The tide turns against biofuels

TheRealNews, April 24, 2008

As biofuel production booms, concerns grow about food supply.

Making a killing from hunger

We need to overturn food policy, now!

GRAIN, April 2008

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For some time now the rising cost of food all over the world has taken households, governments and the media by storm. The price of wheat has gone up by 130% over the last year.[1] Rice has doubled in price in Asia in the first three months of 2008 alone,[2] and just last week it hit record highs on the Chicago futures market.[3] For most of 2007 the spiralling cost of cooking oil, fruit and vegetables, as well as of dairy and meat, led to a fall in the consumption of these items. From Haiti to Cameroon to Bangladesh, people have been taking to the streets in anger at being unable to afford the food they need. In fear of political turmoil, world leaders have been calling for more food aid, as well as for more funds and technology to boost agricultural production. Cereal exporting countries, meanwhile, are closing their borders to protect their domestic markets, while other countries have been forced into panic buying. Is this a price blip? No. A food shortage? Not that either. We are in a structural meltdown, the direct result of three decades of neoliberal globalisation.

Farmers across the world produced a record 2.3 billion tons of grain in 2007, up 4% on the previous year. Since 1961 the world’s cereal output has tripled, while the population has doubled. Stocks are at their lowest level in 30 years, it’s true,[4] but the bottom line is that there is enough food produced in the world to feed the population. The problem is that it doesn’t get to all of those who need it. Less than half of the world’s grain production is directly eaten by people. Most goes into animal feed and, increasingly, biofuels – massive inflexible industrial chains. In fact, once you look behind the cold curtain of statistics, you realise that something is fundamentally wrong with our food system. We have allowed food to be transformed from something that nourishes people and provides them with secure livelihoods into a commodity for speculation and bargaining. The perverse logic of this system has come to a head. Today it is staring us in the face that this system puts the profits of investors before the food needs of people.

Market realities

The policy makers who have shaped today’s world food system – and who are supposed to be responsible for averting such catastrophes – have come out with a number of explanations for the current crisis that everyone has heard over and over again: drought and other problems affecting harvests; rising demand in China and India where people are supposedly eating more and better than in the past; crops and lands being massively diverted into biofuel production; and so on. All of these issues, of course, are contributing to the current food crisis. But they do not account for the full depth of what is happening. There is something more fundamental at work, something that brings all these issues together, and which the world’s finance and development chiefs are keeping out of public discussion.

Nothing that the policy makers say should obscure the fact that today’s food crisis is the outcome of both an incessant push towards a “Green Revolution” agricultural model since the 1950s and the trade liberalisation and structural adjustment policies imposed on poor countries by the World Bank and the International Monetary Fund since the 1970s. These policy prescriptions were reinforced with the establishment of the World Trade Organisation in the mid-1990s and, more recently, through a barrage of bilateral free trade and investment agreements. Together with a series of other measures, they have led to the ruthless dismantling of tariffs and other tools that developing countries had created to protect local agricultural production. These countries have been forced to open their markets and lands to global agribusiness, speculators and subsidised food exports from rich countries. In that process, fertile lands have been diverted away from serving local food markets to the production of global commodities or off-season and high-value crops for Western supermarkets. Today, roughly 70% of all so-called developing countries are net importers of food.[5] And of the estimated 845 million hungry people in the world, 80% are small farmers.[6] Add to this the re-engineering of credit and financial markets to create a massive debt industry, with no control on investors, and the depth of the problem becomes clear.

Agricultural policy has completely lost touch with its most basic goal of feeding people. Hunger hurts and people are desperate. The UN World Food Programme estimates that recent price hikes have meant that an additional 100 million people can no longer afford to eat adequately.[7]Governments are frantically seeking shelter from the system. The fortunate ones, with export stocks, are pulling out of the global market to cut their domestic prices off from the skyrocketing world prices. With wheat, export bans or restrictions in Kazakhstan, Russia, Ukraine and Argentina mean that a third of the global market has now been closed off. The situation with rice is even worse: China, Indonesia, Vietnam, Egypt, India and Cambodia have banned or severely restricted exports, leaving just a few sources of export supply, mainly Thailand and the US. Countries like Bangladesh can’t buy the rice they need now because the prices are so high. For years the World Bank and the IMF have told countries that a liberalised market would provide the most efficient system for producing and distributing food, yet today the world’s poorest countries are forced into an intense bidding war against speculators and traders, who are having a field day. Hedge funds and other sources of hot money are pouring billions of dollars into commodities to escape sliding stock markets and the credit crunch, putting food stocks further out of poor people’s reach.[8] According to some estimates, investment funds now control 50–60% of the wheat traded on the world’s biggest commodity markets.[9] One firm calculates that the amount of speculative money in commodities futures – markets where investors do not buy or sell a physical commodity, like rice or wheat, but merely bet on price movements – has ballooned from US$5 billion in 2000 to US$175 billion to 2007.[10]

The situation today is untenable. Look at Haiti. A few decades ago it was self-sufficient in rice. But conditions on foreign loans, particularly a 1994 package from the IMF, forced it to liberalise its market. Cheap rice flooded in from the US, backed by subsidies and corruption, and local production was wiped out.[11] Now prices for rice have risen 50% since last year and the average Haitian can’t afford to eat. So people are taking to the streets or risking their lives to journey by boat to the US. Food protests have also erupted in West Africa, from Mauritania to Burkina Faso. There, too, structural adjustment programmes and food-aid dumping have destroyed the region’s own rice production, leaving people at the mercy of the international market. In Asia, the World Bank constantly assured the Philippines, even as recently as last year, that self-sufficiency in rice was unnecessary and that the world market would take care of its needs.[12] Now the government is in a desperate plight: its domestic supply of subsidised rice is nearly exhausted and it cannot import all it needs because traders’ asking prices are too high.

