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The economic news continues to worsen. A new World Bank report forecasts a crisis that will spare no country and threatens to roll back decades of progress in the war against poverty. In one of the more sickening ironies of the moment, developing nations may be hurt the worst, even though they are bystanders in this financial catastrophe. While most governments are focused on stimulating their own economies, the world’s poorest citizens will have to turn to international financial institutions that are already overburdened and dependent on struggling developed nations for desperately needed funding.

The World Bank concludes that the world is about to enter the first global recession since World War II. Global industrial production fell 20 percent in the fourth quarter of 2008, and world trade registered its first decline since 1982 — and the sharpest drop in 80 years. The International Monetary Fund estimates 2009 global economic growth at minus 0.5 percent to minus 1 percent. Just a year or two ago, economists were debating whether developing economies, especially those in Asia, had decoupled themselves from the developed economies. That debate is over.

The World Bank report said 94 of 116 developing countries have been hit by the crisis. Forty-six million people in developing countries will be forced into poverty this year as a result of shrinking export markets, a drop in remittances that migrant workers send home to their families — total of $305 billion in 2008 — and only $165 billion in loans (World Bank estimate) this year to emerging markets, 17 percent of the 2007 amount.

Worse, the World Bank reckons that developing countries will find it increasingly difficult to finance the loans they have already received: At least 98 countries could experience problems financing at least $268 billion in public and private debt this year. If the markets worsen, that figure could reach $700 billion.

Even more perversely, amid all the uncertainty, investors are sending money back to the United States. The U.S. may have created this mess, yet international capital continues to feel safest holding U.S. Treasury bills. The result is an additional squeeze on the world’s poorest citizens, and a rising dollar, which, incidentally, raises commodity prices for most other consumers. Just one more turn of the screw.

The World Bank is ready to triple its lending to developing nations, but even $35 billion is a fraction of the sum that is required. Its sister institution, the IMF — which just a few years ago was thought by some to be unneeded in the new age of global finance — spent $50 billion in November alone. Japan has provided $100 billion, but the IMF wants an additional $150 billion from its members. World Bank President Robert Zoellick has called on developed countries to pitch in and provide 0.7 percent of the money they spend on stimulus programs to a new Vulnerability Fund to help those hard-hit developing nations.

That may be a tough sell. Finance ministers and central bankers met March 13-14 in Horsham, Britain, to prepare for the Group of 20 meeting that British Prime Minister Gordon Brown will host next month. The group, which accounts for about 85 percent of global wealth, has taken the lead in responding to the crisis since then U.S. President George W. Bush invited them to Washington in November to discuss the unfolding catastrophe.

The finance ministers and central bankers promised to “take whatever action is necessary” to stimulate growth around the world. That includes support for the IMF — new donations should range from $250 billion to $500 billion. Beyond that, it is not clear what will unfold. Specific measures have yet to be worked out; the most crucial are likely to be left to each country to decide.

There is a rift over the best response to this crisis. Americans, Japanese and the British want more stimulus measures. Continental Europeans, already concerned about mounting debt, emphasize the need for better regulation of international capital markets. The urgency in Europe is diminished somewhat by the continent’s more advanced social safety net; citizens are already cushioned as their economies slide.

It is clear that only a large concerted response will get the global economy through this shock. If nations do not coordinate their efforts, national initiatives will work at cross purposes. Failure to close loopholes with uniform standards will ensure that gaps remain. International finance has already demonstrated its unerring ability to sniff those out and exploit them.

It is also painfully clear that the post-World War II financial order is in desperate need of renovation. It is telling that it is the G20 rather than the G8 taking the lead in this situation. China and other developing countries have agreed to provide funds to the IMF on the condition that voting shares be reapportioned. That step is long overdue.

The most important thing now is to make sure that no government retreats to protectionism, which would surely aggravate the crisis. The G20 governments have pledged not to travel down that road. That promise must be kept.

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