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The 2007-08 food crisis: Have the lessons been learnt? Is the world better prepared to tackle the problem of rising food prices in the light of its experience of the 2007-08 global food crisis? Frederic Mousseau argues that while the world has certainly learnt much from this earlier crisis, it is doubtful whether policy makers will effectively use the lessons that it offers. TWO
years after the peak of 2007-2008, international food prices were on
the rise again in September 2010. With poor crops in Russia, some other
countries of the former Soviet Union and Eastern Europe, international
wheat prices have jumped more than 50% this summer - a harsh reminder
that international food markets remain highly volatile, subject to a
variety of factors, like unfavourable climate conditions, decisions
over food stocks or exports by governments or private actors, fluctuations
of oil prices (determining the level of food being used as fuel) or
financial speculation. Food riots, which took a toll on a number of
developing countries in 2008, now appear to be recurring, with 13 people
killed in One must thus ask whether the world is better prepared today to deal with high international food prices. According to a review of the responses to the 2007-2008 crisis, conducted jointly by the Oakland Institute and the UK Hunger Alliance1, the answer is both yes and no. On the positive side, we have learnt a lot from what happened three years ago. Starting with the identification of the factors that influence global food markets, it is now recognised that volatility is here to stay. We also know a great deal about the effectiveness of different responses put forward to respond to high food prices. This should help decision makers in governments and international institutions put in place the right mechanisms and policies to prevent the adverse impact of high food prices on the poor. But will they effectively use the lessons learnt from the crisis? Nothing is less sure, given the change of paradigm that is required to revise some of the ill-driven policies that have led to the current situation of global vulnerability to the fluctuations of global markets. A crisis less 'global' than generally thought First
of all, research shows that the 2008 global food crisis was less 'global'
than generally thought. A number of countries were successful in preventing
price transmission to domestic markets. For example, the price of rice
actually decreased in The success of measures taken to limit domestic inflation depended primarily on governments' ability to control domestic availability and regulate markets, often based on pre-existing public systems. Export restrictions, especially on rice, were certainly responsible for increased inflation in global food markets and adversely impacted food-importing countries that could not buy anymore from traditional suppliers. Nevertheless, they appear to have constituted a fast and effective way to protect consumers by mitigating the effect of global markets on domestic prices. These findings have not prompted donors to put an end to the aid conditionality that requires further liberalisation of the food and agriculture sector. Yet international aid institutions should recognise what works and support investments and programmes adapted to local contexts, needs, and capacities rather than defined by a one-size-fits-all approach. Governments must be allowed and encouraged to define and implement food and agricultural policies that protect consumers and prioritise small-scale, sustainable agriculture. Remittances and kinship at the forefront of the response Another important finding of the research showed that the bulk of the response to the rise in domestic prices was borne by people themselves. Remittances sent from migrants to their country of origin helped their family members back home to better cope with the increased food costs. Recorded remittances totalled close to $340 billion in 2008, a 40% increase compared to 2007. It is about three times the annual amount of international aid provided to the developing world. Different forms of help, such as borrowing and credit, were among the most used mechanisms to cope with high food prices. People's own responses have remained mostly unnoticed by policy makers and practitioners, who tend to focus on international assistance. Yet, there are ways to intervene, for instance, by decreasing transaction costs on money transfers or by adopting fiscal measures that would either facilitate transfers or collect additional development resources from the companies involved in the business. A broad approach to safety nets With
uneven success, a number of governments have tried to protect their
poor citizens through large-scale safety net systems. Countries such
as Cash
transfers to consumers, generally considered as an effective alternative
to imported food aid, have been increasingly used as safety nets. However,
high food prices undermined the value of the transfers and ultimately
the effectiveness and relevance of the instrument. Thus some national
