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Manufacturing A Food Crisis

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  • Shaji John K
    Manufacturing A Food Crisis By Walden Bello June 2, 2008 edition of The Nation May 15, 2008 http://www.thenation.com/doc/20080602/bello When tens of thousands
    Message 1 of 1 , Jun 2, 2008
      Manufacturing A Food Crisis
      By Walden Bello
      June 2, 2008 edition of The Nation
      May 15, 2008

      When tens of thousands of people staged demonstrations
      in Mexico last year to protest a 60 percent increase in
      the price of tortillas, many analysts pointed to biofuel
      as the culprit. Because of US government subsidies,
      American farmers were devoting more and more acreage to
      corn for ethanol than for food, which sparked a steep
      rise in corn prices. The diversion of corn from
      tortillas to biofuel was certainly one cause of
      skyrocketing prices, though speculation on biofuel
      demand by transnational middlemen may have played a
      bigger role. However, an intriguing question escaped
      many observers: how on earth did Mexicans, who live in
      the land where corn was domesticated, become dependent
      on US imports in the first place?

      The Mexican food crisis cannot be fully understood
      without taking into account the fact that in the years
      preceding the tortilla crisis, the homeland of corn had
      been converted to a corn-importing economy by "free
      market" policies promoted by the International Monetary
      Fund (IMF), the World Bank and Washington. The process
      began with the early 1980s debt crisis. One of the two
      largest developing-country debtors, Mexico was forced to
      beg for money from the Bank and IMF to service its debt
      to international commercial banks. The quid pro quo for
      a multibillion-dollar bailout was what a member of the
      World Bank executive board described as "unprecedented
      thoroughgoing interventionism" designed to eliminate
      high tariffs, state regulations and government support
      institutions, which neoliberal doctrine identified as
      barriers to economic efficiency.

      Interest payments rose from 19 percent of total
      government expenditures in 1982 to 57 percent in 1988,
      while capital expenditures dropped from an already low
      19.3 percent to 4.4 percent. The contraction of
      government spending translated into the dismantling of
      state credit, government-subsidized agricultural inputs,
      price supports, state marketing boards and extension
      services. Unilateral liberalization of agricultural
      trade pushed by the IMF and World Bank also contributed
      to the destabilization of peasant producers.

      This blow to peasant agriculture was followed by an even
      larger one in 1994, when the North American Free Trade
      Agreement went into effect. Although NAFTA had a
      fifteen-year phaseout of tariff protection for
      agricultural products, including corn, highly subsidized
      US corn quickly flooded in, reducing prices by half and
      plunging the corn sector into chronic crisis. Largely as
      a result of this agreement, Mexico's status as a net
      food importer has now been firmly established.

      With the shutting down of the state marketing agency for
      corn, distribution of US corn imports and Mexican grain
      has come to be monopolized by a few transnational
      traders, like US-owned Cargill and partly US-owned
      Maseca, operating on both sides of the border. This has
      given them tremendous power to speculate on trade
      trends, so that movements in biofuel demand can be
      manipulated and magnified many times over. At the same
      time, monopoly control of domestic trade has ensured
      that a rise in international corn prices does not
      translate into significantly higher prices paid to small

      It has become increasingly difficult for Mexican corn
      farmers to avoid the fate of many of their fellow corn
      cultivators and other smallholders in sectors such as
      rice, beef, poultry and pork, who have gone under
      because of the advantages conferred by NAFTA on
      subsidized US producers. According to a 2003 Carnegie
      Endowment report, imports of US agricultural products
      threw at least 1.3 million farmers out of work--many of
      whom have since found their way to the United States.

      Prospects are not good, since the Mexican government
      continues to be controlled by neoliberals who are
      systematically dismantling the peasant support system, a
      key legacy of the Mexican Revolution. As Food First
      executive director Eric Holt-Giménez sees it, "It will
      take time and effort to recover smallholder capacity,
      and there does not appear to be any political will for
      this--to say nothing of the fact that NAFTA would have
      to be renegotiated."

