We are living in a world that is more connected than ever before, where decisions made in one part of the world have consequences that are felt globally. In this context, the world is now living through a global food crisis of unprecedented scale, reach and devastation.
The crisis caught international attention when food riots broke out across the globe, in Haiti, Bangladesh, Ethiopia and elsewhere. People tired of rising food costs took to the streets.
According to the United Nations, food commodities in the global market have risen by 83 percent over the last three years. Corn prices have climbed to double the price a year ago. Wheat prices are 40 percent higher than 2007 and the price of rice is three times last year’s level.
This unprecedented rise in price has left millions of people hungry and desperate. The UN Special Rapporteur on the Right to Food reports that an estimated 854 million people are currently living in a state of food insecurity.
Josette Sheeran, director of the United Nations World Food Programme (WFP), put it this way, “What we are seeing now is affecting more people on every continent, destroying even more livelihoods and the nutrition losses will hurt children for a lifetime.”
Two factors believed to be exacerbating the food crisis are neo-liberal economic policies and investor speculation in food commodity and oil markets. Other factors, including biofuel production, climate change, increased demand for higher protein foods, and lower yield in some producer countries also play a role, but will not be discussed here.
Neo-liberal economic policies have devastated local economies and people’s livelihood in the global South. As countries began to take part in the global market, decision-makers from international financial institutions such as the World Bank and the International Monetary Fund (IMF) began instituting conditions for loans, including structural adjustment programs. Structural adjustment most notably involves domestic shifts to privatize state-owned industries and reduce trade protections.
The story of Haiti is a case in point. Until the mid-1980s Haiti was a self-sufficient rice producing country. Under pressure from the IMF and the World Bank, due to its accumulated debt and conditions for future loans, Haiti was forced to radically change its economic system. Haiti’s trade protections were dismantled, making it the most economically liberal country in the Caribbean, which made it vulnerable to cheap imports and dependent on external sources of production. By the early 1990s rice imports from the United States outpaced local production. Poor Haitian farmers were forced to compete for market share with subsidized rice from the United States and Haiti’s agricultural industry ended up in shambles. Now, as global prices rise, many Haitians cannot afford to buy rice.
In the current food crisis, countries like Haiti, and many in Sub-Saharan Africa, which are “net food importers,” are at the mercy of the global market, unable to feed their own people.
Investor speculation. “Money moves prices and money moves markets.” As Wall Street’s housing crisis began to emerge, large sums of money flowed into the food commodities futures market—as much as $300 billion. This has played a major role in food price inflation.
Michael Masters, a hedge fund investor for more than 12 years, recently testified before Congress and attributed much of the increase in food prices to speculation in the commodities market. Fundamental economic principles of supply and demand played less of a role and institutional investors collectively played a major role in driving the commodities price increase. Speculative investing in the commodities futures market is when an investor buys a product for re-selling rather than for use and every time the product is resold, the price goes up.
Speculative investing also contributes to the increase in fuel costs, which directly impacts the cost of food. According to Aldo Caliari, an economist at the Center of Concern, the impact on the price of crude oil is $20–30 per barrel.
Investors have banked millions of dollars while millions of people worldwide have gone hungry, unable to keep up with increased prices in a volatile market.
The current global food crisis brings many challenges but it also presents opportunities for true reform and changes that can effectively work for the common good.Any attempt at reform or response must take a short, medium and long term approach.
Millions of people are hungry right now; millions are dying. Sheeran has compared this disaster with the 2004 Asian tsunami, calling the food crisis a “silent tsunami.” This must be treated as a disaster and emergency response must take effective, rapid measures. Over the past several months many nations and non-governmental organizations, including MCC, have responded with large sums of emergency food aid. Food aid must be monitored and evaluated according to changing needs. Additionally nonemergency food aid policies must be carefully evaluated for negative impact on local markets.
Food aid will only be a “band-aid” measure if structural changes do not take place. The loopholes in speculative investment must be fixed as a medium term measure. Masters, an ardent believer in the free market system, asked, “Should asset allocation trump human rights?” His answer, “Never!” Masters also said, “Markets without rules don’t work.”
At the time of writing, Congress was in the process of considering legislative measures to regulate and create transparency in the commodities and oil futures markets. Measures such as these can help to ensure that institutional investors do not sacrifice human rights for capital gains.
The global food crisis has been in the works for a long time. Millions of people were already dying of hunger before the riots caught international attention. A sustainable response to the crisis requires a long term approach that addresses a major root cause of the problem. Neo-liberal economic policies have disabled the ability of a country to produce the food it needs to feed its own people. Nations must be allowed to decide their own food security strategies and design policies that will effectively address the problem in their local context.
After the riots in Port-Au-Prince, the Haitian president René Préval proposed that Haiti begin to invest more in its own agricultural industry in order to boost local production. Developing nations should not be penalized for wanting to protect their own markets.
La Via Campesina, an organization that represents a movement of small-farmers, puts it this way, “Food sovereignty is the right of peoples to define their own food and agriculture. Food sovereignty does not negate trade, but rather, it promotes the formulation of trade policies and practices that serve the rights of peoples to safe, healthy and ecologically sustainable production.”
The UN Special Rapporteur has said, “This is an intolerable situation, because it is a preventable one.” This disaster, unlike a tsunami, cyclone or earthquake, was caused by human practices and policies. Therefore it must be addressed in a thoughtful, comprehensive manner. Policymakers must be willing to recognize the failures in the current system and work at comprehensive reform that will truly address the needs of people.