Just a few months ago, we were being told that this is a period of stark, unprecedented and unfolding food crisis, with looming shortages and huge global imbalances between demand and supply. Everyone who matters – from officials in international organisations to leaders of rich and poor countries – warned us of the terrible social, political and nutritional consequences of doing nothing, of the millions who would go hungry and the riots that would occur if the imbalances persisted or increased.
But now the whole problem has disappeared from the international radar, relegated to the inside pages of newspapers and perfunctory afterthoughts in politicians’ speeches. So what happened? Was it not such a problem, after all?
No, the ”silent tsunami” has simply been overwhelmed in public awareness by the much noisier tsunami in the world of international finance, with the giant sucking sounds of possible bank collapses and enormous bail-outs grabbing all the attention. Yet the global food crisis is far from over, and is even likely to intensify in the near future.
One reason why many analysts decided that the food crisis may not be so intense is the global decline in crop prices that began sometime in the middle of last year. For about two years before that, commodity prices, including both food and non-food crops, had been increasing, and in the first few months of 2008 they soared. But in early June last year the prices of both oil and food crops fell, so that they are now lower than they were even a year ago.
When food prices were rising, there was much talk of the shifts in demand that were causing this trend. President Bush joined those who decided that this reflected the increased demand from China and India as their per capita incomes grew. This was a ludicrous argument because food consumption has actually declined in both countries. Both economies have shown even sharper declines in per capita food intake despite the continued presence of widespread hunger, because of increased income inequalities within these countries. In any case, that argument about more food demand from China and India quickly collapsed along with the fall in global prices. Now it is more than evident that the wild swings that have been observed in food and several commodity markets over this year have been the result of speculative forces, rather than any real changes in global demand and supply.
But despite this volatility and the recent price decline, the food crisis remains. And it does indeed reflect patterns of demand and supply – but not the ones that have been talked about. The basic problem now is not even one of absolute shortage so much as the inability to pay for food, and this problem will get worse for many developing countries and their poorer citizens.
Three problems now dominate the global food scenario. First, there is a crisis of cultivation, especially in the developing world. This is the result of two decades of policy neglect: falling public investment in agricultural research, extension and support; aggressive trade liberalisation that exposed southern farmers to heavily subsidised marketing by northern agribusinesses; financial liberalisation that reduced cultivators’ access to credit and made them prey to speculative forces that also affected prices. As a result, cultivation costs have increased even in years when crop prices are falling, and cultivation is becoming unviable in many countries.
Second, this has been associated with a depression in wages in developing countries, which means that mass purchasing power did not increase even when the economies were growing. So demand for food has not gone up, simply because the poor do not have the incomes to pay for it.
Third, there has been an increasing concentration of firms operating in global agriculture, with a few large agribusinesses coming to dominate both input and output markets. These companies are also the ones who benefit from government subsidies promoting ethanol, which divert land meant for food to the paradoxically more energy-intensive production of fuel for cars. This concentration is reflected in recent food-price trends: while world prices have fallen sharply in the past four months, retail prices of food in most developing countries have not fallen.
Unfortunately, each of these negative processes is likely to intensify. The financial crisis will reduce the ability of developing country governments to increase much-needed investment in agriculture or enlarge the distribution of affordable food. It will adversely affect wage incomes, reducing purchasing power further. And it will add to pressures for concentration in industry, including agribusiness.
In the middle of last year, we had a global outcry about the perilous state of billions of people in developing countries whose governments could not afford to provide enough food for them and who could not themselves earn enough to buy food at prevailing prices. These problems are now worse, but the global outcry is all about the multinational banks that are under threat. And several multiples of the money that could not be found to provide food for the hungry are quickly being delivered to bail out irresponsible finance.