      Creating a Rice Crisis in the Philippines

      That the global food crisis stems mainly from free-
      market restructuring of agriculture is clearer in the
      case of rice. Unlike corn, less than 10 percent of world
      rice production is traded. Moreover, there has been no
      diversion of rice from food consumption to biofuels. Yet
      this year alone, prices nearly tripled, from $380 a ton
      in January to more than $1,000 in April. Undoubtedly the
      inflation stems partly from speculation by wholesaler
      cartels at a time of tightening supplies. However, as
      with Mexico and corn, the big puzzle is why a number of
      formerly self-sufficient rice-consuming countries have
      become severely dependent on imports.

      The Philippines provides a grim example of how
      neoliberal economic restructuring transforms a country
      from a net food exporter to a net food importer. The
      Philippines is the world's largest importer of rice.
      Manila's desperate effort to secure supplies at any
      price has become front-page news, and pictures of
      soldiers providing security for rice distribution in
      poor communities have become emblematic of the global

      The broad contours of the Philippines story are similar
      to those of Mexico. Dictator Ferdinand Marcos was guilty
      of many crimes and misdeeds, including failure to follow
      through on land reform, but one thing he cannot be
      accused of is starving the agricultural sector. To head
      off peasant discontent, the regime provided farmers with
      subsidized fertilizer and seeds, launched credit plans
      and built rural infrastructure. When Marcos fled the
      country in 1986, there were 900,000 metric tons of rice
      in government warehouses.

      Paradoxically, the next few years under the new
      democratic dispensation saw the gutting of government
      investment capacity. As in Mexico the World Bank and
      IMF, working on behalf of international creditors,
      pressured the Corazon Aquino administration to make
      repayment of the $26 billion foreign debt a priority.
      Aquino acquiesced, though she was warned by the
      country's top economists that the "search for a recovery
      program that is consistent with a debt repayment
      schedule determined by our creditors is a futile one."
      Between 1986 and 1993 8 percent to 10 percent of GDP
      left the Philippines yearly in debt-service payments--
      roughly the same proportion as in Mexico. Interest
      payments as a percentage of expenditures rose from 7
      percent in 1980 to 28 percent in 1994; capital
      expenditures plunged from 26 percent to 16 percent. In
      short, debt servicing became the national budgetary

      Spending on agriculture fell by more than half. The
      World Bank and its local acolytes were not worried,
      however, since one purpose of the belt-tightening was to
      get the private sector to energize the countryside. But
      agricultural capacity quickly eroded. Irrigation
      stagnated, and by the end of the 1990s only 17 percent
      of the Philippines' road network was paved, compared
      with 82 percent in Thailand and 75 percent in Malaysia.
      Crop yields were generally anemic, with the average rice
      yield way below those in China, Vietnam and Thailand,
      where governments actively promoted rural production.
      The post-Marcos agrarian reform program shriveled,
      deprived of funding for support services, which had been
      the key to successful reforms in Taiwan and South Korea.
      As in Mexico Filipino peasants were confronted with
      full-scale retreat of the state as provider of
      comprehensive support--a role they had come to depend

      And the cutback in agricultural programs was followed by
      trade liberalization, with the Philippines' 1995 entry
      into the World Trade Organization having the same effect
      as Mexico's joining NAFTA. WTO membership required the
      Philippines to eliminate quotas on all agricultural
      imports except rice and allow a certain amount of each
      commodity to enter at low tariff rates. While the
      country was allowed to maintain a quota on rice imports,
      it nevertheless had to admit the equivalent of 1 to 4
      percent of domestic consumption over the next ten years.
      In fact, because of gravely weakened production
      resulting from lack of state support, the government
      imported much more than that to make up for shortfalls.
      The massive imports depressed the price of rice,
      discouraging farmers and keeping growth in production at
      a rate far below that of the country's two top
      suppliers, Thailand and Vietnam.

      The consequences of the Philippines' joining the WTO
      barreled through the rest of its agriculture like a
      super-typhoon. Swamped by cheap corn imports--much of it
      subsidized US grain--farmers reduced land devoted to
      corn from 3.1 million hectares in 1993 to 2.5 million in
      2000. Massive importation of chicken parts nearly killed
      that industry, while surges in imports destabilized the
      poultry, hog and vegetable industries.

