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| | International Financial Institutions and the Food Crisis |
The recent global food crisis and the breakdown of the latest WTO negotiations have brought to the fore the frailty of the global agricultural system, and more generally that of international financial institutions (IFIs). Their legitimacy is increasingly questioned, as they prove powerless to either initiate or formulate an effective exit strategy to the crisis.
While in 2005 few analysts, following momagri’s example, were calling attention to the inadequacy of the World Bank’s and IMF’s proposals, an increasing number of international experts now question the rightfulness of these regulating and development policies. Illustrating the ongoing change, these institutions have on their own ordered a series of internal studies and audits, whose faultfinding findings infer the hope for an end to the advocacy of applied policies.
The British think tank Bretton Woods Project1 is one organization that applied itself to assess and influence the international financial institutions’ projects and policies. Its article “The Food Crisis and the IFIs”, which is excerpted below, deserves the credit to go back over the role played by the World Bank and the IMF in the onset of the food crisis, while underlining the skepticism generated by their proposals for a solution.
The causes of and remedies for the food crisis are hotly contested; how this rupture in the status quo is resolved will have decisive implications for the roles of the IFIs as well as more broadly for global food security and ecological sustainability.
The UN estimates that the recent food price increase will add 100 million to the over 850 million people who were already short of food. The IFIs trace 15 per cent of the increase to higher energy and fertilizer costs linked to skyrocketing oil prices, and another 15 - 30 per cent to the impact of biofuels. They have been silent on the role of speculative financial capital, which Peter Rosset, researcher at the Centro de Estudios para el Cambio en el Campo Mexicano, calls "one of the most important" short-term causes. Other short-term factors include record-low food stocks and severe weather events such as last year's Australian drought.
Commentators are agreed that food production, especially in many developing countries, has failed to keep pace with rapidly growing demand. One factor being blamed for this failure is a two-decade-long across-the-board decline in support for investment in agricultural productivity. Multilateral aid to African agriculture, for example, fell from 32 per cent of total aid in 1981 to a mere seven per cent in 2001, as highlighted by the Bank's evaluation unit (see Update 58).
US and EU food subsidies, combined with WTO and IFI pressure for import liberalisation are being blamed by numerous NGOs, academics, and southern governments for hurting countries' abilities to feed themselves. Henk Hobbelink of NGO GRAIN said "many countries became dependent on food imports, as local farmers could not compete with the subsidised products from the North. This is one of the main factors in the current food crisis, for which the IMF is directly to blame."
Indian UN ambassador Nirupam Sen blamed IFI advice encouraging countries to shift from domestic food crops to cash crops for exports. In a paper for the Nordic Africa Institute, Oxford University researcher Deborah Bryceson describes the IFIs' approach as "de-peasantization" - phasing out of a mode of production to make the countryside a more receptive site for intensive capital accumulation.
Harvard University economist Dani Rodrik counterargues that the retention of import restrictions would have lowered the global supply of food, not raised it. He surmises that import protection would have led global production to be reallocated "from efficient exporters to inefficient importers". He concludes that "if you are for self-sufficiency, you must be willing to live with high prices".
This reflects the complexity of the relationship between food prices, the nature of development, and poverty reduction efforts. The latest World Bank research by Maros and Will paints a mixed picture: "short-run impacts of higher staple food prices on poverty differ considerably by commodity and by country, but, poverty increases are much more frequent, and larger, than poverty reductions". Other analysts believe that in the longer-term, higher prices could begin to benefit rural producers, slow the exodus of farmers from rural areas, and improve environmental sustainability.
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Meanwhile, the IFIs have published a list of dos and don'ts for developing country governments responding to the crisis. On the do side: scaling up social safety nets; eliminating tariffs on key food items; and the temporary use of subsidies on food items vital to the poor and inputs for poor farmers such as fertilisers. The latter recommendation represents a 180 degree shift from previous efforts to eradicate the use of such subsidies in countries such as Malawi. On the don't side are export controls, price controls and general subsidies.
The IFIs have proposed a package of medium-term measures including:
> doubling investment in research and development over the next five years (conceding the inadequacies of the global network of Consultative Group research centres);
> investing one per cent of sovereign wealth fund (see Update 57) assets across Sub-Saharan African, some of which may go towards agricultural productivity;
> easing bio-fuel subsidies;
> completing the Doha trade round; and
> a 'green revolution' for Africa - the Bank is considering joining the Alliance for the Green Revolution in Africa, a body that is funded jointly by the Melinda and Bill Gates Foundation and the Rockefeller Foundation.
While most civil society organisations would agree both on the need for increased investment in research and the need to end bio-fuel subsidies, that is where the similarities end. NGO Institute for Agriculture and Trade Policy insists that the Doha round would lead both to increased dependency of poor countries on food imports, and increased volatility in food prices.
There is also enormous skepticism about the benefits of the current agribusiness model. The International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD), a three-year high-level exercise, came under "enormous pressure" according to one high-level insider to conform with the findings of the Bank's World Development Report on agriculture (see Update 58). In contrast to the WDR, the IAASTD emphasises food security, environmental sustainability, and traditional knowledge. It criticises trade liberalisation for undermining the agricultural sector and stresses the need to "preserve national policy flexibility".
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The international food crisis is a tragedy, which nonetheless provides a unique opportunity for international decision-makers to question the validity of the current agricultural governance system. It is important to learn the lessons of the crisis today, especially those regarding the free trade issue, for it will not be possible to argue tomorrow that we did not realize what risks the world is facing. This is the reason why momagri has been working since 2005, and that the 10 propositions for a new vision of agriculture have been developed.
Momagri’s Editorial Board
| 1 “Agribusiness vs. food security: The food crisis and the IFIs”, Bretton Woods Project, June 17th, 2008 http://www.brettonwoodsproject.org/
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