Making a killing from hunger

The truth about who profits and who loses from our global food system has never been more obvious. Take the most basic element of food production: soil. The industrial food system is a chemical-fertiliser junkie. It needs more and more of the stuff just to keep alive, eroding soils and their potential to support crop yields in the process. In the current context of tight food supplies, the small clique of corporations that control the world’s fertiliser market can charge what they want – and that’s exactly what they are doing. Profits at Cargill’s Mosaic Corporation, which controls much of the world’s potash and phosphate supply, more than doubled last year.[13] The world’s largest potash producer, Canada’s Potash Corp, made more than US$1 billion in profit, up more than 70% from 2006.[14]Panicking now about future supplies, governments are becoming desperate to boost their harvests, giving these corporations additional leverage. In April 2008, the joint offshore trading arm for Mosaic and Potash hiked the price of its potash by 40% for buyers from Southeast Asia and by 85% for those from Latin American. India had to pay 130% more than last year, and China 227% more.[15]

Table 1. Profit increase for some of the world’s largest fertiliser corporations

Company	Profits 2007 (US$ million)	Increase from 2006 (%)
Potash Corp (Canada)	1,100	72%
Yara (Norway)	1,116	44%
Sinochem (China)	1,100	95%
Mosaic (US)	708	141%
ICL (Israel)	535	43%
K + S (Germany)	420	2.8%

Source: Compiled from corporate reports

While big money is being made from fertilisers, it is just a sideline for Cargill. Its biggest profits come from global trading in agricultural commodities, which, together with a few other big traders, it pretty much monopolises. On 14 April 2008, Cargill announced that its profits from commodity trading for the first quarter of 2008 were 86% higher than the same period in 2007. “Demand for food in developing economies and for energy worldwide is boosting demand for agricultural goods, at the same time that investment monies have streamed into commodity markets,”said Greg Page, Cargill’s chairman and chief executive officer. “Prices are setting new highs and markets are extraordinarily volatile. In this environment, Cargill’s team has done an exceptional job measuring and assessing price risk, and managing the large volume of grains, oilseeds and other commodities moving through our supply chains for customers globally.”[16]

Table 2. Profit increase for some of the world’s largest grain traders

Company	Profits 2007 (US$ million)	Increase from 2006 (%)
Cargill (US)	2,340	36%
ADM (US)	2,200	67%
ConAgra (US)	764	30%
Bunge (US)	738	49%
Noble Group (Singapore)	258	92%
Marubeni (Japan)	90*	43%*

Source: Compiled from corporate reports
*Data is for Marubeni’s Agri-Marine division only.
Absent from this list is Louis Dreyfus (France), a private agricultural commodities trader with annual sales in excess of US$22 billion, which does not report its profits.

Managing and assessing are not so difficult for a company like Cargill, with its near monopoly position and a global team of analysts the size of a UN agency. Indeed, all of the big grain traders are making record profits. Bunge, another big food trader, saw its profits of the last fiscal quarter of 2007 increase by US$245 million, or 77%, compared with the same period of the previous year. The 2007 profits registered by ADM, the second largest grain trader in the world, rose by 65% to a record US$2.2 billion. Thailand’s Charoen Pokphand Foods, a major player in Asia, is forecasting revenue growth of 237% this year.

The world’s big food processors, some of which are commodity traders themselves, are also cashing in. Nestlé’s global sales grew 7% last year.“We saw this coming, so we hedged by forward-buying raw materials”,says François-Xavier Perroud, Nestlé’s spokesman.[17] Margins are up at Unilever, too. “Commodity pressures have increased sharply, but we have successfully offset these through timely pricing action and continued delivery from our savings programmes”, says Patrick Cescau, Group CEO of Unilever. “We will not sacrifice our margins and market share.”[18] The food corporations don’t seem to be making these profits from of the retailers. UK supermarket Tesco reports profits up 12.3% from last year, a record rise. Other major retailers, such as France’s Carrefour and the US’s Wal-Mart, say that food sales are the main factor sustaining their profit increases.[19] Wal-Mart’s Mexican division, Wal-Mex, which handles a third of overall food sales in Mexico, reported an 11% increase in profits for the first quarter of 2008. (At the same time Mexicans are demonstrating in the streets because they can no longer afford to make tortillas.[20])

It seems that nearly every corporate player in the global food chain is making a killing from the food crisis. The seed and agrochemical companies are doing well too. Monsanto, the world’s largest seed company, reported a 44% increase in overall profits in 2007.[21] DuPont, the second-largest, said that its 2007 profits from seeds increased by 19%, while Syngenta, the top pesticide manufacturer and third-largest company for seeds, saw profits rise 28% in the first quarter of 2008.[22]

Such record profits have nothing to do with any new value that these corporations are producing and they are not one-off windfalls from a sudden shift in supply and demand. Instead, they are a reflection of the extreme power that these middlemen have accrued through the globalisation of the food system. Intimately involved with the shaping of the trade rules that govern today’s food system and tightly in control of markets and the ever more complex financial systems through which global trade operates, these companies are in perfect position to turn food scarcity into immense profits. People have to eat, whatever the cost.