      During the 1994 campaign to ratify WTO membership,
      government economists, coached by their World Bank
      handlers, promised that losses in corn and other
      traditional crops would be more than compensated for by
      the new export industry of "high-value-added" crops like
      cut flowers, asparagus and broccoli. Little of this
      materialized. Nor did many of the 500,000 agricultural
      jobs that were supposed to be created yearly by the
      magic of the market; instead, agricultural employment
      dropped from 11.2 million in 1994 to 10.8 million in

      The one-two punch of IMF-imposed adjustment and WTO-
      imposed trade liberalization swiftly transformed a
      largely self-sufficient agricultural economy into an
      import-dependent one as it steadily marginalized
      farmers. It was a wrenching process, the pain of which
      was captured by a Filipino government negotiator during
      a WTO session in Geneva. "Our small producers," he said,
      "are being slaughtered by the gross unfairness of the
      international trading environment."

      The Great Transformation

      The experience of Mexico and the Philippines was
      paralleled in one country after another subjected to the
      ministrations of the IMF and the WTO. A study of
      fourteen countries by the UN's Food and Agricultural
      Organization found that the levels of food imports in
      1995-98 exceeded those in 1990-94. This was not
      surprising, since one of the main goals of the WTO's
      Agreement on Agriculture was to open up markets in
      developing countries so they could absorb surplus
      production in the North. As then-US Agriculture
      Secretary John Block put it in 1986, "The idea that
      developing countries should feed themselves is an
      anachronism from a bygone era. They could better ensure
      their food security by relying on US agricultural
      products, which are available in most cases at lower

      What Block did not say was that the lower cost of US
      products stemmed from subsidies, which became more
      massive with each passing year despite the fact that the
      WTO was supposed to phase them out. From $367 billion in
      1995, the total amount of agricultural subsidies
      provided by developed-country governments rose to $388
      billion in 2004. Since the late 1990s subsidies have
      accounted for 40 percent of the value of agricultural
      production in the European Union and 25 percent in the
      United States.

      The apostles of the free market and the defenders of
      dumping may seem to be at different ends of the
      spectrum, but the policies they advocate are bringing
      about the same result: a globalized capitalist
      industrial agriculture. Developing countries are being
      integrated into a system where export-oriented
      production of meat and grain is dominated by large
      industrial farms like those run by the Thai
      multinational CP and where technology is continually
      upgraded by advances in genetic engineering from firms
      like Monsanto. And the elimination of tariff and
      nontariff barriers is facilitating a global agricultural
      supermarket of elite and middle-class consumers serviced
      by grain-trading corporations like Cargill and Archer
      Daniels Midland and transnational food retailers like
      the British-owned Tesco and the French-owned Carrefour.

      There is little room for the hundreds of millions of
      rural and urban poor in this integrated global market.
      They are confined to giant suburban favelas, where they
      contend with food prices that are often much higher than
      the supermarket prices, or to rural reservations, where
      they are trapped in marginal agricultural activities and
      increasingly vulnerable to hunger. Indeed, within the
      same country, famine in the marginalized sector
      sometimes coexists with prosperity in the globalized

      This is not simply the erosion of national food self-
      sufficiency or food security but what Africanist Deborah
      Bryceson of Oxford calls "de-peasantization"--the
      phasing out of a mode of production to make the
      countryside a more congenial site for intensive capital
      accumulation. This transformation is a traumatic one for
      hundreds of millions of people, since peasant production
      is not simply an economic activity. It is an ancient way
      of life, a culture, which is one reason displaced or
      marginalized peasants in India have taken to committing
      suicide. In the state of Andhra Pradesh, farmer suicides
      rose from 233 in 1998 to 2,600 in 2002; in Maharashtra,
      suicides more than tripled, from 1,083 in 1995 to 3,926
      in 2005. One estimate is that some 150,000 Indian
      farmers have taken their lives. Collapse of prices from
      trade liberalization and loss of control over seeds to
      biotech firms is part of a comprehensive problem, says
      global justice activist Vandana Shiva: "Under
      globalization, the farmer is losing her/his social,
      cultural, economic identity as a producer. A farmer is
      now a 'consumer' of costly seeds and costly chemicals
      sold by powerful global corporations through powerful
      landlords and money lenders locally."

      African Agriculture: From Compliance to Defiance

      De-peasantization is at an advanced state in Latin
      America and Asia. And if the World Bank has its way,
      Africa will travel in the same direction. As Bryceson
      and her colleagues correctly point out in a recent
      article, the World Development Report for 2008, which
      touches extensively on agriculture in Africa, is
      practically a blueprint for the transformation of the
      continent's peasant-based agriculture into large-scale
      commercial farming. However, as in many other places
      today, the Bank's wards are moving from sullen
      resentment to outright defiance.

