troung

IMF chief warns of war over food

High prices may lead to trade imbalances

Philippine Daily Inquirer, Associated Press, Agence France-Presse
First Posted 01:01:00 04/14/2008


WASHINGTON—The head of the International Monetary Fund (IMF) has warned that if food prices remain high, there will be war and other dire consequences for people in many developing countries.

IMF managing director Dominique Strauss-Kahn added that the problem could also create trade imbalances that would impact major advanced economies, “so it is not only a humanitarian question.”

With governments in Haiti, Egypt and Bangladesh already facing social unrest because of rising food prices and shortages, Strauss-Kahn said Saturday that if the price spike continued, “thousands, hundreds of thousands of people will be starving. Children will be suffering from malnutrition, with consequences for all their lives.”

Development gains made in the past five or 10 years could be “totally destroyed,” he said, warning that social unrest could even lead to war.

“As we know, learning from the past, those kinds of questions sometimes end in war,” he said.

Thirty-seven countries currently face food crises, according to the Food and Agriculture Organization.

On Saturday, Germany’s development minister, who attended the World Bank’s Sunday meeting, called for greater regulation of the global biofuels market to prevent its expansion driving up food prices.

“It is unacceptable for the export of agrofuels to pose a threat to the supply situation of the very people already living in poverty,” Heidemarie Wieczorek-Zeul said in a statement.

She said the world needed new rules that balance goals, including climate change mitigation, food security and social development.

The development group Oxfam, a frequent IMF critic, said rich countries were largely responsible for the food crisis because they had been cutting aid to developing countries and encouraging biofuel production, which, the IMF said, was responsible for almost half the increase in the demand for food crops.

“Rich countries’ demand for biofuel is driving up food prices and is a big part of the problem,” said Elizabeth Stuart, an Oxfam policy adviser. “Meanwhile, by cutting aid levels, they are doing precious little to be part of the solution.”


Strong impact on poor

Strauss-Kahn spoke at a news conference here after a daylong meeting of the steering committee of the 185-nation IMF that dealt with the unfolding global financial crisis that had affected economies around the world.

In its communiqué, the committee noted “that a number of developing countries, especially low-income countries, face a sharp rise in food and energy prices, which have a particularly strong impact on the poorest segments of the population.”

The committee urged the IMF to work closely with its sister institution, the World Bank, and other organizations to provide developing countries with financial support and policy advice to deal with these problems.

The Washington-based IMF and World Bank were established 64 years ago to respectively regulate the global economy and provide aid to poor countries to reduce poverty.


Unusual uncertainties

The finance ministers and central bankers said their meeting took place “at a time of unusual uncertainties surrounding global and financial market prospects. It stresses that the challenges facing the world economy are global in nature, requiring strong action and close cooperation among the membership.”

They said risks to economic outlook “come from the still unfolding financial market turmoil and from the potential worsening” of housing markets and the credit crisis.

“Inflationary risks—notably from higher food, energy and commodity prices—have also risen,” the communiqué said.

The IMF said that in dealing with these risks governments must make sure inflation was kept under control, recognizing that each country’s situation was different but coherent action was necessary.

Another topic on the committee’s agenda was IMF reform. The ministers said changes such as giving developing countries with rapidly growing economies such as Brazil, India and China slightly more of a say in IMF operations “will strengthen the fund’s role in promoting financial stability and international monetary cooperation.”

Strauss-Kahn and Italy’s Tomasso Padoa-Schioppa, chair of the steering committee, welcomed the reforms to the institution’s structure agreed to by the board at the meeting. Strauss-Kahn predicted that the reforms would be approved by enough countries to meet the necessary threshold of 85 percent of the votes later this month.

“I think there is really little chance that we won’t reach the 85 percent,” he said.

Most important decisions at the IMF, such as changing voting rights, and approving calls for more capital, require an 85-percent vote, giving the United States and the European Union effective vetoes. The United States is the largest shareholder with more than 15 percent of the votes.


Multilateral institutions

Strauss-Khan said that following the reforms, the IMF needed to refocus on its mission.

“We now need to stop looking inwards to the problem of organizing the fund itself and spend more time looking outwards to the problems of the world,” he said.

The IMF called for a strong front to put the reeling world economy back on track.

“The global crisis has to be addressed with a global view and by strengthening the role of multilateral institutions,” Padoa-Schioppa, chair of the International Monetary and Financial Committee (IMFC), the IMF’s top policymaking body, told reporters in a briefing.

The IMF said in its statement that “policymakers should continue to respond to the challenge of dealing with the financial crisis and supporting activity, while making sure that inflation is kept under control.”

Unlike the last IMF meeting in October, where internal reforms were high on the agenda, this time the multilateral institution faced a full-blown, and still unfolding, financial shock that began in August amid rising defaults on US high-risk subprime home loans.


IMF expertise needed

Tasked with maintaining global financial stability, the IMF, whose own finances are strained, insists its expertise and global range make it a key player in resolving what Strauss-Kahn earlier called the worst financial crisis since the Great Depression of the 1930s.

The IMF last week warned the global economy was slowing so rapidly it could slide effectively into recession this year and next.