The urgent need for a policy rethink

The larger backdrop to this perverse food market situation is the global financial system, which is now teetering on its flimsy axis. What began as a localised housing loan collapse in the US in 2007 has unravelled into something far more serious, as people realise that the emperors of the global financial system have no clothes. The world economy is living on debt that no one can pay. While central bankers and Lear jet executives try to patch the holes and restore confidence, the underlying truth is that the system is close to bankruptcy and no one in power wants to take the necessary tough measures: not the IMF, nor the World Bank, nor the leaders of the world’s most powerful nations. Not much more than public relations glitter can be expected from the G8 meeting in June.

Similar problems lie at the heart of the food crisis: an ideologically driven elite has forced countries to wrench open markets and let the free market run, so that a few megacorporations, investors and speculators can take huge payoffs. Many countries have lost that most basic power: the ability to feed themselves. This loss, coupled with the corruption that plagues our countries and trading systems, shows that neoliberalism has lost any legitimacy that it might once have had. It is a measure of how out of touch these ideologues are that many now openly call for more trade liberalisation as a solution to the food crisis, with some even proposing that the rules of the WTO be changed to prevent countries from imposing export restrictions on food.[23]

The World Bank president, Robert Zoellick, has tried to win the world over with his call for a “New Deal” to solve the hunger crisis, but there is nothing new about it: he calls for more trade liberalisation, more technology and more aid. Today’s food crisis is the direct result of decades of these policies, which must now be rejected. While immediate action is necessary to lower food prices and to get food to those who need it, we also need radical changes in agricultural policy so that small farmers around the world gain access to land and can make a living from it. We need policies that support and protect farmers, fishers and others to produce food for their families, for the local markets and for people in cities, rather than money for an abstract international commodity market and a tiny clan of corporate boardroom executives. And we need to strengthen and promote the use of technologies based on the knowledge and in the control of those who know how to grow food. To put it another way, we need food sovereignty, now – the kind that is defined and driven by small farmers and fisherfolk themselves.

Social movements around the globe have been struggling to promote such a reversal of strategy, only to be dismissed as unrealistic and backward by those in power, and often violently repressed. The glimmer of hope in this crisis is that the situation can be reversed. Peasant organisations have concrete proposals about what needs to be done to resolve the crisis in their countries, and governments should listen to what they are saying. Already some governments are talking of a policy change towards food self-reliance.[24] Others are starting to question the fundamental rationale of pushing for more free trade. Neoliberal hawks at the top of the global food policy pyramid have lost whatever credibility they may think they once had. It is time for them to move out of the way so that the visions of food sovereignty and agrarian reform that come from the grassroots can take their place and get us out of this hellish mess.

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Going further:

• Overview: FAO, World Food Situation:http://www.fao.org/worldfoodsituation
• Overview: Financial Times, “The global food crisis”, interactive map, last updated 21 April 2008: http://tinyurl.com/6knmy8
• Overview: Stefan Steinberg, “Financial speculators reap profits from global hunger”, Global Research, Centre for Research on Globalisation, Montreal, 24 April 2008.
  http://globalresearch.ca/index.php?context=va&aid=8794
• Overview: Confédération Paysanne, “Les révoltes de la faim dans les pays du Sud : l’aboutissement logique de choix économiques et politiques désastreux”, Press release, 18 April 2008:http://tinyurl.com/5glx8u (French only)
• Structural Adjustment Programmes: “UNCTAD official blames food crisis on structural adjustment programme,” This Day, Lagos, 23 April 2008: http://allafrica.com/stories/200804230375.html
• Food sovereignty: http://www.viacampesina.org and http://www.nyeleni2007.org
• Agrofuels: GRAIN, Agrofuels special issues, Seedling, July 2007,http://www.grain.org/seedling/?type=68
• Rice in the Philippines: GRAIN, Philippines and beyond: rice crisis – reaping the ‘fruit’ of market capitalism, Hybrid rice blog, 22 April 2008, http://www.grain.org/hybridrice/?lid=201

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References

1      Bloomberg, quoted by the BBC, London, 14 April 2008,http://news.bbc.co.uk/2/hi/business/7344892.stm

2      BBC, “Action to meet Asian rice crisis”, London, 17 April 2008,http://news.bbc.co.uk/2/hi/business/7352038.stm

3       See http://www.riceonline.com for daily reports. With many Asian rice exporters out of the game, needy countries from Asia and Africa are turning to the US market where prices are going through the roof.

