[stop-imf] Bello: How to Manufacture a Global Food Crisis: Lessons from the WorldBank, IMF, and WTO

[robert weissman]

*How to Manufacture a Global Food Crisis: *
*Lessons from the World Bank, IMF, and WTO*

How "free trade" is destroying Third World agriculture--and who's
fighting back

(This article appears in the June 2, 2008, edition of /The Nation /[New
York].

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?

*Eroding Mexican Agriculture*

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 of
government funds. To head off peasant discontent, the regime provided
farmers with subsidized fertilizer and seeds, launched credit schemes,
and built rural infrastructure. During the 14 years of the dictatorship,
it was only during one year, 1973, that rice had to be imported owing to
widespread damage wrought by typhoons. When Marcos fled the country in
1986, there were reported to be 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 in rice of 2.8 metric tons per hectare 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 possible shortfalls. These imports, which rose from 263,000
metric tons in 1995 to 2.1 million tons in 1998, 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 Bryce-son 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 =C2=91consumer' of costly seeds a=
nd
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. In other words,
Bank and IMF resident proconsuls reached to the very innards of the
state's involvement in the agricultural economy to rip it up.

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 per-cent 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."

Malawi is representative of the African tragedy spawned by the IMF and
the World Bank. 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 a senior analyst at and former executive director of
the Bangkok-based research and advocacy institute Focus on the Global
South.