World food insecurity report 2011 – expect more of the same

The UN Food and Agriculture Organization (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) have released ‘The State of Food Insecurity in the World 2011’ (SOFI).

This year’s report focuses on high and volatile food prices, identified as major contributing factors in food insecurity at global level and a source of grave concern to the international community. “Demand from consumers in rapidly growing economies will increase, the population continues to grow, and further growth in biofuels will place additional demands on the food system,” the report said.

Moreover, food price volatility may increase over the next decade due to stronger linkages between agricultural and energy markets and more frequent extreme weather events.

Price volatility makes both smallholder farmers and poor consumers increasingly vulnerable to poverty while short-term price changes can have long-term impacts on development, the report found. Changes in income due to price swings that lead to decreased food consumption can reduce children’s intake of key nutrients during the first 1000 days of life from conception, leading to a permanent reduction of their future earning capacity and an increased likelihood of future poverty, with negative impacts on entire economies.

Key Messages

Small import-dependent countries, especially in Africa, were deeply affected by the food and economic crises. Some large countries were able to insulate themselves from the crisis through restrictive trade policies and functioning safety nets, but trade restrictions increased prices and volatility on international markets.

High and volatile food prices are likely to continue. Demand from consumers in rapidly growing economies will increase, population will continue to grow, and further growth in biofuels will place additional demands on the food system. On the supply side, there are challenges due to increasingly scarce natural resources in some regions, as well as declining rates of yield growth for some commodities. Food price volatility may increase due to stronger linkages between agricultural and energy markets, as well as an increased frequency of weather shocks.

Price volatility makes both smallholder farmers and poor consumers increasingly vulnerable to poverty. Because food represents a large share of farmer income and the budget of poor consumers, large price changes have large effects on real incomes. Thus, even short episodes of high prices for consumers or low prices for farmers can cause productive assets – land and livestock, for example – to be sold at low prices, leading to potential poverty traps. In addition, smallholder farmers are less likely to invest in measures to raise productivity when price changes are unpredictable.

Large short-term price changes can have long-term impacts on development. Changes in income due to price swings can reduce children’s consumption of key nutrients during the first 1,000 days of life from conception, leading to a permanent reduction of their future earning capacity, increasing the likelihood of future poverty and thus slowing the economic development process.

High food prices worsen food insecurity in the short term. The benefits go primarily to farmers with access to sufficient land and other resources, while the poorest of the poor buy more food than they produce. In addition to harming the urban poor, high food prices also hurt many of the rural poor, who are typically net food buyers. The diversity of impacts within countries also points to a need for improved data and policy analysis.

High food prices present incentives for increased long-term investment in the agriculture sector, which can contribute to improved food security in the longer term. Domestic food prices increased substantially in most countries during the 2006–08 world food crisis at both retail and farmgate levels. Despite higher fertilizer prices, this led to a strong supply response in many countries. It is essential to build upon this short-term supply response with increased investment in agriculture, including initiatives that target smallholder farmers and help them to access markets, such as Purchase for Progress (P4P).

Safety nets are crucial for alleviating food insecurity in the short term, as well as for providing a foundation for long-term development. In order to be effective at reducing the negative consequences of price volatility, targeted safety-net mechanisms must be designed in advance and in consultation with the most vulnerable people.

A food-security strategy that relies on a combination of increased productivity in agriculture, greater policy predictability and general openness to trade will be more effective than other strategies. Restrictive trade policies can protect domestic prices from world market volatility, but these policies can also result in increased domestic price volatility as a result of domestic supply shocks, especially if government policies are unpredictable and erratic. Government policies that are more predictable and that promote participation by the private sector in trade will generally decrease price volatility.

Investment in agriculture remains critical to sustainable long-term food security. For example, cost-effective irrigation and improved practices and seeds developed through agricultural research can reduce the production risks facing farmers, especially smallholders, and reduce price volatility. Private investment will form the bulk of the needed investment, but public investment has a catalytic role to play in supplying public goods that the private sector will not provide. These investments should consider the rights of existing users of land and related natural resources.