4       Brian Halweil, “Grain harvest sets record, but supplies still tight”, Worldwatch Institute, Washington DC,http://www.worldwatch.org/node/5539

5      Katarina Wahlberg, “Are we approaching a global food crisis?”, World Economy & Development in Brief, Global Policy Forum, 3 March 2008,

6      Food policy expert interviewed on Radio France International, Paris, 20 April 2008.

7      “UN food chief urges crisis action,” BBC, London, 22 April 2008,http://news.bbc.co.uk/2/hi/americas/7360485.stm

8      Sinclair Stewart and Paul Waldie, “U.S. food producers, speculators square off”, Globe and Mail, Toronto, 23 April 2008,

9      Ibid. and Paul Waldie, “Why grocery prices are set to soar”, Globe and Mail, Toronto, 24 April 2008,

10     Paul Waldie, “Why grocery prices are set to soar”, op cit.

11    Bill Quigley, “USA role in Haiti hunger riots”, ZNet, US, 23 April 2008,

12    World Bank, “Can the world market for rice be trusted”, Box 1 on p. 52 of “Philippines: Agriculture Public Expenditure Review,” Technical Paper, World Bank, Washington DC, 2007,http://go.worldbank.org/TGRSK19300

13    Potash and phosphates are two of the main ingredients in chemical fertiliser.

14    David Ebner, “Saskatchewan: A lot more than wheat” Globe and Mail, Toronto, 11 April 2008,

15    John Partridge and Andy Hoffman, “China deal sends Potash soaring”Globe and Mail, Toronto, 17 April 2008,

16    “Cargill income up sharply in third quarter”, World Grain, Kansas City, 14 April 2008, 

17    “Tightening belts,” The Economist, London, 10 April 2008,

18    Jonathan Sibun, “Unilever profits surge despite price pressures,”Daily Telegraph, London, 3 November 2007, http://tinyurl.com/6p8tcx; and, “Get set for more price hikes: Unilever chief,” Business Standard, India, 16 March 2008, http://tinyurl.com/694cqn

19    Foo Yun Chee, “Major European retailers post higher profits for 2007,” Reuters, 6 March 2008,www.iht.com/articles/2008/03/06/business/RETAIL.php

20    Associated Press, “Wal-Mart de Mexico’s 1Q profits rise 11 percent on higher sales, cost controls,” 8 April 2008,

21    Monsanto, Annual Report, 2007.

22    DuPont, Annual Report 2007, and “Syngenta anuncia cifra negocio en progresión 28 por ciento primer trimestre”, EFE, 22 de abril 2008,

23    Isabel Reynolds, “WTO should pressure food exporters – Mandelson”, Reuters, 23 April 2008,

24    See, for example, recent comments from West African farmers and officials: Noel Tadégnon, “Le ROPPA préconise une pression sur les autorités politiques pour soutenir l’agriculture africaine,” APA, 23 April 2008, http://www.apanews.net/apa.php?article61599; and, “Réunion extraordinaire du Conseil des ministres de l`UEMOA, hier : 200 milliards pour freiner la flambée des prix,” Le Nouveau  Réveil, Abidjan, 24 April 2008, http://www.lenouveaureveil.com/a.asp?n=290011&p=1903

Powering past fossil fuels

TheRealNews, April 27, 2008

“We are stuck in a paradigm of energy generation that is two centuries old”

Open Letter to Governments on World Food Crisis

FIAN International, Heidelberg, April 17th, 2008.

This year marks the 60th anniversary of the Universal Declaration of Human Rights. This is also the year in which States are about to finally approve the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights, that will finally put an end to the unbalanced protection given to these rights.

The failure of States and intergovernmental organizations to minimally reduce the number of chronic hungry in the world, despite repeated commitments to do so, and the recent “rebellion of the hungry” spreading through dozens of countries in the world, is a clear demonstration that the Consensus of Washington, the market led globalization and the associated agribusiness led, chemical intensive monoculture agriculture are not the answer to peoples problems.

It is unacceptable that 850 million human beings still have to live and daily go to sleep hungry. It is unacceptable that 2 billion people still live in dire poverty, while a minority of billionaire companies and individuals continue to impose their private interests on national governments and intergovernmental organizations, with no effective public and participatory regulation by States and intergovernmental organizations. This reality demonstrates blatant and systematic violations of the Right to Food, as enshrined in international Human Rights Law.

Social movements and civil society organizations have repeatedly alerted states and intergovernmental organizations, against the impact of reducing the capacity of national governments to regulate their national agricultural and food security policies, to support local agriculture, to regulate food dumping, to maintain food stocks, etc. Measures were imposed on many countries, even those who suffered the most with the colonial process, through structural adjustment processes, debt renegotiation, trade liberalization treaties and more recently in poverty reduction strategies.

Despite these alerts, agribusiness continues to influence governments and intergovernmental organization. The increasing appropriation of the already unequally distributed resource of cultivable land results in more displacement of traditional populations and peasants, more violent evictions, more criminalization of social movements and human rights defenders, with the destruction of the local diversified production of food, more dependency on food imports and more hunger, and malnutrition.

The more recent call for production of agrofuels just adds to the root problems. It is just the prescription of “more of the same remedy”, that is, to supposedly prevent further complications of climate change with more of the present agricultural model that is one of the main causes of greenhouse gas emissions, and one of the main root causes for hunger, evictions, violence, slave, child  and bonded labor, among other human rights violations.

