Topics discussed by the Crisis, Poverty and Food Security panel included the link between the global economic crisis and food insecurity and the need to reform global governance of food security; the lack of research focused on agriculture and its implications; and the need for global investment in agricultural production and development. The global economic crisis has created both challenges and opportunities for agriculture and food security.
Crisis, Poverty and Food Security Panel
Chair: Maureen O’Neil, CIGI IBG; President and CEO, Canadian Health Services Research Foundation
Jennifer Clapp, CIGI chair in global environmental governance, Balsillie School of International Affairs
Jorge Braga de Macedo, president, Tropical Research Institute and professor at University of Nova’s Faculty of Economics (Lisbon); former finance minister of Portugal
Uma Lele, special advisor to the M.S. Swaminathan Foundation, Chennai, India; former senior advisor to the World Bank
There is a link between the global economic crisis and food insecurity, said Professor Jennifer Clapp. In early 2008, there was a food security crisis stemming from a sharp increase in food prices. Though prices have subsequently dropped on international markets, global food insecurity has gotten worse in developing countries, where prices have remained high. Statistics from the Food and Agriculture Organization (FAO) suggest that more than one billion people now suffer from lack of food.
Dr. Clapp said an opportunity exists to reform global governance of food security. The L’Aquila Food Security Initiative announced by the G20 in July will channel investment funds through the World Bank to promote production increases in developing countries. According to Dr. Clapp, production increases are vital, but because the global economy is so tightly linked to food security, there is a also need for broader economic governance to support global food security goals.
She described the link between the financial crisis and food insecurity. With the decreasing value of the US dollar in 2007-08, there was a rush to invest in financial products based on commodity futures prices, which include agricultural commodities. That action created a price bubble in food commodities, which was a primary factor in rising hunger over the past two years. Dr. Clapp said regulation of the financial sector, in particular the placement of limits on the extent to which investors can purchase financial products based on agricultural commodity prices, is needed to address food price volatility. The economic collapse in 2008-09 also contributed to an abrupt realignment in people’s access to food in the world’s poorest countries for two reasons: (1) it became difficult for countries that depend on food imports to access credit to buy those imports; and (2) currency devaluation made it more expensive to buy food from other countries.
As Professor Clapp explained, 50 to 80 percent of a poor person’s wages are spent on food. She cited a growing dependence on imported food and an unequal trade regime that are harming poor countries’ ability to ensure food security, particularly when prices are volatile and the global economy is weak. Rich nations are subsidizing their own agricultural sectors so much that developing country food production is out-priced, which in turn harms production incentives in poor countries. Moreover, investment in agriculture and food security by governments and multilateral agencies has declined over the past 30 years. The international community has not stepped up to fill the gap; rich countries should not use the economic crisis as an excuse to decrease aid for agriculture and food security. The World Food Programme has raised only 50 percent of its budget for 2009. She emphasized the importance of balancing the short- and long-term investment in food security initiatives, and the need for a less volatile and more equitable global economy.
Jorge Braga de Macedo
“Together Alone” was the title of Jorge Braga de Macedo’s talk. The title, inspired by a song from the rock band Crowded House recorded in New Zealand in 1992, suggests that governance (“alone”) did not prevent a crisis exacerbated by globalization (“together”). Queen Elizabeth visited the London School of Economics one year ago and asked: “If these things were so large, how come everyone missed them?” During a subsequent visit of Her Majesty to Brazil, President Lula said “this is a blue-eyed crisis,” meaning that it originated in countries where crises were not supposed to happen.
The “together alone” paradox can be rephrased in terms of “group” or “tribal” thinking (that Paul Krugman likes to call “incestuous suppression”): No one saw the global crisis coming because everyone who could see belongs to the tribe that suppresses crises. Specifically, there were cooperation failures within and between countries which brought about a negative interaction between globalization and governance. Because peer-review mechanisms at the OECD and the EU did not lead to international governance innovation among advanced countries, the global common good is threatened with severe implications for poverty alleviation and food security. Peer pressure among nations and regions is necessary to mainstream science and technology for development, with respect not only to agricultural research but also to institutional change.
Over the last 30 years, the lack of agricultural research for development has threatened agricultural productivity in developing countries. Lower productivity and neglect of agriculture exacerbated food price volatility and the energy crisis, leading to the near financial meltdown of September 2008. The economic crisis was a common threat, but no one saw it coming in developed countries, and when it struck no one knew how to deal with its global nature. The developing world saw it coming, but couldn’t believe it because advanced countries were supposed to know what they were doing.