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Food inflation crippled India’s households in 2010

The price of a basket of staple foods has become crippling in rural and urban India. The government’s response is to favour agri-commodity markets, greater retail investment and more technology inputs. For food grower and consumer alike, the need for genuine farm swaraj has never been greater.

The retail prices of staple foods rose steadily through 2010, far exceeding in real terms what the Government of India and the financial system call “headline inflation”, and exceeding also the rate of the rise in food inflation as calculated for the country. These calculations ignore the effective inflation and its increase as experienced by the rural and urban household, and they ignore also the considerable regional variations in India of a typical monthly food basket.

Moreover, from a household perspective an increase in the prices of food staples is not seen as an annual phenomenon, to be compared with some point 12 months in the past. It is intimately linked to employment (whether informal or seasonal), net income, and the pressures on the food budget from competing demands of medical treatment, education and expenses on fuel and energy.

When real net income remains unchanged for over a year or longer, the household suffers a contraction in the budget available for the food basket, and this contraction – often experienced by rural cultivator families and agricultural labour – is only very inadequately reflected by the national rate of increase in food inflation.

An indicator of the impact on households is provided by the price monitoring cell of the Department Of Consumer Affairs, Ministry Of Consumer Affairs, Food and Public Distribution. This cell records the retail and wholesale prices of essential commodities in 37 cities and towns in India. Data over a 36-month period (2008 January to 2010 December) for the prices of cereals, pulses, sugar, tea, milk and onions reveals the impact of the steady rise in the Indian household’s food basket.

In 33 cities and towns for which there are regular price entries, the price per kilo of the “fair average” quality of rice has risen by an average of 42% over the calendar period 2008 January to 2010 December. In 12 of these urban centres the increase has been over 50% (Vijayawada, Thiruvananthapuram, Hyderabad, Bengaluru, Patna, Cuttack, Bhubaneshwar, Indore, Bhopal, Shimla, Karnal and Hisar).

The average price rise over the same period for a kilo of tur dal, for 32 cities for which there is regular price data, is 46%. In 11 of these urban centres the increase in the price of tur dal has been over 50% (Puducherry, Bengaluru, Patna, Agartala, Nagpur, Mumbai, Indore, Ahmedabad, Shimla, Jammu and New Delhi). Where wheat is concerned, from among the 27 cities and towns for which there are regular price entries over three years, in 10 the per kilo price rise is 30% and more.

If in search of a comforting cup of tea over which to rue the effect of the steady price rise, this too will cost a great deal more than it did three years ago. For 25 urban centres with regular price data, the average increase over the same period of 100 grams of loose tea leaf is 38% and in 11 of these cities and towns the increase is between 40% and 100%.

The sugar with which to sweeten that cup of tea has become prohibitively expensive over the January 2008 to December 2010 period. For the 32 cities and towns for which there is regular price data, the average price increase for a kilo of sugar is 102%, the range of increase being between 76% and 125%.

This increase for sugar – relatively homogenous for the price reporting centres – exhibits the countrywide nature of the price rise of the commodity. Nor is there a household economy case for substituting sugar for gur, or jaggery. For the 17 towns and cities reporting data for gur prices over the same 36-month period, the increase in price over the period has been an average 118% with 11 of these centres recording an increase of over 100%.

Adding a third element of higher cost to the humble cup of tea is the price of milk. For the 25 towns and cities which recorded increases in the per litre price of milk over the 36-month period (one city recorded a drop) the average rise is 37%. In seven cities a litre of milk costs at least 50% more in December 2010 than what it did in January 2008 – Ahmedabad, Bhopal, Indore, Jaipur, Jodhpur, Patna and Hyderabad.

In conspicuous contrast are the rates of increase in price of cooking media – groundnut oil, mustard oil and vanaspati. Over the January 2008 to December 2010 period the 37 urban centres recorded average price increases of 10%, 9% and 10% respectively for groundnut oil, mustard oil and vanaspati.

