STWR - Share The World's Resources

Free market economics are the problem, not the solution. They have exposed poor countries to the full force of the food crisis.

5th June 08 - John Hilary, The Guardian (UK)

Forget Mugabe. This week's UN food summit in Rome has opened up a far more profound debate over the future of the global economy and our ability to feed the world's ever-growing population. In the blue corner, the government and corporate leaders who argue that we need more trade, more markets and more globalisation. In the red corner, a growing number of people who point out that when you're in a hole, it's a good idea to stop digging.

Cheerleader for the blues is the British prime minister. Gordon Brown would have us believe that the best way of tackling the global food crisis is to conclude the current round of talks at the World Trade Organisation, which aim to liberalise international trade still further and open world markets to the exports of multinational corporations. According to Brown, and to other siren voices in the British press over the past week, a good dose of free-market medicine is what the world needs to bring it out of its current malaise.

Such medicine is more likely to kill the patient. It is precisely the liberalisation of agricultural markets that has exposed poor countries to the full force of the current food crisis, as their farmers have been overwhelmed by competition from cheap imports and local production systems have collapsed. Even countries such as Mexico and the Philippines, which were formerly self-sufficient in food, are now forced to buy in vast quantities to feed their own populations. To suggest that they need another free-trade deal is like tackling knife crime by handing out guns.

While local markets used to be protected from global price shocks, people now find themselves defenceless in the face of the perfect storm of factors which have forced up world prices. Free-market policies have driven millions of rural and urban workers in developing countries out of regular jobs and into the informal economy, where hunger is an ever present reality even at the best of times. As that hunger turns to desperation, food riots have erupted in 34 countries, including severe unrest in Egypt, Haiti, Bangladesh, Kenya and Somalia, to name a few.

The trade deal on offer at the WTO would exacerbate this problem by forcing open markets still further. In a plea to government ministers, UN chiefs and other officials attending this week's food summit in Rome, an international coalition of 237 farmers' organisations, aid agencies, food and trade specialists has published an open letter arguing that the global food crisis must not be invoked as a reason to rush through a WTO trade deal. Instead, the letter says, such a deal "will intensify the crisis by making food prices more volatile, increasing developing countries' dependence on imports, and strengthening the power of multinational agribusiness".

So where should we be looking for solutions? Certainly the world would welcome an end to the EU and US farm subsidies which lead to the dumping of agricultural produce on developing country markets, yet anyone who still believes that the WTO is going to deliver this has not done the maths. More importantly, agriculture needs a radical reorientation away from the mess that globalisation has made of it.

In the current crisis, the food sovereignty model that puts local producers and local markets first is winning over more and more followers. Investment in sustainable farming practices and genuine land reform would mark an important first step in that direction. But if there's one thing that everyone is coming to see, it's that "more of the same" is not an option.

John Hilary is director of campaigns and policy at War on Want.

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Harvests of Hunger

3rd June 08 - Jomo Kwame Sundaram, The Guardian (UK)

A shortage of food is rarely the reason people go hungry. Even now, there is enough food in the world, with a bumper harvest this year, but more people cannot afford to buy the food they need. Addressing this growing crisis is the aim of the Global Conference on Food Security in Rome this week.

Even before the recent food price spikes, an estimated billion people were suffering from chronic hunger, while another two billion were experiencing malnutrition, bringing the total number of food-insecure people to around three billion, or almost half the world's population. Roughly 18,000 children died daily as a direct or indirect consequence of malnutrition. Obviously, the recent increases in food prices are likely to drive the number of people vulnerable to food stress even higher.

As we respond to the current humanitarian emergency due to higher food prices, we must not lose sight of the longer-term problems that have undermined food security in recent decades.

The major increases in food production associated with the Green Revolution in the 1960s - with considerable government and international not-for-profit support - gave way to new policy priorities in the 1980s. As the growth in food supply slowed, demand continued to grow, and not only due to population increases. With higher incomes, rising meat consumption requires more grain for animal feed.

Since the 1980s, governments have been pressed to promote exports to earn foreign exchange and import food. But food cannot be treated as just another commodity, and governments should develop appropriate policies, infrastructure, and institutions to ensure food security (not to be equated with total self-sufficiency) at the national or regional level.

The problem is that governments in many developing countries, having neglected food security and the productive sectors of their economies for several decades, now lack the fiscal capacity to raise public spending in order to increase food production and agricultural productivity. Moreover, growing urbanisation and other non-agricultural uses of land have reduced acreage available for food production, while agricultural land is increasingly used to produce commodities other than food, such as bio-fuels.

But we should not rush to abandon bio-fuels, despite some undoubtedly poor policies in recent years. Some bio-fuels are far more cost-effective and energy-efficient than others, and different bio-fuel stocks have very different opportunity costs for food agriculture (sugar has not experienced any significant price increase).

Another problem is that fewer and fewer transnational agro-businesses now dominate marketing, production, and inputs. This comes largely at the expense of small farmers and consumers, particularly the poor. Moreover, with less government support, rural credit has often become prohibitively expensive.

In addition, more securitisation, easier online trading, and other financial market developments in recent years have facilitated greater speculative investments, especially in commodity futures and options markets, including those affecting food. Falling asset prices in other financial market segments, following the sub-prime mortgage meltdown in the United States, may be more important for explaining the recent surge in food prices than supply constraints or other factors underlying longer-term gradual upward price trends.

Meanwhile, rich countries' agricultural subsidies and tariffs have undoubtedly undermined food production in developing countries. However, cutting farm subsidies will increase food prices, at least initially, while reducing agricultural tariffs alone will not necessarily lead to an increase in food production in poor countries without complementary support.

Instead, some food security advocates have called for rich countries to compensate for the adverse consequences of their own agricultural subsidies and protectionism by providing additional foreign aid to the developing world, targeting production efforts that enhance food security. To avoid catastrophe, the world community must also meet the urgent emergency food and planting requirements mentioned above, including more generous budget and balance-of-payments support for low-income food-importing countries.

Finally, as world leaders gather in Rome, the international community must secure a meaningful global commitment to food security that will not be undermined by contradictory policies.

Jomo Kwame Sundaram, better known as Jomo KS, is a prominent Malaysian economist, who is currently serving as the United Nations Assistant Secretary General for Economic Development in the United Nations Department of Economic and Social Affairs (DESA).

In cooperation with Project Syndicate.

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