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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington.
The spikes in global food prices in 2007-2008 were a wake-up call there’s something fundamentally wrong with the global food system. And it’s about to happen again:
“Commodity prices doubled in ’08, the estimated number of hungry people topped one billion and food riots spread through the developing world. A second price spike in 2010-2011, which is expected to drive the global food import bill for 2011 to an astonishing $1.3 trillion, only deepened the sense that the policies and principles guiding agricultural development and food security were deeply flawed. There is now widespread agreement that international agricultural prices will remain significantly higher than pre-crisis levels for at least the next decade, with many warning that demand will outstrip supply by 2050 unless concerted action is taken to address the underlying problems.”
Well, a new report titled Resolving the Food Crisis: Assessing Global Policy Reform Since 2007 from the Institute for Agriculture and Trade Policy and Tufts University Global Development and Environment Institute offers some answers to these questions. And with me today are the report’s authors. Timothy A. Wise is a research and policy director at the Global Development and Environment Institute. And Sophia Murphy is a senior adviser at the Institute for Agriculture and Trade Policy. Thank you both for joining us.
TIMOTHY A. WISE, GLOBAL DEVELOPMENT AND ENVIRONMENT INSTITUTE: Good to be here, Paul.
Please help us make real news!
JAY: So, Tim, let me start with you. First, give us a sort of overview of what you found in your report.
WISE: Our main finding was that the fundamental underlying causes of the crisis have yet to be addressed, that some of the urgency went out of that initial surge in interest, and that in fact there areâ€”the underlying causes remain. We sit poised on the verge of what could well be yet another food price spike that sends millions more into poverty and hunger.
JAY: In fact, as we talked about in an earlier interview, while there was a lot of rhetoric leading into the recent G-20 meetings about addressing food security, not a heck of a lot happened, nor the follow-up of WTO, right, and not much really came out of that either. Sophia, so talk a little bit about your study, then. It’s a very comprehensive and detailed study, and we can’t get into it all now, but youâ€”there were three main issues you think needed to be addressed whenâ€”as Tim talks about, underlying issues. So what are they?
SOPHIA MURPHY, INSTITUTE FOR AGRICULTURE AND TRADE POLICY: Well, a big one is around the use of biofuels, which leads into questions about how we use the resources we have. And I think that forâ€”especially for the G-20 governments, they still shy away from acknowledging that there might be limits to growth, if you like. And that’sâ€”while they’ve been happy to put a lot of money and energy into production and increasing the output, they haven’t been willing to look at how we use food, where food gets wasted, and how the transformation of food into biofuels in particular has created a very substantial spike in demand that had an immediate effect on price and which continues to pose a lot of challenges. So that would be a first.
The second I would say is around financial speculation and the fact that by not separating anymore the way the insurance and finance and commodity futures markets work [incompr.] vast increase in the amount of money coming into commodities markets and failure to regulate it, which the Dodd-Frank legislation in the States last year set out to try to do but didn’t really succeed in doing.
And the third thing would be landgrabs, where you have a huge new interest by investors, and also by some governments that are big net food importers, to secure their food by actually growing it and shipping it straight to their countries where they are, and therefore creating a lot of interest, particularly in Africa, where there’s a lot of fertile land and a lot of people without a lot of political power to hold on to that land, and so a big pressure to itake over large areas for production for export or to hold as speculation. So there’s a second use for the land, which is just to buy it and wait till the price goes up.
JAY: Right. Tim, well, let’s dig into these three main areas to start with. And why don’t we work backwards, start with landgrab? Give us some examples of what you mean by landgrab. And then, what kind of policy are you proposing to deal with it?
WISE: Well, the landgrab problem has come to urgent attention because of huge and largely unregulated purchases and leases of agricultural land, as Sophia pointed out. The scale of this is just phenomenal. I mean, you’re talking aboutâ€”I mean, a study by the Land Matrix Partnership estimated that since 2001, 227 million hectares of land, 227 million hectares had been leased by, really, sovereign wealth funds, as Sophia pointed out, in countries that are resource-poor and want to guarantee their future food access, or by speculators who see land as a valuable commodity that will increase in value over time and that it’s worth holding on to. It’s sold as a form of agricultural development.