Finally, the volatile allium cepa, or common red onion. In 29 cities and towns reporting regularly the per kilo prices of onion, the increase in price of the vegetable has been astonishingly steep. The average increase for 29 cities is 197.5% and in 14 the increase has been 200% and above – New Delhi, Shimla, Ahmedabad, Indore, Mumbai, Rajkot, Agartala, Aizawl, Bhubaneshwar, Cuttack, Kolkata, Chennai, Hyderabad and Vijaywada. In pale comparison is the otherwise worrying average increase of 39.5% for a kilo of potatoes – this is the 36-month average increase recorded by 27 urban centres.

A Christmas troika from the ILO

Three excellent titles have been released by the International Labour Organization (ILO) since November, the Global Wage Report 2010-11, World Social Security Report 2010-11 and Extending Social Security to All.

Global Wage Report 2010-11. Social security represents an investment in a country’s “human infrastructure” no less important than investments in its physical infrastructure. At an early stage of economic development the priority is, of course, to put in place a basic level of provision; the evidence adduced in this Guide points to its affordability for, essentially, every country. While this message lies at the heart of the Guide, it is important to keep in mind that, at a later stage, the basic level can and should be augmented, and the ILO’s long-standing approach to social security offers the framework to do so.

While the financial, fiscal and economic affordability and sustainability of social protection systems has become – rightly or wrongly – a major concern for countries at all stages of economic development, the Guide provides testimony showing that some level of social security can be afforded even at early stages of national development. Social security systems remain affordable moreover when economies mature and population age. Hence, a country’s national investment in social security can be well justified, whether or not an extensive social security system has already been developed.

More on the title here. Get the pdf here.

World Social Security Report 2010-11. This is the first in a new series of biennial reports that aim to map social security coverage globally, to presenting various methods and approaches for assessing coverage, and to identifying gaps in coverage. Backed by much comparative statistical data, this first report takes a comprehensive look at how countries are investing in social security, how they are financing it, and how effective their approaches are. The report examines the ways selected international organizations (the EU, OECD and ADB) monitor social protection and the correlation of social security coverage and the ILO Decent Work Indicators. The report’s final section features a typology of national approaches to social security, with a focus on countries’ responses to the economic crisis of 2008 and the lessons to be learned, especially concerning the short- and long-term management of pension schemes.

Social security systems play a critical role in alleviating poverty and providing economic security, helping people to cope with life’s major risks and adapt to change. They can have a remarkable effect on income inequality and poverty in developing countries through income transfers. The 2008-09 financial crisis has shown that they are also powerful economic and social stabilizers, with both short- and long-term effects. However, there are serious problems of access to social security around the world which the crisis has shown into sharp relief, and the financing of systems has been put at risk by shrinking national budgets.

More on the title here. Get the pdf here.

Extending Social Security to All. The second in a series of ILO reports focusing on wage developments, this volume reviews the global and regional wage trends during the years of the economic and financial crisis of 2008 and 2009. In Part I, the report highlights the slow down in the growth of monthly average wages as well as some short-term fluctuations in the wage share. These changes happened against a backdrop of wage moderation in the years before the crisis and a long-term trend of rising wage inequality since the mid-1990s. Part II of the report discusses the role of wage policies in times of crisis and recovery. Collective bargaining and minimum wages can help achieve a balanced and equitable recovery by ensuring that working families share in the fruits of future economic growth.

At the same time, preventing the purchasing power of low-paid workers from falling can contribute to a faster recovery by sustaining aggregate demand. The report shows that policy strategies and design are crucial to ensure that low-paid workers benefit from union representation and minimum wages, and argues that wage policies must be complemented with carefully crafted in-work benefits and other income transfers. Part III concludes with a summary of the report and highlights issues that are critical for improving wage policies.

More on the title here. Get the pdf here.

Europe’s workers say ‘no’ to top-down ‘austerity’

After ordering drastic ‘austerity’ programmes in Hungary, Romania, Greece, Spain and Portugal, pressure is now being increased on other countries to significantly reduce the living standards of broad social layers. This is what ‘austerity’ in the EU, and particularly western Europe, actually means. It does not mean the ruling parties and their agencies do with smaller salaries. It means that the massive deficits in public finances resulting from the economic crisis and bank bailouts be countered by slashing wages and social spending.