In early 2002, the Monterrey Consensus on the Millennium Development Goals (MDGs) reflected the first time international organizations developed an agenda together which, however, has not been implemented: there has been no momentum for global change. Institutional cooperation is needed outside the usual players: according to the Encyclical of Benedict XVI “Caritas in veritate,” the defence of multilateralism goes hand-in-hand with the realization that structural insecurity generates anti-productive attitudes wasteful of human resources. Similarly, culture-based multilateralism, in which mutual accountability is inseparable from peer pressure, should find coalitions where peer pressure is for action, not for inaction.
In 2006, the eight heads of state and government of the Portuguese-speaking countries (CPLP) gathered in Bissau approved a declaration on MDGs. It emphasizes that the underlying philosophy is one of “genuine partnership for development,” based on “mutual knowledge,” an original concept which suggests governance innovation. The ministers of science, technology and higher education have since called for common sets of indicators in their fields. Participants in a workshop convened by a series of research institutes from EU and CPLP had made the same call one year earlier (the Lisbon declaration on science and technology for global development of September 30, 2008, available on the Portuguese ministry website). Other suggestions relevant to business associations in developing countries are to: 1) reinforce further the knowledge base by capacity building in science and technology, using all forms of partnership, North-South-South, regional, public/private; 2) develop technological infrastructures; and 3) stimulate more local innovation which contributes to good capacity utilization.
The international organization that sparked the “green revolution” in crop yields during the 1960s and 1970s, and which improved poverty throughout Asia, is called the Consultative Group on International Agricultural Research (CGIAR) and is housed at the World Bank. It is well known that due to a lack of support for implementation in Africa, the “green revolution” did not benefit the poor there. Symbolically, the first meeting of the Consultative Group in Africa took place in Maputo, Mozambique, in December last year and announced a major reform, to be assessed in March 2010 with the Global Forum on Agricultural Research at a stakeholders’ conference in Montpellier, France.
This will be preceded by a gathering of representatives of 36 universities and institutes in 19 European countries who founded an association and a European economic interest grouping looking at the whole world called AGRINATURA. Hopefully, it will be easier to avoid compartmentalization and “group think” in multi-stakeholder initiatives, including non-governmental organizations. As for culture-based multilateralism, its visibility remains low, in part because of the language barrier. Mentioning concrete governance innovations in EU and CPLP at CIGI09 should help sustain their implementation and broaden their appeal.
The current financial crisis is “a movie we’ve seen before,” said Ume Lele, referring to the Asian Crisis in the late 1990s. The difference this time around is that the consequences of today's financial crisis are worldwide. According to Ms. Lele, agriculture tends to be a safety net for workers who lose jobs in other sectors, for example, those earning less than $2 a day who are not even the poorest, as the Asian Crisis had demonstrated. The same phenomenon is at work throughout the developing world today to a varying degree. Fortunately, while economic growth has declined following the global financial crisis in India and China, the decrease has not been as precipitous as in OECD countries. Nevertheless, with the commodity boom followed by a global recession, a decrease in global demand for commodities and reduced prices have had a negative impact on economic growth and agricultural incentives in developing countries , particularly those countries in which agriculture dominates in GNP and exports.
In addition to the impacts of the recent global financial crisis on poverty and food security, secular trends superimposed by potentially serious structural changes in recent years are a cause for concern. During the course of economic modernization the role of agriculture declines and that of the manufacturing sector increases. The financial crises tend to stall this process of modernization, and a secular decline in agriculture. On the contrary crisis precipitate a shift of labour back to agriculture from the non-agricultural sector. Other recent trends include the slowing down in agricultural productivity growth in Asia and stagnation in agricultural productivity in Africa, a growing water crisis, declining farm size and the increased role of biofuels, which are competing for land and other resources away from food production. The growing role of biofuels is a particularly serious concern since demand for energy tends to enjoy high and even growing income elasticity with consumption of energy growing with economic development , in sharp contrast to the income elasticity of demand for food which tends to decline with increase in income. Increased demand for biofuels therefore has the potential to adversely affect food supply and access to food particularly of the poor. The lack of progress on the Doha Round particularly affects developing countries’ agricultural sectors. Accelerated globalization, while positive for growth, is also manifested in the rapid growth in demand for forest products, for example, from China, for example, for Brazilian products. It contributes to climate change since deforestation contributes 20 percent of the greenhouse gas emissions.
According to Ms. Lele, investment in agricultural research is necessary but is not enough; what is required is substantially greater investment in the agricultural and the rural sectors of developing countries as a whole. Whereas emergency aid has been increasing total long-term official development assistance for the entire world is merely $107 billion of which only 38 percent goes in support of long term development. The rest is debt forgiveness or emergency assistance. Moreover, international organizations are not working well together. What is also required, she said, are safety nets for the poor with a focus on greater consumer protection for the poor; ; increased investment in IT, health, education and physical infrastructure; securing of property rights; and investment in institutional and human capacity. Aid should be harmonized around country strategies using a non-ideological approach. There should also be much more south-south exchange of experience involving the G20, she concluded.