Betting on Hunger
“For the first time in history more than a billion people go to bed hungry each night.” Surprisingly, this shocking fact was brought to our attention by the president of the World Bank, Robert Zoellick, who reports that the Millennium Development Goal of eradicating hunger by 2015 “will not be achieved” but that “growth can contribute to overcoming poverty”. After falling in the previous decade, poverty and malnutrition rates began to rise again in 2008 and the World Bank estimates that 64 million more people are living in extreme poverty in 2010.
Food riots in Mozambique in September brought back bad memories we thought we could safely forget. The UN conference on trade and development (Unctad) report was euphemistic: “Food security is still a pressing problem in many developing countries.”
Natural events increased the imbalance. The violent monsoon in India and floods in Pakistan destroyed crops, increasing rice and tea prices by more than 30% in a few months. Fires swept through Russian farmland, reducing the wheat harvest and making it impossible to sow seed for next year.
But the current global conflagration owes more to market forces than the forces of nature. Raw materials are the new target for investors who have plenty of money to play with, generously supplied by the Central Banks, free (or almost free) of charge. After betting on property, the financial whiz kids are turning to basic commodities, such as non-ferrous metals, and agriculture.
Last month the London hedge fund Amajaro bought a quantity of cocoa equivalent to 25% of all European stocks, and a few days later the price per tonne broke all records. The same thing is happening with wheat, rice and soya. European leaders are all upset, and some have gone so far as to speak of a need for regulation – exactly what they said during the sub-prime crisis. The consequences for developing countries are particularly serious because the International Monetary Fund and World Bank have encouraged them to turn to foreign markets and abandon local production. Unctad now recognises, at least on paper, that “a sustainable growth strategy requires a greater reliance on domestic demand” and that “this may call for a rethinking of the paradigm of export-led development”. Better late than never. A pity that all they offer is pious platitudes, which may foster our illusions but won’t feed the planet.