The German government, acting on behalf of the German export industry, is calling the tune for western EU. This spells continuing trouble for Europe’s working classes for it has been clear for several years that the ruling coalition in Berlin is acting in concert with the most powerful European financial and business circles, in particular the German export industry which claims to have led Germany into a new phase of ‘growth’.

There is no lack of voices saying these policies are short-sighted. On Monday, four leading European economists warned in the Financial Times that such harsh measures were “necessary but risky”. They threaten to trigger a depression affecting the whole eurozone. The resulting economic, financial and social stresses could destroy the eurozone. They suggested, therefore, a European solution: the European Financial Stability Facility established in the spring should become a permanent instrument that can be used to support highly indebted countries.

But this week Europeans marched on the streets in protest against the impacts of ‘austerity’. Up to 100,000 took part in a march on Wednesday on the European Union buildings in Brussels, Belgium, organised by the European Trade Union Confederation (ETUC), reported the World Socialist Web Site (WSWS). The march in the Belgian capital was the official centre-piece of Europe-wide demonstrations against austerity and cuts, though a general strike in Spain was by far the most significant expression of workers rising anger at the attack on their livelihoods.

Nearly 70% of Spanish workers — 10 million — took part in Wednesday’s general strike. In some sectors, such as mining, metal, auto manufacture, electronic, fishing and other industries, participation was nearly total. The movement also encompassed many self-employed workers and small businesses. Although the government tried to downplay the effects of the strike, the national grid operator Red Electrica Corp. said that electricity consumption was down by 20%.

The strike dealt a blow to business leaders, politicians and the media who claimed it would not be well supported. But without the minimum service levels agreed by the unions, which allowed the government and local authorities to determine how many airplanes, trains and buses had to be provided, the country would have ground to a complete halt.

[There’s more in Deutsch on the strikes from Die Tageszeitung of Berlin, which reported on the strikes in France, the protest against the pension ‘reform’ and the social impacts of ‘austerity’. The Liberation of France reported on the massive Spanish strikes, and Socialist World has reportage of the Brussels strike.]

Greece’s main union federations, representing about 2.5 million workers, did not strike on Wednesday and only organised a march to parliament in the evening. Only a few of the smaller unions called strike action, with hospital doctors stopping work for 24 hours. There was strike action by bus and trolley drivers for several hours and the Athens’ metro system and trams were shut down for a period at noon.

A demonstrator reacts after being hit by anti-riot police in central Barcelona during the general strike held in Spain. (Guardian) Photograph: Josep Lago/AFP/Getty Images

In Ireland, there were rallies hundreds strong in Belfast and Derry. A man drove a cement mixer covered with anti-bank slogans into the gates of the Irish parliament in Dublin to protest the bailout of the banks. In Portugal, there were protests in Lisbon and Porto. According to trade unions sources some 20,000 people took part in the evening demonstration in Lisbon.

Most of the other protests were in eastern Europe. In Poland, thousands marched in Warsaw against government plans to freeze wages and raise some taxes. They demanded the government guarantee job security and scrap plans to raise taxes. In Lithuania, some 400 protesters held an illegal demonstration in Vilnius. In Slovenia, around half of all public service workers continued a third day of an indefinite strike to protest at the government’s plan to freeze salaries for two years.

The Guardian reported that in Portugal, unions said 50,000 protesters joined a march in Lisbon and 20,000 in Porto. “It’s a crucial day for Europe,” said John Monks, general secretary of the European Trades Union Confederation, which orchestrated the events. “This is the start of the fight, not the end. That our voice be heard is our major demand today – against austerity and for jobs and growth. There is a great danger that the workers are going to be paying the price for the reckless speculation that took place in financial markets. You’ve really got to reschedule these debts so that they are not a huge burden on the next few years and cause Europe to plunge down into recession.”

In Brussels marchers from across Europe waved union flags and carried banners saying “No to austerity” and “Priority to jobs and growth”, bringing parts of the city to a halt. The protest was led by a group dressed in black suits and masks and carrying umbrellas and briefcases to represent financial speculators, acting as the head of a funeral cortege mourning the death of Europe.