The food price crisis: another 'lost decade' for development?

Monday, June 02, 2008 11:38 AM by Simon Maxwell

The FAO crisis summit on food has now finished - Simon Maxwell has written a further blog with his perspective on how successful it has been in responding to the food price crisis. 

As world leaders pack their bags for a crisis summit on food in Rome next week, the news is of food prices beginning to fall, and of large donor pledges to cover the cost of emergency needs. So, that's all right, then. Or is it?

Actually, no. The Food and Agriculture Organisation summit is a vital step in a process that will develop through a series of events in 2008, including the G8 in Hokkaido in July, and the UN Call to Action on the Millennium Development Goals, in New York in September. At this stage, the Rome summit must deliver four things.

First, a strong message that prices have begun to ease but that the food crisis has not gone away. This remains the most serious threat to nutritional welfare and the most serious reverse to poverty reduction since the structural adjustment crises of the 1980s. The 1980s were dubbed the "lost decade" in development. The 2000s are now at risk of an identical tag.

It's true that prices have fallen back a little from the peaks reached in February. Wheat is 40% down, soya is down as well, and maize and rice have at least stopped rising. Record plantings and better climatic conditions are driving futures prices down from the peak. However, prices are still likely to remain well above past normal levels. The latest 10-year projections from FAO and the OECD show wheat, rice, maize and oilseeds all at levels higher than the average for 2005-7, in some cases by a third.

Have the rises hurt? Of course - as riots in now more than 30 countries testify, and as many personal stories bear witness. Food accounts for 45% of the consumer price index in the poorest 20 countries, and for up to 80% of expenditure for the very poorest households. Both rural and urban poor must buy their food and are especially hard hit. Hardship has increased as a result of food price rises, and gains in reducing poverty have been reversed - the World Bank president, Robert Zoellick, estimates that poverty reduction efforts have been set back seven years.
That's why the second message from the Rome summit must be that the poor will be protected from the worst impact of food price rises. The immediate threat to the pipeline of humanitarian aid has been avoided by the success of the World Food Programme's appeal for additional funding, in particular a grant of $500 million by Saudi Arabia. Many other donors have committed to emergency aid, including governments like Canada and the US, and large financial institutions like the Asian and Latin American Development Banks, each of which has pledged $500m, though much of this as loans. In an important move, donors have recognised that the aid needed is not just for humanitarian relief, but also for more general safety nets. They have also noticed that cash is more useful than food, in most cases, to pay for food imports or cover the cost of safety-net programmes. The Asian Development Bank, for example, is providing budget support, which will also help to keep inflation under control.

How much more is needed? That's the $64,000 question. The latest figures from FAO show that 22 countries are especially vulnerable, and that low-income food deficit countries as a group are likely to spend an additional $20bn on food imports during the coming year. Covering that would mean increasing aid by 20% at a stroke, at a time when many large aid donors are failing to meet the pledges they made at Gleneagles to increase aid. That deficit alone, needed to meet the health and education targets of the millennium development goals, currently stands at $30bn a year.

Meeting import bills is only a start, however. Social protection bills are soaring, and the cost of long-term investment in agriculture has just begun to register. There will be much talk in Rome of food subsidies and cash handouts, of fertiliser packages and irrigation projects. Make no mistake: the food crisis is not intractable but managing it will not be cheap. And we must guard against robbing Peter to pay Paul. Pledges are always welcome, but this should not mean less in the pot for other pressing areas, such as primary schools or malaria nets,

This suggests a third message from Rome: recognition that this is a global problem we all share and must all help to solve. The rise in prices has many causes, from drought in Australia to neglect of investment in agriculture. Key drivers are the rise in consumption, as diet improves in countries like China and India, and the use of grain for biofuels. It is estimated that a moratorium on biofuels would cut 20% of food prices immediately. Of course, poor people in poor countries need larger and more diverse diets, so the solution is not to undermine progress there. Instead, a package of measures will be needed, covering the short-term social protection needs of the poorest and the longer-term investments to sustain food production. Rich and poor countries, governments and businesses, will have to work together. A good model is the combined effort to create the green revolution in the 1970s: an alliance of foundations, private funding, aid donors and governments. The food price crisis represents a global risk and needs to be treated as such. Not for nothing did Norman Borlaug, the father of the green revolution, win the Nobel prize for peace.

Finally, the Rome summit must deliver a roadmap for international action, leading through the G8 and the MDG summit, and beyond. The UN will be in the spotlight next week. Will it act "as one", to use the current jargon, or will the agencies engage in an all too familiar battle for leadership and resources? As Gordon Brown has rightly observed, the international system created at the end of the second world war is hardly fit for purpose in a 21st-century world of new and unexpected challenges. The food crisis of 2008 offers an opportunity to accelerate that change.

This blog was originally published on Guardian Unlimited Comment is Free on 30th May 2008:  view the Guardian blog and comments.