Food Fears Return

Project Syndicate, 2011-05-09, Jomo Kwame Sundaram

ROME – Lack of food is rarely the reason that people go hungry. The world today produces enough food to feed everyone. The problem is that more and more people simply cannot afford to buy the food they need. Even before the recent food-price increases, a 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.

Global food prices are at the highest level since the United Nations Food and Agriculture Organization (FAO) started monitoring them in 1990. The World Bank estimates that recent food-price increases have driven an additional 44 million people in developing countries into poverty.

The rapid rise in world prices for all basic food crops – corn, wheat, soybeans, and rice – along with other foods like cooking oils, has been devastating for poor households all over the world. But almost everybody’s standard of living has been reduced. Middle-class people are increasingly careful about their food purchases; the near-poor are losing headway and falling below, rather than staying above, the poverty line; and the poor and vulnerable, not surprisingly, are suffering even more.

Food production increased greatly with the quest for food security and the Green Revolution from the 1960’s to the 1980’s, owing to considerable government and international not-for-profit support. But agricultural experts have warned of the risks of the flagging efforts to boost food output since the 1980’s.

As food-supply growth has slowed, demand has continued to rise, owing not only to population increase, but also for reasons such as growing use of food crops to sustain livestock. The problem is exacerbated by the significant drop in official development assistance for agricultural development in developing countries. Aid for agriculture fell by more than half in the quarter-century after 1980, as the World Bank cut agricultural lending from $7.7 billion in 1980 to $2 billion in 2004.

With cuts continuing, agricultural research and development – needed to improve crop productivity – has fallen for all crops in all developing countries. Meanwhile, in the private sector, agribusinesses spend much more on research than all public agricultural research institutes together.

Developing-country governments also stopped subsidizing farmers or being involved in food marketing, storage, transportation, or credit provision. Meanwhile, rich countries continue to subsidize and protect their farmers, thereby undermining food production in developing countries.

The World Bank and the World Trade Organization still insist that further agricultural trade liberalization is the best medium-term solution. Since the 1980’s, governments have been pressed to promote exports to earn foreign exchange and import food. As a result, many poor countries have turned to the world market to buy cheap rice and wheat, instead of growing their own. Some countries and regions that were previously self-sufficient in food now import large quantities of it. This drives up food prices, causing even more anguish for the world’s poorest people.

Other factors have contributed to the food crisis. Climate changes resulting from greenhouse-gas emissions exacerbate water-supply problems, accelerate desertification and water stress, and worsen the unpredictability and severity of weather events, all of which adversely affect agriculture in much of the world. Deforestation, growing population pressure, urbanization, soil erosion, over-fishing, and the impact of foreign domination over marketing, inputs, processing, and even farming also play a role.

Increased oil prices are also affecting the price of food. Commercial agriculture uses petroleum, oil, and gas to operate machinery, transport goods, and produce agro-chemicals needed for fertilizers and pesticides.

Moreover, food crops are being grown to produce bio-fuels, reducing their availability for human consumption. Rich countries have provided generous subsidies and other incentives for increased bio-fuel production, while poorer countries encouraging bio-fuel production have provided far fewer market-distorting incentives to farmers.

Certainly, some bio-fuels are far more cost-effective and energy-efficient than others, while different bio-fuel stocks have very different opportunity costs (for example, sugar has not experienced any significant price increase). Hence, the debate over bio-fuels needs to be far more nuanced.

Speculation and hoarding have also been contributing to food-price spikes. More securitization, easier online trading, and other financial-market developments in recent years have facilitated greater speculative investments, especially in commodity futures and options markets.

As the financial crisis deepened and spread from late 2007, speculators began investing in commodities, and the dollar’s decline relative to other currencies has also induced such investments. Indeed, this may explain recent food-price surges better than the factors underlying longer-term gradual upward price trends.

In that case, the problem that many people around the world are facing today is one of food security, not a lack of food. Of course, if you are hungry or undernourished today as a result of food-price increases, that is a distinction without a difference.

Jomo Kwame Sundaram is United Nations Assistant Secretary-General for Economic Development.