CIGI Chair and Professor, Balsillie School of International Affairs, University of Waterloo
Food security is on the agenda as the G8 leaders meet this week in L’Aquila, Italy. It is an appropriate moment to be addressing this important issue, as the FAO recently announced that the number of undernourished people on this planet has now surpassed 1 billion. This is an historic high for the number of people experiencing severe hunger.
It is extremely troubling that global hunger is on the rise despite the fact that food prices on international markets are lower today than they were last year at this time, when the G8 leaders last met. When looking at the factors contributing to this situation, it becomes clear there are multiple complex causes to the current food situation, many of which have sources in rich countries. These problems have been exacerbated by the current economic crisis as it spreads from North to South.
- Food prices are still relatively high in developing countries, as reported recently by the FAO, despite the drop in prices on global markets. Short term supply bottlenecks in poor countries, exacerbated by a lack of financing for imports due to the global credit crunch, have contributed to these higher local prices.
- Food price volatility on global markets remains a threat. There is growing recognition that financial speculation on agricultural commodity markets in industrialized countries – driven by global financial market volatility in recent years – played a key role in bidding up prices so quickly in 2008, as noted in a recent US Senate report on the topic.
- The current economic crisis is pushing more people into poverty. This trend is confirmed by a recent UN progress report on the Millennium Development Goals, which indicates that 55-90 million more people will be living in extreme poverty in 2009 than was anticipated. Poor people in developing countries spend on average some 50-80 percent of their income spent on food. If their incomes fall, so does their access to food.
- The economic crisis has also meant a general contraction in the availability of credit within countries, which affects developing world farmers’ ability to invest in the expansion of agricultural output.
- There has been a serious decline in both government and multilateral agricultural investment over the past 30 years in developing countries. The share of agriculture in Overseas Development Assistance (ODA) declined from 18 percent in the 1979 to just 3.5 percent in recent years. Even the World Bank admits that its support for agriculture dropped from over 30% of its lending in 1980 to just 12 percent in 2007. The ability to increase agricultural investment is threatened by cuts to both domestic budgets and foreign aid in the wake of the current economic crisis.
- Food import dependence has been on the rise in developing countries in recent decades, particularly in the least developed countries. This problem is outlined in a recent UNCTAD report on the impact of the food crisis on Africa. The report points out that years of agricultural trade protectionism by rich industrialized nations – which led to low world food prices for most of the past 30 years – contributed to food import dependence and vulnerability to food price volatility in the world’s poorest countries.
- Food aid is woefully underfunded and lacks flexibility. Although donor countries pledged additional food aid funds at last year’s G8 Summit, the level of food aid commitments in 2009 is down as the economic crisis takes its toll on aid budgets. The WFP recently announced that it has raised less than one quarter of its US $6.4 million budget for 2009. In addition to funding shortfalls, much of the food aid available is inflexible, making it highly inefficient as an aid resource. Although most other major donors have untied their food aid, the largest donor of international food aid, the US, continues to tie most of its food aid to US-produced grain. Tied food aid results in long delays and high transportation costs, meaning that fewer hungry people can be fed than would be the case if the same amount were spent locally, within developing countries, to source the food. The US Government Accountability Office has published a new report on the idea of local and regional procurement (LRP) of food aid in developing countries, highlighting the efficiency gains of this practice. Yet the 2008 US Farm Bill only approved a small pilot project for LRP while continuing to tie virtually all of its food aid.
Given the enormity of the factors contributing to global food insecurity today, it is important that the G8 Leaders come to an agreement to address these problems in a meaningful way. The first ever G8 Agriculture Ministers’ meeting back in April of this year was largely viewed as a failure. Beyond agreeing that the food security situation is grim, not much was accomplished in terms of agreement on the way forward.
There is no silver bullet solution to global food insecurity. The problem is enormously complex. In the midst of trying to address the situation, the G8 leaders must not forget that the global economic crisis, which originated within their own territories, is a major exacerbating factor. Rather than proposing a single solution, they must approach the problem on multiple fronts and recognize that their own economic policies – both now and in the past – have enormous relevance for determining the way forward.
Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.