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Symposium 2010

Proposal - Meeting the Rising Global Demand for Food

The Challenge

It is becoming increasingly difficult to satisfy the rising global demand for food in a sustainable manner. A number of factors contribute to uncertainty about the world’s ability to meet the food ...

It is becoming increasingly difficult to satisfy the rising global demand for food in a sustainable manner. A number of factors contribute to uncertainty about the world’s ability to meet the food demand of an increasing population: average living standards are rising; land use is shifting from agriculture to urban and industrial uses; the production of nonfood crops for biofuels is on the rise; investments in increasing agricultural productivity are growing slowly; water and arable land are increasingly becoming scarce; and global warming is making it more difficult to produce food in some poor countries. Moreover, the food price crisis of 2008 added fuel to the fire and put food security on top of the policy agenda.

There are four aspects of the global food problem:

  1. Supply side: How to increase the food production to meet increasing demand?
  2. Price regulation: How to avoid price shocks like in 2008?
  3. Social protection: How to prevent the proliferation and the deepening of poverty?
  4. International governance: How to design new international institutions and define rules aiming to cope with the food security threat?
  • I would like to focus particularly on the price regulation and the social protection aspects.

Price Regulation

Food price shocks have several adverse effects:

  • Increasing inflation has caused tight monetary policy which hinders growth and increases unemployment as well as increasing poverty.
  • Given that the food expenditures constitute a large share of the poor’s budget, food price shocks make the poor poorer.

Example of Turkey: Food expenditure’s share in the budget is 36 percent for the poorest 20 percent, but only 16 percent for the richest 20 percent. Inflation difference between the poor and the rich stagnated between 2003 and 2007, and then increased by 12 percentage points from 2007 to 2010. Main driving force was the food price shock.

Proposed Solutions
Let me remind you that most of the solutions have been proposed in the 2008 GES.
Food price shocks should be avoided as much as possible through:

  1. An international virtual grain reserve founded to regulate prices during shortages.
  2. A ban of speculation on food transactions.
  3. Avoiding price control of food during crises in developing countries.
    Let me remind you that the price controls have adverse effects on productivity growth in the long run as they weaken incentives to invest in new technologies.
    Furthermore, price controls should be accompanied by carefully designed policies to promote investments.
  4. A ban on food export restrictions.
  5. New WTO rules are needed.

However, I would like to emphasize that this is not realistic without a well functioning international reserve system.

Social Protection
Proliferation and deepening of poverty has adverse effects on health care and children’s education in the long run (vicious circle).

Example of Turkey: Poverty rate decreased from 23 percent in 2003 to 9 percent in 2006, and then slightly increased by 1 percentage point. During the same period, food consumption of the poorest declined by 2 percent; half of the poor declare that they had to decrease the food consumption of their children.

Proposed Solutions

The poor should be protected from the adverse effects of the grain shortages and high food prices.

  1. Countries should design a new price index, “Poor Consumer Price Index”, in order to monitor closely the food price effects on the poorest segments of the society and to take timely measures. WB and UNCTAD can collaborate in the design and the monitoring of this index.
  2. Aart De Geus projects that the prices in real terms of cereals, rice and oilseeds will be higher by 10 to 35 percent than in the past decade. As the food prices are projected to be persistently high, social protection is needed, and may be provided through a voucher system (Cash transfer systems are inefficient as they are not well-targeted). However, note that this system cannot be a viable solution if the supply side solutions are not working, as the voucher system is not a remedy to the disequilibrium between supply and demand, but can only redistribute the available quantity even though at a higher food price level.

International Governance

2008 Global Economic Crisis overshadowed the challenge of high food prices. A specific international financing system based on taxation of “winners” and a new institution based on the coordination between WB, FAO, WTO and UNCTAD should be established.

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