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Chronic poverty, high food prices and economic crises have led to a
sharp increase in the number of hungry people in the Horn of Africa,
larger than the combined populations of the United States, Canada
and the European Union. Some argue that that the sharp increase in
global hunger is not the result of poor harvest or natural
disasters. Instead, they attribute it to artificial factors such as
high food costs, growing unemployment, and declining incomes.
The food price crisis is linked to short and long-term problems, on
both the supply and the demand side. Grain inventories, trade and
investment regulations, and speculation on commodities markets all
affect this relationship.
However, the principal cause of food price inflation on world markets
remained the rapid increase in the production and use of biofuels.
The expansion of biofuel production created significant new demand
for agricultural commodities, which in turn had important knock-on
effects on the prices of other commodities. Biofuel demand increased
global commodity prices, particularly that of vegetable oils
including palm oil, soybeans, and rapeseed, and cereals such as
maize. Estimates of how big this impact projects it about 70pc.
Speculative demand had also a major effect on the run-up in prices. On
the supply side, persistent drought and other weather related
problems in some of the major producers for world markets shrank
supplies just as demand was taking off. But neither of these factors
alone was enough to trigger the crisis.
The World Bank Group (WBG) and the International Monetary Fund (IMF),
notwithstanding the powerful countries behind them, are also
responsible for the current situation of global food crisis. Before
the global food system was broken, the idea of setting a timetable
for the eradication of hunger was tabled at the UN. It was strongly
rejected by the US, the European Union, Canada, Japan, New Zealand
and Australia. Along with the rejectionists, the two institutions
were advocates of structural adjustment programmes (SAPs), which
pushed for the elimination of public engagement in agricultural
services, including the provision of extension services, marketing
and distribution systems, credit and other inputs, in the 1980s.
Their theory was that the private sector could take over.
In most developing countries, however, there was not enough profit to
be made or adequate capital in the first place to establish a viable
private alternative for the public services that had been provided
by the state.
Many governments had done a poor job of providing extension and
distribution services, keeping prices low for farmers to keep food
prices down for urban consumers. Too often, corruption and poor
marketing channels also undermined the services provided. In some
places, however, the private sector was ready and able to step in
and improve farmers’ income.
At the same time, the World Bank and IMF conditions attached to SAPs
pushed developing countries to abandon local and regional reserves
of grain. Advocates of this policy insisted that globalisation had
reduced the need for local inventories because there would always be
a supply somewhere in the world.
Nevertheless, in practice, the expansion in productive capacity in some
successful countries, driven by public investment in agriculture and
agricultural research, has outpaced growth in demand for the last 30
years. Especially in grains, oilseeds and livestock, has grown
significantly in countries where public investment remained large:
industrialised countries, and in a handful of developing countries
such as Brazil and India.
A good number of other developing countries also improved their
productive capacity through investment but this has not been the
dominant pattern overall. During the last decade, the economies of
China and India enjoyed a period of unprecedented expansion. While
they were experiencing an extraordinary period of income growth,
they were simultaneously investing in the productive capacity of
their agricultural sector.
Yet, the contribution of rising demand in these two countries in the
run up of food prices has been overplayed in much of the analysis of
the crisis.
Another significant long-term trend prevailing in the agricultural
sector is the increase in demand for livestock products and the
consequent increase in demand for feed. The globalisation of the
food distribution and delivery system is driving a convergence in
the diets of middle and upper income households in developing
countries, especially the richer countries but even in the poorest,
towards the diet of high-income countries.
The shift to increased consumption of meat is an area of special
concern, as it is directly linked to the use of land for the
production of animal feed. The increased pressure to produce meat
increases the share of agricultural land allocated to the production
of feed crops and the demand for grazing land.
Decades of low prices have discouraged investment, both public and
private, in developing countries agriculture. Low prices have also
limited the ability of the sector to generate adequate income and
economic activity for the 2.5 billion people that depend on
agriculture to survive worldwide. Depressed global prices have
undermined production and markets at every level, local through
global. For example, cheap rice exports from Japan and Thailand into
West Africa have depressed not just local rice production but also
production of traditional staple foods such as millet.
Whatever the reason may be and whoever is responsible, high price of
agricultural commodities would be good news for underdeveloped
countries such as Ethiopia. It would be a blessing for countries in
which agriculture still provides more than half of employment
opportunities. It should be good for countries whose agriculture
sector has been neglected and where potential productivity gains are
considerable. It would be good for redressing some of the inequity
between urban and rural areas that has emerged with globalisation,
by redistributing some wealth into rural economies.
Exceptionally, it would be excellent for Ethiopia as it has abundant
arable land and cheap labour with diverse climate. It is good for it
as agriculture provides more than 80pc of the employment.
To maximise the agricultural production, EPRDF is doing great by
investing in a massive infrastructure that is crucial for
agricultural development, distribution of inputs and provision of
extension services. Public investment is also tailored at
establishing marketing channels, facilitating credits, and
encouraging agro-processing.
Since natural resources are largely fixed, the level of public
investment in infrastructure is a viable indicator of how the
productive capacity of the sector is likely to evolve. Certainly,
high prices of agricultural commodities would also attract private
investment into the sector.
Regardless of the efforts, however, the challenge of the global food
crisis demands aggressive involvement of the government in the
sector. No doubt, good days are ahead. |