      At the time of decolonization, in the 1960s, Africa was
      actually a net food exporter. Today the continent
      imports 25 percent of its food; almost every country is
      a net importer. Hunger and famine have become recurrent
      phenomena, with the past three years alone seeing food
      emergencies break out in the Horn of Africa, the Sahel,
      and Southern and Central Africa.

      Agriculture in Africa is in deep crisis, and the causes
      range from wars to bad governance, lack of agricultural
      technology and the spread of HIV/AIDS. However, as in
      Mexico and the Philippines, an important part of the
      explanation is the phasing out of government controls
      and support mechanisms under the IMF and World Bank
      structural adjustment programs imposed as the price for
      assistance in servicing external debt.

      Structural adjustment brought about declining
      investment, increased unemployment, reduced social
      spending, reduced consumption and low output. Lifting
      price controls on fertilizers while simultaneously
      cutting back on agricultural credit systems simply led
      to reduced fertilizer use, lower yields and lower
      investment. Moreover, reality refused to conform to the
      doctrinal expectation that withdrawal of the state would
      pave the way for the market to dynamize agriculture.
      Instead, the private sector, which correctly saw reduced
      state expenditures as creating more risk, failed to step
      into the breach. In country after country, the departure
      of the state "crowded out" rather than "crowded in"
      private investment. Where private traders did replace
      the state, noted an Oxfam report, "they have sometimes
      done so on highly unfavorable terms for poor farmers,"
      leaving "farmers more food insecure, and governments
      reliant on unpredictable international aid flows." The
      usually pro-private sector Economist agreed, admitting
      that "many of the private firms brought in to replace
      state researchers turned out to be rent-seeking

      The support that African governments were allowed to
      muster was channeled by the World Bank toward export
      agriculture to generate foreign exchange, which states
      needed to service debt. But, as in Ethiopia during the
      1980s famine, this led to the dedication of good land to
      export crops, with food crops forced into less suitable
      soil, thus exacerbating food insecurity. Moreover, the
      World Bank's encouragement of several economies to focus
      on the same export crops often led to overproduction,
      triggering price collapses in international markets. For
      instance, the very success of Ghana's expansion of cocoa
      production triggered a 48 percent drop in the
      international price between 1986 and 1989. In 2002-03 a
      collapse in coffee prices contributed to another food
      emergency in Ethiopia.

      As in Mexico and the Philippines, structural adjustment
      in Africa was not simply about underinvestment but state
      divestment. But there was one major difference. In
      Africa the World Bank and IMF micromanaged, making
      decisions on how fast subsidies should be phased out,
      how many civil servants had to be fired and even, as in
      the case of Malawi, how much of the country's grain
      reserve should be sold and to whom.

      Compounding the negative impact of adjustment were
      unfair EU and US trade practices. Liberalization allowed
      subsidized EU beef to drive many West African and South
      African cattle raisers to ruin. With their subsidies
      legitimized by the WTO, US growers offloaded cotton on
      world markets at 20 percent to 55 percent of production
      cost, thereby bankrupting West and Central African

      According to Oxfam, the number of sub-Saharan Africans
      living on less than a dollar a day almost doubled, to
      313 million, between 1981 and 2001--46 percent of the
      whole continent. The role of structural adjustment in
      creating poverty was hard to deny. As the World Bank's
      chief economist for Africa admitted, "We did not think
      that the human costs of these programs could be so
      great, and the economic gains would be so slow in

      In 1999 the government of Malawi initiated a program to
      give each smallholder family a starter pack of free
      fertilizers and seeds. The result was a national surplus
      of corn. What came after is a story that should be
      enshrined as a classic case study of one of the greatest
      blunders of neoliberal economics. The World Bank and
      other aid donors forced the scaling down and eventual
      scrapping of the program, arguing that the subsidy
      distorted trade. Without the free packs, output
      plummeted. In the meantime, the IMF insisted that the
      government sell off a large portion of its grain
      reserves to enable the food reserve agency to settle its
      commercial debts. The government complied. When the food
      crisis turned into a famine in 2001-02, there were
      hardly any reserves left. About 1,500 people perished.
      The IMF was unrepentant; in fact, it suspended its
      disbursements on an adjustment program on the grounds
      that "the parastatal sector will continue to pose risks
      to the successful implementation of the 2002/03 budget.
      Government interventions in the food and other
      agricultural markets... [are] crowding out more
      productive spending."

