| || |
| ||Editorial || |
| || |
World Bank not Ready to Place Agriculture
at the Center of Development Policies
In the latest edition of its global monitoring report published annually to assess the strides made in the implementation of the Millennium Development Goals (MDGs), the World Bank is concerned about the consequences of the financial crisis for developing countries. Conversely to its 2008 report however, the organization advocates increased and unregulated trade liberalization, which would have a very negative impact on most farmers’ revenues worldwide––especially those in developing nations––as the momagri model recently demonstrated.
The global financial crisis has unquestionably turned into a human and development crisis. Originating in industrialized countries, it quickly and unrelentingly spread throughout developing nations with dramatic consequences for the poor, whose very livelihood is sometimes threatened1. So much so that new risks generated by the crisis are now creating emergency situations in the development field.
This is highlighted in the latest global monitoring report issued this past April 24 by the World Bank under the title “A Development Emergency” 2. Focusing on the Millennium Development Goals (MDGs), the document evaluates their midterm progresses and brings the attention of the international community on the perils created by the financial crisis for their implementation. Because, as indicates the World Bank, if there was already a development crisis before the crisis, there is now an unavoidable reality that calls for urgent international measures, so that advances made with difficulty to fight poverty, hunger, illiteracy and diseases are not eroded.
The report first strives to make a diagnostic of the situation before recommending priority fields and intervention means to contain the consequences of the crisis in developing countries. While no one can challenge the diagnostic, the proposed recommendations are nevertheless drawing out some reservations. In fact, they seem to be not only inappropriate but some of them are even dangerous and counter-productive. In any case, they testify to the World Bank’s lack of consideration for agriculture and its crucial role to the economic growth of developing countries, in spite of reversals of opinion that seemed to have been made in previous reports.
An alarmist diagnostic…
The report starts out by listing a series of key figures illustrating the many risks generated by the crisis for developing nations. The World Bank’s evaluations highlight the fact that growth in developing countries could drop to 1.6 percent in 2009, against an 8.1 percent rate in 2006/07, thereby breaking the momentum in progress caused by the encouraging growth recovery registered in the region during the past few years. This growth drop-off is largely attributable to a $700 billion reduction in private capital flows, upon which developing countries largely rely. Hence an increase in unemployment (according to the International Labor Organization, 23 million people will lose their jobs in developing countries) and a highly probable increase in poverty, estimated to entrap between 55 and 90 million additional people into squalor.
In addition to this clear and fully detailed diagnostic, the World Bank report gets the credit for insisting on the human costs of the financial crisis. Because of its impact on education (a whole age class taken out of schools), infant mortality and the deterioration of children’s health (under-nutrition), the crisis will cause irreversible consequences with long-lasting repercussions. As the report rightfully notes, we have every reason to believe that the consequences of the crisis on poverty and development will last much longer than the crisis itself.
Emphasizing these two phenomena (irreversibility and asymmetry of the crisis) is an interesting contribution by the World Bank, which attests to its willingness to recognize the urgency of the situation and work more actively to reach the development goals.
… but recommendations that raise more questions than bring solutions
With that said, the World Bank’s recommendations to eradicate the consequences of the crisis are fueling many reservations. Because, if a World Bank report3 recognized the need to return agriculture at the heart of development policies in October 2007, such good resolutions do not seem to be still on the agenda.
In fact, among the six priority spheres of intervention outlined in the report to curb the impact of the crisis and regain lost ground in carrying out the MDGs, agriculture is not mentioned. The document lists instead:
1. Implementing services and social protection programs targeted to the neediest; Admittedly, some of these fields represent significant catalysts for economic growth and the fight against poverty. However, it is surprising to note the absence of agriculture, all the more so that it obviously intersects with each of these fields: one cannot think of health without wholesome and sufficient food; social protection programs and services will be a bottomless pit if nothing is done to ensure employment for 70 percent of the world population, who are farmers; and in most developing countries, agriculture remains the major economic development tool, no matter the amount of development assistance allocated by the international community, etc…
2. Boosting human development objectives, particularly in healthcare, which, according to the World Bank, is the sector where prospects are the bleakest;
3. Mobilizing the private sector to reach the MDGs;
4. Pledging a budgetary response to sustain growth;
5. Providing increased aid to poorer countries (LDCs);
6. Preserving the openness of the financial and trade system.
Making a stronger point yet, the report stresses the need to conclude the Doha Round, not so much to ward off any protectionist threat but rather to improve the efficiency of agricultural production and the effectiveness of exchanges (sic) as well as prevent future food crises from happening.