But in fact the kind of agricultural development even where you get agriculture being started on that land is problematic, and the people who are on it (and there are people on a lot of that land with precarious tenure rights) get thrown off. So there are international discussions going on at this point, from the World Bank on down to the FAO, and they recognize that this is a huge problem. They’re calling for responsible agricultural investment and codes for such investment. But until those are in place and until there’s a regulatory framework that can really restrict this, there needs to be a moratorium on these kinds of measures. Governments need to be empowered to put moratoria on the transfer of land, their agricultural land, to foreigners and to investors like that.
JAY: Under WTO rules, can a sovereign nation actually stop a foreign country coming in, or company, corporation, buying up its land?
WISE: There have been a number of cases where governments have actually already put some restrictions on these. A moratorium while regulations get developed, I think, is notâ€”I’m not sure. Sophia may have more information than I do, but I don’t think the WTO is the main obstacle to that kind of a restriction.
JAY: Right. I mean, I know this is happening in Africa. It’s also happening in Canada. There’s large corporate buy-ups of wheat fields going on. Sophia, so what bars the way? Or is there any motivation? Do you see any sign that some of these governments want to stop this from happening?
MURPHY: Well, I think there are. As Tim said, there are governments that have moved to do something. A lot depends on the politics. So there areâ€”where there is an accountable government in place, there has been a better response than where that accountability from the government is not so well developed.
I think that in countries like Canada and Australia, part of it is invisible to most people. Those are countries where there’s huge amounts of farmland, over 90 percent, even 95 percent of the population is urban, and no one really sees those resources. The whole decline of a rural population has happened out of sight, if you like. And I think it takes a while to generate a response there. And also, you know, in those countries, people are used to thinking of land as an investment asset.
I think in the countries in Africa, the land is everything. It’s all the people have. It’s often communally held. There are noâ€”there’s no one to go and buy the land from, exactly. The land is held by a village or by different kinds of communities, and it’s much more difficult to establish title. But it’s also much more difficult politically, once the community is mobilized, to take the land away. They have a different relationship with it.
So I think what there is right now is a free-for-all. The WTO has very little regulation in this area. There’s very little by way of framework or, you know, blueprint or guidelines. The negotiations at the UN are trying to get voluntary guidelines together. It’ll be very weak, but it will at least allow countries that are interested to see what kinds of questions they want to ask, what models are out there to strengthen the conditions of the investment agreements. So there’s definitely things to be done. But right now, compared to the scale of the grabs, nothing is happening.
JAY: Tim, so all this has to do with concentration of ownership, and that has a lot to do with price volatility. You said at the beginning of the interview we could be looking at another massive spike in 2010-2011. Why do you say that?
WISE: Well, I think one of the disturbing things that we found here is that despite all of the genuine activity, there was a lot of concern and effort put in internationally in all these institutions and beyond the institutions that we looked at. We looked at five institutions in detail to see how they’ve responded. In spite of all of that, if you look closely, the two main things driving food prices higher at an underlying level are biofuels expansion, ethanol expansion in particular. And the price spikes are coming from widespread speculation and volatility, so commodities as an asset class. Neither of those has been regulated, despite some efforts to do so through the Dodd-Frank Act, through European regulations. And so they haven’t been re-regulated to a point that one could guarantee against another flood of speculative money coming into commodities and driving prices up. And biofuels remains. Biofuels are expanding as we speak, dependent at this point on government subsidies that support them in key countries like the United States, and also on the high price of oil’s making biofuels a strong investment.
JAY: What do you want seen done on biofuels? What kind of legislation do you think needs to be passed?
WISE: Well, I think the most obvious legislative changes, regulatory changes that could happen would be if the main developed countries that are providing subsidies and other incentives for biofuel expansion remove those. That would decrease the pressure and the incentives to convert land and crops to biofuels. That said, if the price of oil remains high, biofuels will remain competitive, and I think it’s an open question whether the food versus fuel problem will be solved byâ€”.
JAY: Well, does it need more than just lack of subsidies? Does it need some form of regulation? Or does itâ€”that there needs to be some intervention saying, you know, not so much land can be put towards biofuels? I mean, is there anything short of that going to be effective?