State and Intergovernmental organizations and officials are responsible and accountable for their actions and omissions, vis-à-vis their population. The present state of affairs demonstrates that the political will of states clearly prioritizes the interests of the minorities instead of the welfare of a overwhelming part of the world population. These priorities must be reversed.

FIAN International, the human rights organization for the human right to adequate food, calls States and intergovernmental organizations, including the Bretton Woods institutions to:

1.        Meet their obligations under the Universal Declaration of Human Rights and international human rights law, taking urgent action to impose regulations on the present expansion of the market led agricultural liberalization process, to respect, protect, and fulfil the rights of the people, with special attention to the promotion of the human right to feed oneself, including the access to productive resources, within the framework of Food Sovereignty.

2.        Take immediate measures to support national governments in guaranteeing that the victims of acute hunger and chronic hunger as well, are assisted and supported in their quest to survive and to recover the capacity to produce or acquire the food or means necessary to feed themselves, in dignity. This must be made the effective priority zero at international and national level, with the allocation of adequate funds.

3.        Ensure coherence of all food related national and international policies with the obligations under the right to food. In particular, policies on agriculture and fishery, trade and investment, development and energy, should contribute to promote and never undermine the full realisation of the right to adequate food.

4.        Guarantee that FAO includes the protection and promotion of the right to adequate food, in line with what its states members approved in the Guidelines on the Right to Adequate Food, as the framework for the global goals and strategic objectives under revision, within the FAO reform process.

5.        Impose an immediate moratorium on the goals for agrofuel production, to avoid a further deterioration of the present hunger crisis.

6.        Impose an immediate moratorium on land grabbing, land evictions and expansion of land allocation for the expansion of agribusiness led agriculture,

7.        Immediately implement measures to fully support small farmer and peasant based sutainable, agroecological diversified food production, at global level

8.        Guarantee that the discussion of alternatives for climate change are carried out in a fully participatory process, at all levels, and that the alternatives chosen take into account the precautionary principle and the need to effectively socially and economically include the most excluded and poorest.

Flavio Valente
FIAN International
Secretary General

 

Press Release: ADB’s 2020 Strategy Confirms Corporate Bias

NGO Forum on ADB, 10 April 2008, Manila

Civil society groups criticized the new strategic framework of the Asian Development Bank, saying it is moving towards private sector-led development, which is anti-poor and vulnerable to corruption.

The strategic framework suggests expanding the Bank’s activities with the private sector to boost market-led economic growth in Asia and the Pacific region. This will result in a more “business-friendly” environment and could suggest disabling what’s perceived as a corrupt public sector in favor of a less accountable private sector.

According to the LTSF, ADB will increase its support for private sector by 50% in 2020 which is presently only about 12% of its total operation. Basic need such as health, education, water and other infrastructure—sectors now largely being privatized anyway— will gradually be increased to only 20%.

“It’s a shame that the ADB is targeting poverty alleviation through its corporate friends but not through legitimate governments,” said Hemantha Withanage, Executive Director of NGO Forum on ADB.

The LTSF recognizes that poverty remains the central challenge facing Asia and the Pacific region. Likewise, it states that rapid economic growth is putting severe strains on the environment. However, increasing private sector’s leverage in development projects would be dangerous due to their profit-oriented activities and strong disregard of the existing Bank’s policies safeguarding local communities and the environment from disastrous impacts.

“The private sector does not respect social and environmental safeguards of local communities. They are only interested about making profits. Corruption goes side-by-side with private sector operations,” Withanage added.

According to the ADB, private sector is the engine of growth. However, Asian communities still believe that growth could still be best led by the public sector. In many occasions, citizens have opposed to private sector development projects due to corruption and violations of human rights. Recently, villagers from the Pulbari village in Bangladesh staged a mass action against a proposed private lending by the ADB for coal power project. The protest has forced the Bank to pull out from the project.

 “ADB seems to miss out on a costly lesson that the most recent troubles of the global economy (as in the 1997 Asian crisis) were triggered and caused by the private sector aided by negligent governments,” said Gani Serrano of PRRM, a founding member of the NGO Forum on ADB. He adds, “In any case, the private corporations can very well take care of themselves, it’s Asia’s poor millions that need ADB’s undivided attention.”

For more information, please contact:

Hemantha Withanage: hemantha@forum-adb.org

Romil Hernandez: romil@forum-adb.org

Acute water crisis in Dhaka city

People stand in a queue to collect WASA water at Moghbazar in Dhaka on Monday as water crisis turns acute in different areas of the capital. — New Age photo. 

Children bring out a silent procession with pitchers in south Madartek in the capital yesterday demanding smooth water supply. The area is experiencing acute water crisis despite installation of a new pump there. Photo: The Daily Star.

Residents of Pikepara of Mirpur in the capital queue up with their vessels yesterday and wait for a Dhaka Wasa water tanker as the area has been experiencing acute water crisis for more than a month. Photo: Anisur Rahman, The Daily Star. 

