Analysis

The Tale of Two Crises

Economic Crisis Complicates Food Crisis

The number of poor people who do not have access to food will dramatically increase, (Reuters photo)

In reality, both of these crises are linked to one another and having a common origin.

The financial and the food crises have arisen because of the neo-liberal policies that have been adopted by almost every country across the globe.

Neo-liberal policies have created an environment where financial speculations could thrive, and they have created a food crisis which initially erupted three decades ago, but has been recently intensified because of the global financial crisis.

The Food Crisis’ Origin

Back in the 1970s, the United States, along with the International Monetary Fund (IMF) and World Bank, unleashed neo-liberal economic policies which aimed at promoting the interests of corporations.

In the agricultural sector, these policies have employed various means in order to help a small number of corporations gain virtual monopoly over food industry.

Most notably, the United States and IMF used the debt stranglehold that they had over most governments, especially in developing countries, to force them to reduce their agricultural tariffs, thereby creating new export markets for transnational companies.

As part of these policies, almost all governments were required to reduce subsidies to small-scale farmers and end any assistance that they gave to consumers to buy food.

The United States and IMF also forced most countries to open their economies to foreign investors in a process known as financial liberalisation through which multinational agri-businesses moved to set up operations throughout the world. 

However, these corporations tended not to grow food for local consumption; rather, they grew food for the lucrative markets in the United States and Europe.

Indeed, transnational food corporations came to control almost all of global food production, distribution, and sales. For example, three companies control 90 percent of the world’s grain supply.

These companies set the prices of food through trade on commodities exchanges and they can, therefore, drive food prices up and down depending on their interests.

The Consequences on the Developing World

While corporations make trillions out of the trade in food and can export food anywhere, it is the people, especially in developing countries, who suffer.

Most small-scale farmers in the developing world— who no longer received subsidies from their governments— have gone bankrupt, because they cannot compete with multinational agri-businesses.

As a result, unfair competition has led to massive unemployment and forced millions of people to move from the rural areas to the cities.

With so many people leaving the land, domestic agriculture in most developing countries has collapsed, making most countries in the developing world unable to meet their own food needs.
 
In fact, Africa imports 25 percent of its food from the United States and the European Union, which of course benefits multinational food companies, making over 800 million people not afford buying food starting from 2006.

As part of the pro-corporate policies that have been implemented across the globe since 1970s, financial markets everywhere were deregulated to create new money-making opportunities for the rich.

As part of deregulation, corporations were allowed to begin speculating on currencies, bonds, and shares anywhere in the world.

As a result, corporations borrowed massive amounts of money to speculate on anything and everything, including commodities, like food.

Similarly, corporations that were involved in agriculture began speculating on shares and even debts, which led to instability in the financial system and increasing frequency of economic crises.

When the sub-prime crisis hit, speculators scrambled for safe havens and chose to invest in commodities, such as food.

Consequently, over a period of less than two years, and up until late 2008, food prices shot up.

Corporations and speculators profiteered from these higher prices, while more and more people faced the prospect of starvation.

Indeed, due to food price hikes— accompanied with speculators moving their money into commodities— an extra 100 million people lost their access to food and joined the other 800 million people who were already suffering from severe malnutrition.

Recently, as the global recession has set in, food prices have come down, but they are still far higher than they were prior to the sub-prime crisis.

Thus, the food and financial crises were directly linked, and both ultimately were resulted from the pro-corporate policies that have been imposed on the world since the 1970s.

Furtherer Starving Poor

Major states in the world, such as the United States, have spent trillions trying to save banks that are currently collapsing because of the financial crisis.

The brutal reality is that politicians have chosen to use this money to help rich speculators rather than trying to help the poor and ensure them enough food.

 Bail-out policies which aim at saving financial markets, banks, and corporations will further entrench the food crisis.

Nothing highlights this fact better than harsh conditions that IMF imposed on countries, such as Turkey, Iceland and Hungary, who have loaned from the IMF in order to save their economies from the financial crisis.

As part of these conditions, these countries have agreed to further liberalise their economies and open up their markets to increased agricultural imports.

This is bound to drive many small-scale farmers out of business, because they will have to compete with giant agri-corporations, which will further negatively impact these countries’ food security.
 
Due to the global financial crisis, banks have also become very wary of lending money to small-scale farmers— while money for food aid has almost dried up— leaving increasing numbers of small-scale farmers bankrupt and more people vulnerable to food insecurity.

In addition, transnational agri-corporations are using this opportunity to extend their control over the human food chain.

Indeed, since the financial and food crises, most powerful governments have been intensifying their drive for a global "free" market economy through bilateral trade agreements, and trying to revive World Trade Organization (WTO).

The aim of these initiatives is to assist corporations by enforcing further tariff reductions and opening up new markets for them.

Added to this, all "free" trade agreements, whether bi-lateral or multilateral protect the property of corporations.

This means that the land that corporations have in poorer countries cannot be redistributed without these countries facing the real prospect of economic sanctions.

Added to this, "free" trade agreements without exception protect the intellectual property rights of corporations which are being used by agri-business giants to exclusively own the right to promote GMOs (Genetically Modified Organisms).

In the agricultural sector, corporations will use these policies to extend their dominance and further entrench their control over global food prices, which will intensify the food crisis.

Structural Solutions

In Latin America, a number of states with progressive governments, such as Venezuela and Bolivia, have made genuine attempts to address the food crisis after breaking with neo-liberalism.

These countries, along with Cuba, have attempted to set up a viable regional alternative to free trade in the form of the Bolivarian Alternatives for the Americas (ALBA).

 ALBA states have created major agricultural projects producing soy beans, rice, poultry, and dairy products, which guarantees food security for ALBA member states.

 As an example, Venezuela has used these projects to provide subsidised food to millions of people, and it also redistributed 2 million hectares of land to small-scale farmers.

Recently, ALBA states launched a $100 million fund for staple foods such as maize and rice to ease the impact of the recent food price hikes on the poor.

To avoid private speculators being involved, these states agreed to establish a public food distribution network and to regulate the price of food.

ALBA and other initiatives in Venezuela could be one path to end the food crisis in the developing world, including Muslim countries.

Unfortunately, the vast majority of developing world countries, including most in the Muslim world, does not have progressive governments.

These governments rather protect the interests of corporations, through actively protecting their property, granting them tax reduction, protecting their intellectual property rights, and undermining workers’ rights by establishing punitive law.

In addition, they have reduced the subsidies that they used to provide to small-farmers, and they no longer subsidise food or regulate food prices.

In addition, most of these governments have not taken any serious steps to assist their populations during the food crisis.

Most countries will not undertake progressive land reforms or end the power that corporations have in order to set food prices, which would be part of any serious bid to resolve the food crisis; They have simply maintained neo-liberal policies.

Many governments in the developing world, such as the South African one, even work actively with corporations to promote their products, especially their GMO products.

This has enabled these companies to increase their control over the food markets in South Africa and other developing countries.

In these countries, it seems that people themselves are going to take action on a massive scale if they are going to avoid chronic food shortages and malnutrition cases.

If a better world is to be created, people shall— amongst other things— organise themselves through new non-hierarchal movements founded upon direct participatory democracy where all wealth, including the land, should be socialized.

It is only through struggle that a better world will be created where the rich do not spend trillions saving the rich while the poor suffer.

Shawn Hattingh works as a research and education officer at the International Labour Research and Information Group (ILRIG) in Cape Town. He works on the impact of neo-liberal globalisation on workers and communities, and the alternatives that are developing around the world to these policies.