Archive for May, 2008

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The Global Food Crisis

May 5, 2008

By Mark C. Partridge, Senior Contributor

5 May 2008: From milk to rice, food prices are rising around the world. The world’s poor, from Senegal to San Francisco, have been going with less and less to eat as food prices have climbed 83% in the last three years.

A report by the Asian Development Bank says that meat prices are up 60% in Bangladesh and 30% in the Philippines, while China has been suffering from record pork prices for months. Even in the United States, more people are turning to food banks for help because they are unable to provide for the families.

According to the World Bank, higher prices could push 100 million people in developing countries into poverty. The effects of such pressures are already becoming evident with increasing unrest across the globe. Haitians ousted their government because they were unable to mitigate their hunger. In Egypt, the Army was recently put to work in the kitchens to ensure that there was enough subsidized bread to go around, after the price of non-subsidized bread rose 26%. Yemen saw buildings go up in flames because of hunger, while numerous other countries have been shaken by anger over the cost of basic food stuffs.

What has caused this increase in prices across the board? Like all markets, food prices have spiked in part because of energy prices. Farmers use fertilizers that are made up from oil byproducts. Also, the cost of shipping goods has increased, leading to higher prices at the shops.

A side product of higher energy prices has been the rush toward biofuels. Farmers in the U.S., chivied on by subsidies, have planted corn and maize, which are then processed and blended with gasoline to increase fuel efficiency. It has been estimated that biofuels have caused 15% of the rise in food prices in recent years.

Most significant, though, has been the changing food habits in Asia. The emerging middle classes in India and China are eating more and demanding the same goods that the West’s citizens have enjoyed for years. This trend has led to increased demand for milk, meats, and sweets. According to Goldman Sachs, meat consumption has climbed nearly 40% in the past 15 years. Also, the emergence of larger supermarkets has lead to changing shopping habits with people buying larger quantities and more variety.

Politicians and diplomats are starting to take notice and are offering up solutions. United Nations Secretary-General Ban Ki-Moon has called for an increase in additional $755 million to the World Food Programme, which is struggling to meet its responsibilities under the economic realities. U.S. President George W. Bush, who has garnered claim for his assistance to Africa, has called to $770 million in international funding to help the world’s poor fill their bellies. The Association of South-East Asian Nations (ASEAN) met over the weekend and agreed that member governments would cooperate to increase rice production and stabilize prices. The International Monetary Fund has also stepped up its support of African nations.

Interestingly, there has been increasing chatter about the World Trade Organization’s Doha round. Dominique Strauss-Kahn called for a renewed effort agreement on the new set of trade-barrier reductions that would allow for easier transfer of food stuffs across borders-and thus cheaper food. “No one should forget,” wrote Strauss-Kahn, “that all countries rely on open trade to feed their populations. But we are already seeing actions at the national level, such as curbs on food exports that have a damaging global impact. Completing the Doha round would play a critically helpful role in this regard, as it would reduce trade barriers and distortions and encourage agricultural trade.”

However, there is growing opposition to free trade around the world. In the U.S., NAFTA-bashing was a common past-time of Senators Barak Obama and Hillary Clinton (even if some of this rhetoric should be taken with a grain of salt.) People in the West are unhappy with free trade and the “Washington Consensus,” which they see as taking their jobs overseas and hurting their bank accounts.

So, what do you think readers? Could the Doha round ease food prices around the world? If so, could the food crisis spark action on this front? And finally, if the Doha round is a medium- to long-term solution, what else can be done in the interim to alleviate the pressure of food prices on the world’s poor?

Send us your thoughts, editors@diplomaticourier.org

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