billion-dollar bailouts for the hungry?
Just a few months ago, we were being
told that this is a period of stark, unprecedented and unfolding food
crisis, with looming shortages and huge global imbalances between demand
and supply. Everyone who matters - from officials in international organisations
to leaders of rich and poor countries - warned us of the terrible social,
political and nutritional consequences of doing nothing, of the millions
who would go hungry and the riots that would occur if the imbalances persisted
or increased.
But now the whole problem has disappeared from the international radar,
relegated to the inside pages of newspapers and perfunctory afterthoughts
in politicians' speeches. So what happened? Was it not such a problem,
after all?
No, the ''silent tsunami'' has simply been overwhelmed in public awareness
by the much noisier tsunami in the world of international finance, with
the giant sucking sounds of possible bank collapses and enormous bail-outs
grabbing all the attention. Yet the global food crisis is far from over,
and is even likely to intensify in the near future.
One reason why many analysts decided that the food crisis may not be so
intense is the global decline in crop prices that began sometime in the
middle of last year. For about two years before that, commodity prices,
including both food and non-food crops, had been increasing, and in the
first few months of 2008 they soared. But in early June last year the
prices of both oil and food crops fell, so that they are now lower than
they were even a year ago.
When food prices were rising, there was much talk of the shifts in demand
that were causing this trend. President Bush joined those who decided
that this reflected the increased demand from China and India as their
per capita incomes grew. This was a ludicrous argument because food consumption
has actually declined in both countries. Both economies have shown even
sharper declines in per capita food intake despite the continued presence
of widespread hunger, because of increased income inequalities within
these countries. In any case, that argument about more food demand from
China and India quickly collapsed along with the fall in global prices.
Now it is more than evident that the wild swings that have been observed
in food and several commodity markets over this year have been the result
of speculative forces, rather than any real changes in global demand and
supply.
But despite this volatility and the recent price decline, the food crisis
remains. And it does indeed reflect patterns of demand and supply - but
not the ones that have been talked about. The basic problem now is not
even one of absolute shortage so much as the inability to pay for food,
and this problem will get worse for many developing countries and their
poorer citizens.
Three problems now dominate the global food scenario. First, there is
a crisis of cultivation, especially in the developing world. This is the
result of two decades of policy neglect: falling public investment in
agricultural research, extension and support; aggressive trade liberalisation
that exposed southern farmers to heavily subsidised marketing by northern
agribusinesses; financial liberalisation that reduced cultivators' access
to credit and made them prey to speculative forces that also affected
prices. As a result, cultivation costs have increased even in years when
crop prices are falling, and cultivation is becoming unviable in many
countries.
Second, this has been associated with a depression in wages in developing
countries, which means that mass purchasing power did not increase even
when the economies were growing. So demand for food has not gone up, simply
because the poor do not have the incomes to pay for it.
Third, there has been an increasing concentration of firms operating in
global agriculture, with a few large agribusinesses coming to dominate
both input and output markets. These companies are also the ones who benefit
from government subsidies promoting ethanol, which divert land meant for
food to the paradoxically more energy-intensive production of fuel for
cars. This concentration is reflected in recent food-price trends: while
world prices have fallen sharply in the past four months, retail prices
of food in most developing countries have not fallen.
Unfortunately, each of these negative processes is likely to intensify.
The financial crisis will reduce the ability of developing country governments
to increase much-needed investment in agriculture or enlarge the distribution
of affordable food. It will adversely affect wage incomes, reducing purchasing
power further. And it will add to pressures for concentration in industry,
including agribusiness.
In the middle of last year, we had a global outcry about the perilous
state of billions of people in developing countries whose governments
could not afford to provide enough food for them and who could not themselves
earn enough to buy food at prevailing prices. These problems are now worse,
but the global outcry is all about the multinational banks that are under
threat. And several multiples of the money that could not be found to
provide food for the hungry are quickly being delivered to bail out irresponsible
finance.