water crisis is not a crisis of scarcity – yet – but a crisis of access, fuelled by weak international leadership. There is enough fresh water but the poorest billion people are missing out: 1 person in 8 does not have access to safe water, leading to at least 5000 preventable child deaths a day.

I have a couple of questions for Messrs Bush, Bernanke and Paulson. How much food would $700 billion provide to the world's hungry?  How much water would $700 billion provide to the thirsty around our planet?