Showing a total change of mind compared with its last 2008 report4, the World Bank in fact states on page 141, “the 2008 global food crisis had deep roots in the distortions of the world trading system”. For the World Bank, “distortions of the world trading system” include tariffs, quantitative restrictions or prohibitions on imports or exports, as well as any domestic producer direct supports and export subsidies for agricultural products.
Also on page 141, the international organization reports that during decades “the combined impact of these trade-distorting agricultural policies has been to displace and reduce the efficiency of agricultural production globally”, since they fostered inefficient agricultural production in rich countries at the expense of more efficient production in LDCs. Meaning: We did not push agricultural trade liberalization far enough!
Condemning the discriminatory, opaque and ineffective nature of such policies, the report considers that it is essential to fight agricultural subsidy policies. In this respect, concluding the Doha Round is considered not only as a requirement but also as a step: the report does not hesitate, on page 143, to insist on “further liberalizing agricultural trade on a multilateral basis.”
A misleading and dangerous overview
Such outlook is misleading and dangerous. On one hand, the World Bank’s report substantiates its viewpoint of economics-centered agricultural production––i.e. a sector like any other––without any thoughts to related issues, such as food security vs. national security, preservation of the environment, economic development levers, etc…
On the other hand, the organization makes a judgment error in its analysis of the situation, in particular regarding LDCs’ dependence on commodities. Taking into account their underdeveloped banking systems, LDCs were only marginally affected by toxic assets in the manner of industrialized nations. Besides their dependency to private capital––rightfully noted by the World Bank––one of the main channels of transmission of the financial crisis in LDCs is really the unfettered financialization of commodity markets observed in the past few years. Thus, unprecedented liquidity trades recorded on financial exchanges had an effect on LDCs’ economies, in which two thirds or more of the population relies on commodity production and trade.
So, promoting “more advanced” liberalization of international agricultural trade is widely questionable: apart from the risks tied to price volatility increases, unfettered liberalization of international agricultural markets would render LDCs even more dependent on financial––even speculative––trades on agricultural exchanges. The World Bank therefore seeks to contain the crisis without realizing that recommended remedies are the cause of the crisis.
For years, the World Bank neglected agriculture to the benefit of other activities considered more productive in terms of development. If this 2008 global monitoring report were to take the opposing view by adopting a policy that places agriculture at the center of development efforts, the 2009 edition shows that an ideological revolution is far from accomplished within this higher international institution.
It is now more than high time to recognize the strategic nature of agriculture, not only for its role in fighting malnutrition and poverty but also for its contribution to national economic development and its ties to environmental protection. Let us hope that we will not need another food and/or financial crisis for the international community to be aware of this fact.
1Please see momagri’s April 27, 2009 article “Ghana, Between Food Insecurity and the Financial Crisis” http://www.momagri.org/UK/Focus-on-issues/Ghana-Between-Food-Insecurity-and-the-Financial-Crisis_484.html
2 The complete English version of the report can be consulted at: http://siteresources.worldbank.org/INTGLOMONREP2009/Resources/5924349-1239742507025/GMR09_book.pdf
3 Please see the October 19, 2007 “World Development Report 2008: Agriculture for Development”. It calls for greater investment in agriculture in developing countries and recommends that the sector be placed at the center of the development agenda if the goals of halving extreme poverty and hunger by 2015 are to be reached. “Cutting down malnutrition has a ‘multiplier’ effect because it contributes to reaching other MDGs, in particular those tied to mothers’ healthcare, infant mortality and education” remarked Robert B. Zoellick, President of the World Bank, at the presentation of the report. http://web.worldbank.org/WBSITE/EXTERNAL/ACCUEILEXTN