Opening the Schoolhouse: Undoing the World Bank’s Damage

By Robert Weissman*, April 24, 2008, CommonDreams.org

For 30 years, the International Monetary Fund (IMF) and World Bank have remade much of the developing world according to a market fundamentalist ideology.

The results — measured by lost wealth, stunted social indicators, depletion of natural resources and trashing of the environment, rising inequality and concentration of income, damage to indigenous communities, or many other standards — have been catastrophic.

Can the ongoing harm be undone?

Yes.

Consider one very small example, with not-so-trivial consequences: the case of school fees in Kenya.

In the 1980s and 1990s, the IMF and particularly the World Bank told developing countries to adopt user fees for education. The institutions have enormous power to impose conditions on developing countries eager to get loans, especially heavily indebted countries that need new loans to pay off old debts and keep their economies functioning.

Why should families be charged for sending children to school? The idea was school fees can help pay for the cost of schools, especially as the Bank and Fund demand government spending cutbacks.

In practice, and predictably, school fees proved a disaster.

Mary Njoroge has recently retired after 31 years in the Kenyan educational system. Her final post was Director of Basic Education in the Ministry of Education.

Njoroge says that, “even as the fees were introduced, poverty levels were rising in most of the country, and the parents were not able to pay the fees. That led to many, many children dropping out of school — just because of the inability of parents to pay the fee.”

In Kenya, Njoroge says, school fees were a very important revenue source. They became an inadequate substitute for lost federal revenue — and the existence of school fees became a rationale for further federal spending cuts.

“It was from the fees that the schools could buy books, buy chalk, buy exercise books and any readers that they were going to use,” Njoroge says. “Fees also paid for the running of the school, the overhead of the school. That money was very important. The schools were not going to be able to run without it.”

Not surprisingly, the poorest families were hit the worst by this policy, and girls worst of all. There were no exemptions for the poor, though exemptions have proven an utter failure in other places.

For poor families. says Njoroge, “Initially, the choice was if children have to go to school, which children would go? And boys were the ones sent to school in the very poor communities and girls were left at home. Eventually, even that became difficult and for the very poor communities both boys and girls dropped out of the school system. Only those who were able to afford the school fees were left to continue.”

By the start of the 2000s, spurred by outside pressure, the World Bank came to recognize that school fees were a failure. But Kenya and other countries had come to rely on fees, and it wasn’t obvious how to do away with them.

Then, something transformative happened.

In the 2002 presidential elections, Mwai Kibaki ran on a platform that highlighted a commitment to eliminate user fees for education. This promise helped Kibaki get elected. And then he delivered on the promise.

“When the new government came in and announced that in the new year [2003] children could attend school without paying fees,” says Njoroge, “we witnessed an additional 1 million new children in our schools, over and above the 5.9 million who had already been in the school system.” An additional million came soon thereafter.

User fees had locked the schoolhouse doors to a quarter of Kenyan children. Abolishing fees opened the doors.

Njoroge says that improved tax collection and better systems for financial accountability paid for most of the additional costs — both the lost school fees money, and the money needed to teach so many more kids. The excitement around the initiative also attracted donor funding.

This surge of new students into classrooms created significant transitional problems, says Njoroge, but now teachers have been trained how to handle bigger classes, and how to teach multi-grade classrooms.

Eliminating school fees has been a grand success. “When the fees were lifted, says Njoroge, “we immediately saw the kids at school. It led to investment of resources by the government into the education system. It led to developing new strategies to finance the education program in a transparent and accountable manner, which also has attracted international donors.” And the Kenyan example has inspired many other countries to follow suit, including more than a dozen nations in Africa.

Everything is not perfect. Fees are still in place for secondary schools.

And the system needs to hire more teachers. Which brings the story back to the IMF and World Bank.

Teaching the additional 2 million kids in primary school requires at least 40,000 new teachers, Njoroge says, and Kenya has about 60,000 trained teachers who are unemployed.

But Njoroge says that Kenya cannot hire new teachers, because agreements with the IMF restrict its ability to increase budgetary outlays for teachers.

But just as user fee policy was changed even though it once seemed un-reformable, so too shall IMF policies that directly and indirectly block countries from undertaking desperately needed investments in healthcare and education soon come to an end.

*Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor, and director of Essential Action.

Biofuels Starving Our People, Leaders Tell UN

By Allegra Stratton, CommonDreams.org

The leaders of Bolivia and Peru have attacked the use of biofuels, saying they have made food too expensive for the poor.

Speaking at the United Nations, the Bolivian president, Evo Morales, said the increased use of farmland for fuel crops was causing a “tremendous increase” in food prices.

The Reuters news agency reported that the Peruvian president, Alan Garcia, called on developed countries to grow more food. In the last few months, food prices in Peru have run ahead of the country’s general rate of inflation.

Watch a video from TheRealNews: Morales calls for ‘reparations to the earth’

Their attack coincided with a report published today by the environmental group Friends of the Earth warning the EU of the perils of expanding biofuel use in Latin America. Last year the EU agreed on a target of 10% biofuel use for transport by 2020.

Watch another video from TheRealNews: The tide turns against biofuels

The report says the certification schemes being set up by some South American countries to ensure sustainable production of sugar cane and soya bean crops are not enough to prevent damage to the environment and “fail to address the biggest problems” caused by the cultivation of land currently covered by forests or smaller farms.