IMF policymakers also welcomed moves by central banks to provide liquidity support to ease strains in the credit markets. Reports from Associated Press and Agence France-Presse

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To sit down with these men and deal with them as the representatives of an enlightened and civilized people is to deride ones own dignity and to invite the disaster of their treachery - General Matthew Ridgway

Zemco

'

Not war, rebellion. The people in African states and other places can rebel and kill their US corporate taskmasters. That will free up the coffee and chocolate plantations so they can be reverted back to their original use of producing food crops like maize and wheat.

gunnut

That worked real well in Zimbabwe.

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"Only Nixon can go to China." -- Old Vulcan proverb.

Dreadnought

Yeah, And killing their American "taskmasters" (guessing their are only Americans profitting through businessses in Africa)so you call will do what for them besides make them appear criminals. Maybe the U.S. and their missions leave Africa altoghether so that more starvation and disease and HIV can become even more widespread

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Fortitude.....The strength to persist...The courage to endure.

Dreadnought

Some words for thought before you kill all the American "Taskmasters"

According to Carol Adelman, who was one of the top officials in the American aid effort, the measure used by many in the global community to gauge a country's generosity only counts government foreign aid "and the United States has for many centuries given a lot of private aid overseas".


She calculates that US businesses give $2.8bn every year; American charities give $6.6bn; the country's colleges give scholarships to foreign students worth $1.3bn.

And this last way of helping, runs the argument, is particularly effective on the old premise that the best way to cure hunger is not to give food, but to teach people how to grow it.

It's Dr Adelman's contention, moreover, that this aid is much more effective than government aid which may get skimmed by bureaucrats.

And that is NOT from an American newspaper.

Lars

Doesn't matter what you do in Haiti, the place is going down the tubes. The soil is shot.

Zemco

With more than 100 developing nations, $2.8 Billion is about $28 Million per country, and a paltry amount compared to the profits extracted. It's also a little disingenuous since much of that money is used for infrastructure improvements to benefit the corporations, not the people.

Those countries were net exporters of food, until foreign corporations, mostly US, British and French, took over the land and converted it to non-food agricultural plantations, like sugar cane, chocolate and the recent craze the last 10 years being coffee and tea. The corporations export the commodities and the profits, leaving the government with a paltry 8%-12% in royalties, and with reduced revenues, they're forced to borrow money from the IMF to develop industry under western tutelage for non-existent markets leaving the countries with no revenues.

You can certainly see why everyone is running to the Chinese, who are much more generous with the royalties, and invest significantly more money than the token $28 Million from US businesses.

The plantations dislocate a lot of workers because of the technology used, and the flock to the cities were there's no jobs, except being a rebel.

I wouldn't want to be hanging on to any stock in Starsucks.

ameer

Like I just said in another thread, it's going to eventually reach a breaking point with lots of death, unfortunately. Prepare for more war and famine in Africa. Western aid can only hold this off for so long, I hate to say it but the longer they try holding it off, the worse it will get it. I wish people would understand they can't just keep having kids and start using condoms.

bolo121

sadly in the end it all points to this simple fact. There are just too many people in the world. Improved production can only do so much, in the end demand will outstrip supply and famine will ensue.
People especially in the overpopulated poor nations (such as mine) must realise if you breed like vermin, you will also doom your offspring to die like vermin.
In the end more education, birth control and awareness is all that will fix this problem.

cesm

OK but talking about corporations please don't forget some anglo-swizz and anglo-dutch leaders. (Can I write their names in this forum ?)
There is another thing : what's the more profitable for the whole economy of the poor countries ? Production of local food, or exportations (agriculture or industry) ? Some experts (IMF for example) were rather in favor of exportation and industry, even if that means buying the food the population needs and losing a part of the foreing currencies earned before. And now this system fails.
Corruption could explain some things, too. It could be easier to divert some money from the international deals rather than supporting the local economic growth.

Generous, are they ? Wait and see. I wonder what will be the results of the chinese "help" after a century. Last chinese help for some hungry people in Zimbabwe I've heard about : a ship with 77 tons of weapons, including grenades and mortars. After a few decades, some may miss the Europeans.

Parihaka

Of course you can

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In the realm of spirit, seek clarity; in the material world, seek utility.
Gottfried Wilhelm Leibniz

Shek

Bolo,

This disastrous prediction of too many is over two centuries old and the reason why economics got the nickname as the "dismal" science. Supply is plentiful, political instability and the use of that supply is what's causing the issues, not excess demand.

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"So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

cesm

OK, thx. Nestlé and Unilever.

bolo121

Yes, the green revolution postponed it a bit but population is catching up fast. The political and economic distortions and inefficiencies are part of life, they wont be getting fixed any time soon. Even if food is there the soaring prices will ensure that most ordinary people wont get enough. The more people there are the more the pressure and the subsequent suffering.
Also consider lead times, let's say it takes a year to fix things in a country, the supply will only improve once the next crop is planted and barring climate problems, is harvested. You'd still have a couple of bad years and since things are bad worldwide help would be thin on the ground.
People must be educated: breed less eat more.
I'm keeping my fingers crossed and hoping that India can get out of this with minimal death toll.
Food and the poor | The new face of hunger | Economist.com

Food | The silent tsunami | Economist.com

gunnut

Western aid, especially food aid, only exacerbate the problem. The land and the system can't support that many people. Nature usually kills off excess people to restore balance. Our aid upsets that balance. Our aid only prolongs the suffering. They need to learn to live with each other or let nature takes its course.