From: The Nation, May 16, 2008
MANUFACTURING A FOOD CRISIS
By Walden Bello
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 producers.
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-Gimenez 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 crisis.
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 priority.
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 on.
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 2001.
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 cost."
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 sector.
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 monopolists."
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 farmers.
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 coming."
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 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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