In his UN comments, Morales criticised “some South American presidents” for pushing biofuels. The Bolivian president did not name them but his views are in sharp contrast to those of the Brazilian president, Luiz Inacio Lula da Silva, who has said developing countries have enough land to produce both food and biofuels.

Morales called on developed nations to accept that problems created by biofuels in developing countries were partly their responsibility. After his speech, he told a news conference that “it is not an internal problem, it is an external problem”.

“This is very serious,” he said. “How important is life and how important are cars? So I say life first and cars second.”

In his UN speech, Morales called for the International Monetary Fund and the World Bank to take action against the biofuel industry “in order to avoid hunger and misery among our people”.

Reuters reported Garcia as saying biofuels were “creating very serious problems for countries that have to import these (food) products. We believe there are alternative energies that do not put the world’s food in danger.”

Peru’s government has been forced to hand out food to the poorest in the country’s capital, Lima, because of the crisis caused by rising food prices. It has cut tariffs and raised interest rates to try to curb inflation, which rose 4% last year.

Both leaders are facing challenges to their authority. This month, Garcia’s approval rating sank to 26% – the lowest since he took office in 2006 – and 57% of those polled said rising prices was the main reason for their disapproval.

Morales, meanwhile, is fighting opposition leaders in four eastern provinces who want significant autonomy from the central government.

 

Farmers, not lenders, hold key to food security

Tanim Ahmed*, NewAge, April 18, 2008 Photo: NewAge

Food security of Bangladeshis is directly dependent on the survival of and sustenance of the small farmers. If the incumbents can’t ensure implementation of a mechanism that guarantees prosperity for the small farmers, instead of hurtling them down the familiar path of further marginalisation, it will eventually ruin the realistic prospect of attaining sustainable food sufficiency in a few staples and long-term food security in general. 

ONE would be in quite a quandary if one were to decide which is scarier – that the World Bank and the International Monetary Fund have begun to talk about global food crisis and believe there is something to be done, or that the finance adviser has started to bemoan that the international finance institutions only talk the talk but not walk the walk.
   

When the World Bank and the IMF talk about global food crisis, it bodes ill. They are almost sure to come up with a number of policy advice and prescription which, if previous such cases, e.g. the crisis in Asia and Latin America, were any indicators, would prove to be even more disastrous. In other words, one might be looking at a further deterioration of the economy in general besides more empty and half-fed stomachs. When the multilateral lending agencies, especially the International Monetary Fund, take interest in a crisis, more often than not it seems to be because there is money to be made.
   

Besides the Bretton Woods Institutions, the United Nations has also released a study on agriculture recently while the International Rice Research Institution has sounded a warning. The World Bank president called for rich countries to donate $500 million to the World Food Programme to put food in hungry mouths around the world. In other words and for a better frame of reference, this amount is almost the same as the tariffs that Bangladesh paid the United States in 2006, which was $496 million, and half the amount that the rich countries pay their farmers in subsidies every day.
   

From a different perspective though, it means that the international organisations see no problems with poor countries surviving on charity and alms of the rich. But they do not see any reason for retaining large food stocks or provision of subsidies for farmers in the poorer countries while the richer ones continue to subsidise their farmers and thereby agriculture ensuring its sustainability. Bangladesh was repeatedly asked to lower its amount of buffer food stocks and caught unawares when there was the need for it.
   

Presumably there would be more of such policy advice from the lending agencies dealing with more specific and sensitive issues including agricultural input subsidies and mechanisms to ensure better prices for the farmers, besides, of course, the relentless push to promote genetically modified crops – which represents a large business interest – and new financial services. These are discussed at length in the last World Development Report 2008, which focuses on agriculture as an avenue towards development.
   

It is a rather curious coincidence that the World Bank chose to highlight agriculture over 20 years later in its annual flagship publication shortly before the food crisis became a global phenomenon. This publication will regardless be referred to time and again to promote and push policies across the globe calling for more involvement of the private sector and withdrawal of the state in all spheres of agriculture, despite the fact that the report admits to the failure of the private sector in certain sectors in different countries.
   

Findings of an Independent Evaluation Group report of the World Bank’s agricultural programmes in Sub-Saharan Africa between 1991 and 2006 only confirm that policymakers in Bangladesh or, for that matter, anywhere else in the world, should not be looking to the lending agencies for advice. The report, published late last year, found that donors and governments had neglected agriculture for a long time. Whatever limited activity there had been had performed ‘below par’. During the period of the study, the bank channelled $2.8 billion in investment lending to agriculture, constituting just 8 per cent of its investment lending to the region.
   

The authors of the report make a number of criticisms of the agency’s work. Apparently, having encouraged governments to close their public seed companies, ‘Bank projects have not been very successful in promoting private sector participation in seed production’. Regarding soil fertility, the report said the World Bank ‘did not appear to have engaged its African clients in serious policy dialogue about the region’s declining soil fertility’.
   

Regarding agricultural extension, the report says private extension services are generally skewed towards well-endowed regions and high-value crops — which are of little surprise. As for market access and ensuring better prices for the farmers, the study found that in most reforming countries the ‘private sector did not step in to fill the vacuum when the public sector withdrew’. Consequently, it found, the results fell short of expectations due to ‘inadequate background analytical work, weak political support, and insufficient appreciation of the system’s incentives’.
   

