Manufacturing A Food Crisis
By Walden Bello
June 2, 2008 edition of The Nation
May 15, 2008
http://www.thenation.com/doc/20080602/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?

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-Giménez 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. To head
off peasant discontent, the regime provided farmers with
subsidized fertilizer and seeds, launched credit plans
and built rural infrastructure. When Marcos fled the
country in 1986, there were 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 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 shortfalls.
The massive imports 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
Bryceson 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 'consumer' of costly seeds and 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.

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 percent 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."

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

Walden Bello is senior analyst at and former executive
director of Focus on the Global South, a research and
advocacy institute based at Chulalongkorn University in
Bangkok. He is the author or co-author of many books on
politics and economic issues in the Philippines and
Asia, including, most recently, Deglobalization (Zed),
and recipient of the 2003 Right Livelihood Award, also
known as the "Alternative Nobel Prize." In March he was
named Outstanding Public Scholar for 2008 by the
International Studies Association.