programmes could not be adequately adjusted to high prices, which resulted
in a dramatic drop in beneficiaries' purchasing power. This was the
case for the Ethiopian safety net, the largest in Provision
of food subsidies was relevant in countries with high levels of poverty
and for commodities that constituted a higher share of households' expenses
(e.g. rice in The review thus clearly shows that social protection must go beyond cash and food transfers, and ensure a comprehensive range of interventions, including measures that may distort markets but are protective of consumers and supportive of producers. It also demonstrates that welfare programmes can hardly be effective if price volatility is not put under control. A boost to food aid programmes with a move to reform a skewed system High food and oil prices dramatically raised the World Food Programme (WFP)'s operational costs. In 2008, the Programme had to find an additional $755 million to maintain its activities at the 2007 level. It was eventually successful in fundraising this amount and financing more interventions with its largest budget ever. While its resources increased by 85% in 2008, extra operational costs limited WFP's ability to expand its operations to the same extent. The number of WFP beneficiaries and the tonnage distributed thus only increased by 19% and 18% respectively between 2007 and 2008. However, the change was also qualitative with a swift implementation of WFP's new Strategic Plan. While it used to rely mainly on in-kind food aid, WFP purchased a record 72% of its food. The Purchase for Progress (P4P) programme was launched in 2008 to develop procurement from smallholders in the poorest countries. This ongoing reform of international food aid is encouraging, especially around local and regional procurement and the support to local food systems (e.g. stocks). WFP's historic budget increase allowed about 20 million more beneficiaries, reaching 100 million beneficiaries in total. However, this number is modest when considering that high food prices added another 109 million people to the ranks of the undernourished. International food aid therefore appears necessary and important for the millions of people who can meet their food needs through such programmes, but far from sufficient to cope with the amplitude of world hunger and the effects of high food prices. Increased coverage but narrow focus of nutrition programmes As a matter of fact, food aid programmes have not prevented the dramatic increase in the number of people identified as being chronically malnourished, which jumped from 850 million in 2007 to over a billion in 2009 as a result of high food prices. Even after a decrease, down to 925 million in 2010 as reported by the Food and Agriculture Organisation (FAO), this represents very worrying backwards progress on the first Millennium Development Goal of halving hunger by 2015. The food crisis marked a time of substantial increase in the number of malnourished children treated worldwide - from an estimated 260,000 in 2004 to some 1.8 million in 2008. Nevertheless, this represents at most 9% of the 19 million severely malnourished children in need of specific treatment worldwide, a gap due to the cost of treatment, people's limited access to adequate health services in developing countries, as well as restrictions imposed by several governments on international humanitarian agencies. Furthermore, the fight against child malnutrition tends to focus primarily on treatment and feeding, with little attention given to some essential questions like the role of agricultural practices and policies to ensure a durable reduction of malnutrition. Increasing the number of malnourished children receiving proper treatment is imperative for reducing child malnutrition and mortality. Malnutrition also needs to be addressed in a more integrated manner in development programmes and policies. Questions over reinvestment in agriculture The above is well illustrated by the nature of the reinvestment in food production that high food prices triggered in the developing world. High food prices favoured a reinvestment in food production to either take advantage of the good market prospects or decrease dependency on food imports and increase self-sufficiency. A number of countries were successful in raising production levels through a variety of interventions, including provision of inputs and services, public procurement and price support to producers, and measures to provide credit and insurance. The
most used response was the provision of agricultural inputs, especially
chemical fertilisers, often for the benefit of better-off farmers. In
several instances, long-term development resources were diverted to
finance such short-term interventions. With some notable exceptions,
such as FAO programmes in Niger, relatively little investment was made
in favour of sustainable agriculture, diversification of production,
local seed production, and preservation of natural resources, all considered
long-term solutions to hunger, climate change, and environmental degradation.