In conclusion, the report says ‘despite its presence for more than two decades in several countries, Bank support has so far not been able to help countries increase agricultural productivity sufficiently to arrest declining per capita food availability’.
   

While this internal study adds to the embarrassment of the lending agency, one really does not need to draw upon the Internal Evaluation Group’s findings to realise that the international financial institutions’ policies and prescriptions would eventually fail in developing countries like Bangladesh where over 80 per cent of the farmers are small and marginal. It is precisely because all policies and prescriptions of the lending agencies would necessarily hinge on the assumption of the ‘perfect market’ where information is ‘symmetrical’, competition is ‘perfect’, and individuals act as free radicals and to the best of their interests – all necessary presumptions of the ‘free market’.
   

It is a hard fact in Bangladesh that such a market does not exist. Information is anything but symmetrical and in fact highly skewed. Small and marginal farmers hardly realise that the price of their products rise several times by the time they reach the consumer or even the retailer. These farmers cannot – as perfect competition would dictate – sell their product to the highest bidder since they are simply not allowed to have a voice in the sales of their products. It is almost always a coercive process where the farmers are desperately dependent on the one or two brokers for their urgent need for cash, or are forced to sell to a certain agent at a certain price without ever participating even in the smallest of the local markets.
   

Thus, the lending agencies would be spewing out, as the World Bank does in its latest development report, sets of prescriptions based on a premise that does not exist in reality. That such prescriptions will fail should not come as a surprise but is absolutely predictable. But AB Mirza Azizul Islam, the finance adviser to the military-controlled interim government, and his comrades in arms running the current regime, appear more likely to gulp down whatever prescriptions come from these agencies, if they are is a hint of assistance.
   

The same day that he criticised the lending agencies to being all talk and no action (April 15), politicians and economists criticised the role of lending agencies and the governments’ subservient roles as regards their imposed diktats. They rightly suggested that the government should build a sufficient food stock to weather food crises in future. This is also what the incumbents should be concentrating on at the moment.


It would have been more helpful to the people if the incumbents themselves were more active instead of criticising the lenders for their ‘inaction’. In this regard the incumbents deserve to be commended indeed for finally, although belatedly, breaking out of their bureaucratic lethargy and declaring a procurement price for boro rice. However, the procurement target appears to have been reviewed downwards to some 1.5 million tonnes instead of 2 million tonnes as was hinted at earlier. And as for the procurement price, there are doubts that the benefit reach the farmers as they would not be selling the rice directly to the government but the rice millers would.
   

There should be little doubt that the backbone of Bangladesh agriculture are the small and marginal farmers constituting over 80 per cent of the 22 crore people engaged in farming, which incidentally makes the peasantry the largest employers of the country. Consequently, food security of Bangladeshis is directly dependent on the survival of and sustenance of the small farmers. If the incumbents can’t ensure implementation of a mechanism that guarantees prosperity for the small farmers instead of hurtling them down the familiar path of further marginalisation, it will eventually ruin the realistic prospect of attaining sustainable food sufficiency in a few staples and long-term food security in general. 

*Tanim Ahmed, journalist, NewAge, Dhaka, Bangladesh. Contact: tanimahmed@gmail.com

FTA Talks With Delhi: Dhaka to assess India’s export subsidy

Star Business Report, The Daily Star, April 21, 2008

The government is going to study Indian export subsidy as part of groundwork before it starts bilateral free trade agreement (FTA) talks with Delhi. 

The commerce ministry yesterday sent a letter to the Bangladesh High Commission in New Delhi to make the assessment as soon as possible, ministry sources said.

Asked, a high official of the ministry confirmed the government will start negotiations with India after getting the export subsidy assessment results.

“Bangladesh needs to fix its strategy against Indian subsidised exports otherwise Bangladesh will lose its market,” Feroz Ahmed, commerce secretary, said.

He said the country will focus on the products that have been included in the Safta negative list.

Golam Moazzem, senior research fellow of Centre for Policy Dialogue, said the country should focus on ‘Safta Plus’.

As the country has gained a little from many multilateral and regional deals the government should improve its two ways trade with major trading partners, he said.

The government earlier eyed bilateral free trade agreements with India, Pakistan, Sri Lanka, Malaysia, Myanmar and China. 

Many countries across the world are going for bilateral free trade agreements although they have many regional and multilateral trading agreements in place, Shishir Dev, a trade expert, said.

“The implementation process of bilateral free trade agreement is very simple and results of such agreement are very effective for which Bangladesh needs to consider signing FTA,” he added.

Bangladeshi import from India was recorded at US$21.10 billion in 2006-07 fiscal. 

Bangladesh exported only $ 350 million goods to India in the same period.

An government expert on international trade negotiation said FTA has some risks for smaller countries as how long the special and differential treatments (S&D) remains under the FTA the smaller countries can gain but when it ends the big countries continue gaining alone.

Preferring anonymity, he said FTAs have some benefits like it provides for duty free entry for all goods except those included in a short negotiated negative list.