New ways to help the world's poorer countries develop are needed along with changes in the international financial system, a senior U.N. official said Wednesday.
James Gustave Speth, head of the U.N. Development Program, also said globalization of the world economy could be threatened by a backlash from those who maintain it causes more harm than good.In remarks prepared for a speech at the National Press Club, Speth said that unless inequality between rich and poor nations is reduced there is a risk that "an unstable, frightening, two-class world with a global underclass" could emerge.
He said the global economic crisis that started 15 months ago in Asia has plunged more than a third of the world economy into a slump or sharp decline in growth and a global recession threatens.
"Everywhere, the poor are paying the heaviest price for this mismanagement of global finance," Speth said. He mentioned that 8 million children have dropped out of school in Indonesia and unemployment is growing in Thailand. These two nations and South Korea received multibillion-dollar rescue packages from the International Monetary Fund.
He noted the economic downturn was not confined to Asia but has spread to other emerging markets, including Africa, where growth projections for 1998 have been reduced from 4 percent to 1 percent.
The U.N. agency Speth heads manages more than $2 billion in aid and maintains offices in 130 countries. He is leaving his job June 30 after five years to become head of Yale University's School of Forestry and Environmental Studies.
Speth said there were many lessons to be learned from the spreading global crisis "and since the contagion is approaching the United States, perhaps we will learn them."
Among the myths that have been quickly dispatched, he said, are that globalization is working and trade and private capital are reliable substitutes for foreign aid.
"Gone are the notions that progress can be left to the wisdom of the market, that government is hardly necessary," Speth said. "If the state is needed to save the market from itself, imagine how much more it is needed to save people."
He said globalization is on trial "and a growing backlash from many quarters could threaten the process itself." He added: "Multilateral challenges require multilateral solutions."