Structural problems like inequitable land repartition were ignored overall
by the responses. They were actually aggravated by the rush by wealthier
nations and private investors to lease or purchase land from developing
countries. According to the World Bank, 45 million hectares' worth of
large-scale farmland deals were announced in 2009, compared with annual
average expansion of agricultural land of less than 4 million hectares
before 2008. This constitutes a serious concern for future food security
in many countries already affected by hunger, like While most international funding focused on the poorest countries, the International Finance Corporation (IFC) of the World Bank financed food production by agribusinesses in middle-income countries. The overall focus on a short-term supply response seems questionable given the need to address structural issues. Also, a substantial part of the response took place in 2009 and 2010, i.e. after the peak in food and fertiliser prices of 2008. A sustainable agriculture agenda is more than ever required to boost food production in the poorest countries, with less reliance on external inputs, enhanced management of natural resources, and investment in favour of smallholders, rural poor, and other marginal groups. Such an agenda requires robust agricultural policies that can guide investments and interventions. A response that falls far short of the requirements The plethora of international summits and declarations on the food price crisis between 2007 and 2009 may have prepared the ground for more effective food and agriculture policies in the future. However, three years after the rise in food prices, it does not seem to have produced much tangible dividend for the one billion hungry people. Overseas development assistance (ODA) increased by 25% in 2008 but aid to agriculture remained marginal, representing about 4% of the total ODA. Though some donors like Spain or the EC have actually disbursed the funds they committed in 2008, overall the promises made at different summits, including the $20 billion on three years announced by the G8 major industrial countries in L'Aquila in 2009, have still not materialised. The High Level Task Force on the Global Food Security Crisis (HLTF) estimated that $40 billion incremental public financing was required per annum to meet the challenge of hunger, and it remains a far-fetched goal. A boost to regional integration A number of policy responses implemented in some large countries, such as trade facilitation and market regulation, food subsidies, or the management of food stocks, seemed difficult to put in place in smaller countries in Sub-Saharan Africa. Borders are often porous, with cross-border movement of food or cattle well integrated in a regional economy, which makes it difficult for individual countries to intervene effectively. This
explains to some extent why high food prices have favoured regional
integration processes, including policy dialogue (e.g. around cross-border
trade) and the development of common instruments like food reserves
in several regions. In Conclusion The review of the responses to high food prices in 2007-2008 shows that the defence against the increased prices was easier for countries with the resources, institutions, and public mechanisms in place to support food production and manage domestic availability of food. It also demonstrates that providing aid to the poor was important but far from sufficient to prevent hunger in countries unable to limit domestic inflation. High food prices have thus shaken the Washington Consensus, which has advocated cuts in public support for agriculture and promoted the withdrawal of state regulation of the food economy. High food prices necessitated a reassessment of the food and agriculture policies and programmes that have been pursued around the world by governments, donors, and international institutions. They favoured an acceleration of important changes that were already underway for food security interventions: more responsible food aid, safety nets being established or scaled up, and nutrition treatments reaching more children than ever. However, research demonstrates that without adequate measures to prevent inflation, the effectiveness of these interventions is limited. This is, however, not yet recognised by a number of donors and financial institutions despite the reality check of 2007-2008. Research also shows that remittances, borrowing, and other forms of 'self-help' were far more important in value than international aid. Processes such as regional integration and national policy shifts also appear to be essential in developing robust food and agriculture policies that could address the root causes of hunger and poverty in a sustainable way. International development agencies must integrate these facts when considering future interventions. With regard to agriculture, food production has received fresh interest and investment but the focus on agricultural inputs makes it a missed opportunity. An important body of research, including the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD), clearly indicates the need to invest in sustainable agriculture, agroecology, and proper management of natural resources. Is
the world better prepared today now that food prices are on the rise
again? Certainly not, given that free trade is still upheld by world
leaders, as strongly stated at the last G20 meeting of major economies
in Frederic Mousseau, a Senior Fellow at the Oakland Institute, is an internationally renowned food security consultant who has worked for almost 20 years with international relief agencies such as Action Against Hunger, Doctors Without Borders and Oxfam International. Email: fmousseau@oaklandinstitute.org Note 1 Mousseau,
F. (2010). The High Food Price Challenge: A Review of Responses to Combat
Hunger. *Third World Resurgence No. 240/241, August-September 2010, pp 40-43 |
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