      By the time an even worse food crisis developed in 2005,
      the government had had enough of World Bank/IMF
      stupidity. A new president reintroduced the fertilizer
      subsidy, enabling 2 million households to buy it at a
      third of the retail price and seeds at a discount. The
      result: bumper harvests for two years, a million-ton
      maize surplus and the country transformed into a
      supplier of corn to Southern Africa.

      Malawi's defiance of the World Bank would probably have
      been an act of heroic but futile resistance a decade
      ago. The environment is different today, since
      structural adjustment has been discredited throughout
      Africa. Even some donor governments and NGOs that used
      to subscribe to it have distanced themselves from the
      Bank. Perhaps the motivation is to prevent their
      influence in the continent from being further eroded by
      association with a failed approach and unpopular
      institutions when Chinese aid is emerging as an
      alternative to World Bank, IMF and Western government
      aid programs.

      Food Sovereignty: An Alternative Paradigm?

      It is not only defiance from governments like Malawi and
      dissent from their erstwhile allies that are undermining
      the IMF and the World Bank. Peasant organizations around
      the world have become increasingly militant in their
      resistance to the globalization of industrial
      agriculture. Indeed, it is because of pressure from
      farmers' groups that the governments of the South have
      refused to grant wider access to their agricultural
      markets and demanded a massive slashing of US and EU
      agricultural subsidies, which brought the WTO's Doha
      Round of negotiations to a standstill.

      Farmers' groups have networked internationally; one of
      the most dynamic to emerge is Via Campesina (Peasant's
      Path). Via not only seeks to get "WTO out of
      agriculture" and opposes the paradigm of a globalized
      capitalist industrial agriculture; it also proposes an
      alternative--food sovereignty. Food sovereignty means,
      first of all, the right of a country to determine its
      production and consumption of food and the exemption of
      agriculture from global trade regimes like that of the
      WTO. It also means consolidation of a smallholder-
      centered agriculture via protection of the domestic
      market from low-priced imports; remunerative prices for
      farmers and fisherfolk; abolition of all direct and
      indirect export subsidies; and the phasing out of
      domestic subsidies that promote unsustainable
      agriculture. Via's platform also calls for an end to the
      Trade Related Intellectual Property Rights regime, or
      TRIPs, which allows corporations to patent plant seeds;
      opposes agro-technology based on genetic engineering;
      and demands land reform. In contrast to an integrated
      global monoculture, Via offers the vision of an
      international agricultural economy composed of diverse
      national agricultural economies trading with one another
      but focused primarily on domestic production.

      Once regarded as relics of the pre-industrial era,
      peasants are now leading the opposition to a capitalist
      industrial agriculture that would consign them to the
      dustbin of history. They have become what Karl Marx
      described as a politically conscious "class for itself,"
      contradicting his predictions about their demise. With
      the global food crisis, they are moving to center
      stage--and they have allies and supporters. For as
      peasants refuse to go gently into that good night and
      fight de-peasantization, developments in the twenty-
      first century are revealing the panacea of globalized
      capitalist industrial agriculture to be a nightmare.
      With environmental crises multiplying, the social
      dysfunctions of urban-industrial life piling up and
      industrialized agriculture creating greater food
      insecurity, the farmers' movement increasingly has
      relevance not only to peasants but to everyone
      threatened by the catastrophic consequences of global
      capital's vision for organizing production, community
      and life itself.

      Walden Bello

      Walden Bello is senior analyst at and former executive
      director of Focus on the Global South, a research and
      advocacy institute based at Chulalongkorn University in
      Bangkok. He is the author or co-author of many books on
      politics and economic issues in the Philippines and
      Asia, including, most recently, Deglobalization (Zed),
      and recipient of the 2003 Right Livelihood Award, also
      known as the "Alternative Nobel Prize." In March he was
      named Outstanding Public Scholar for 2008 by the
      International Studies Association.

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