WISE: Well, thereâ€”it may well be that that’s true. It’sâ€”I think at this point the first stepâ€”and it’s a relatively straightforward first step, from a policy perspectiveâ€”is to say, whoa, this is having an impact on the underlying prices of foods. It’s driving them up to unaffordable levels. And government policies that provide incentives for that expansion need to be reduced and eliminated. That would really be a first step. I think then we’d have to assess where we are, depending on the price of oil, on the competitiveness of the other biofuels, and the evolution of the biofuels market.
JAY: Sophia, it seems to me if you don’t take on these big commodity traders who are making more money than any of the tech or telecommunications companiesâ€”.
MURPHY: It is a huge and perennial problem. They have been powerful for long time. You know, Cargill’s been pretty big in grain for 150 years, coming up to 200 years. I think that, well, definitely the deregulation of the commodity markets had a big impact, and the banks both got into commodity trade, and the commodity traders got into hedge funds and investment portfolios that look a lot more like banking.
And at the moment, the grain companies continue to be allowed to basically do insider trading, on the grounds that they’re hedging their risk as traders of physical commodity. And they argue that there are, you know, glass walls between their investment wings and their trading business, which raises a lot of eyebrows, honestly. It’s difficult to see how you could keep those business clean and entirely separate.
So there’s been a big kind of wash, where the banks look more like traders and the traders look more like banks. And a lot of the traders’ advantages, I guess, or a lot of what was considered normal practice for traders, I think, needs to be looked at really hard now that they are allowed to do what bankers used to do as well.
I don’t see any effort, or a don’t seeâ€”I see effort to stop that. It was clear [incompr.] Dodd-Frank that Cargill and companies like them had many, many meetings with the federal regulators and were clearly very concerned to see that the outcome not limit their ability to do what they were doing to make money, and they more or less succeeded. So I guess the pressure or the need for pressure remains to bring that regulation in.
You could do things in the U.S. that would regulate the commodity markets, and wherever the companies were based, it would affect them, because they have to trade on the Minneapolis, Chicago, New York exchanges floors. That’s where most of the grains are traded, some in France. And, again, the EU has just begun to think about this issue. But you canâ€”it doesn’t matter so much where the companies are headquartered in this case; what matters is where the commodity markets are regulated from, and with London, Paris, and especially D.C., you would be a long way forward.
JAY: I guess the problem, Tim, is it’s precisely is the political problem in the U.S. All the trading’s more or less coming through the U.S. On the other hand, they couldn’t get even limited position limits passed at the futures trading commission.
WISE: Right. It’sâ€”the reforms have been very limited. It’sâ€”they’re not unimportant, but they’reâ€”but I know a few people who think that they’re going to be effective at limiting the kind of financialization of the commodity markets that we’ve seen in recent years.
JAY: Right. Well, a final word. What do youâ€”if people are going to demand something, what are they going to demand?
WISE: I think what people are demanding is regulation. And I think where we’re most encouraged in looking at the global scene following these food price spikes is at the developing world. The developing world has gone from a net food exporter to a net food importer in a massive way, and the drive up in prices has created huge fiscal pressures on them, on their food import bills, and I think really strained the credibility of the wisdom that you could always just trade for your food and go to your comparative advantage, you know, if it wasn’t food. So they’ve been much more assertive.
African countries, a number of African countries have been very assertive in what they want, and even as a group. They responded to the G-20, actually, with a very decisive statement saying (and I quote this; it comes from the African Union, actually): “African countries are not looking forward to depending continuously on external supplies that will remain uncertain in prices and quantities. Actually, our ultimate and unquestionable ambition is to develop our agriculture and markets. . . . In our opinion, we must rely on our own production to meet our food needs. In fact, importation is not Africa’s goal.”
That is as clear a statement as you could want that there needs to be a change in business as usual, that there needs to be support for the kind of agriculture that developing countries, African countries do that involves smallholders, that involves women, that involves low-input systems, not high-input monoculture systems, that involves the kind of agricultural development that I think can really address the food crisis in the long run and also support poverty alleviation and development in the countries that need it most.
JAY: Thank you both for joining us.
WISE: Thank you.
MURPHY: Thank you.
JAY: And thank you for joining us on The Real News Network.
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