Wednesday, May 21, 2008

Food Crisis: Root Causes and the Farm Bill

The food crisis is, if you will pardon the pun, providing "fertile ground" for development articles. I would like to take the opportunity to share three excellent, recent articles on the issue, and how it relates to development as a whole. Each article helps to draw out how and why market imperfections and the international economic structure have "sown the seeds" of this crisis and are now bearing fruit (or a lack thereof, for most of the world).

(1) Walden Bello, "Manufacturing a Food Crisis," The Nation, May 15, 2008.

(2) K. Subramanian, "The Fund, Fed, and Finance Feed the Famine," The Hindu Business Line, May 16, 2008.

Both of these articles are excellent. Bello's article focuses on the role of the IMF and WTO in setting the stage for the current situation, while Subramanian's article provides a more general economic overview of how current speculation builds on the groundwork provided by Bello's piece. I should note that Walden Bello is one of the most respected scholars and public activists in development today - a native and professor from the Philippines and former director of Focus on the Global South.

(3) Martin Khor, "New US Farm Bill Will Anger the World," Malaysia Star, May 19, 2008.

One would think that we'd started to learn from our mistakes - especially given that even World Bank President Robert Zoellick is calling for reduced US agricultural subsidies and increased market access for Southern countries. Apparently not, as Khor, a Malaysian journalist, economist, WTO expert, and director of the Third World Network, explains.

Last week, both chambers of Congress passed the 2008 Farm Bill with more than a 2/3 majority, enough to override the President's threatened veto. For once, Khor and I agree with something that President Bush is doing - and, when he finally acts intelligently, the US Congress decides to be stupid en masse. The bill has two parts - one that is good, and one that is bad. First, it proposes $200 billion in domestic food aid. That's OK, and probably a good idea, since it helps those having trouble with grocery bills. But the remaining $89 billion in the bill is an expansion of US farm subsidies - without a cap on earnings. President Bush's main problem: it undermines out diplomacy and efforts in the WTO and doesn't restrict the benefits to smaller farmers. A quote from the article: "Bush had proposed limiting farm subsidies to those earning less than US$200,000 (RM643,180) a year. However, under the Farm Bill, even millionaires can receive the handouts."

Given the massive food prices and profits being earned by corporate agriculture in the inflated speculative market - do they really deserve the subsidies? Also, there's the fact that subsidies lower food prices in times of short supply, allowing farmers to lower prices in tight times for their business - the problem right now isn't that of a supply crunch, its one of manic-period market speculation causing a largely artificial price spike. Subsidies under those conditions will have minimal impact on actual market conditions, because they don't address the root cause of the price spike. So, we have $90 billion dollars of useless spending that only serves to prop up US corporate agriculture and anger the world even more.

The one time President Bush is actually thinking diplomatically, Congress goes behind his back and listens to the agriculture lobby. Well done, ladies and gentlemen.