How the food and financial crises are interconnected

By Eric Toussaint, Brussels

In 2007-2008, the standard of living of more than half of the world population dropped dramatically when the price of food soared. There were massive demonstrations in at least 15 countries in the first half of 2008. Tens of millions of more people than before faced hunger, and hundreds of millions had to reduce their food consumption (and consequently, their access to other essential goods and services).

All of this was the result of decisions made by a handful of companies in the agro-industry and the financial sector (the institutional investors who contribute to doping the prices of agricultural products) with the backup of the US administration and the European Commission. In fact, the percentage of exports in the world production of food remains small. Only a small part of the rice, wheat or corn produced in the world is exported, while by far the greater amount is consumed in the country of production. However, the price on the export market determines the price on the local market. The export market price is fixed in the US, mainly in three stock exchanges (Chicago, Minneapolis and Kansas City). Consequently, the price of rice, wheat or corn in Timbuktu, Mexico, Nairobi and Islamabad is directly affected by the evolution of the prices of these cereals on the US stock markets.

In 2008, under pressure and to avoid being overthrown by the rioting at the four corners of the Earth, the authorities in the developing countries had to take measures to guarantee their citizens access to staple foods. This state of affairs resulted from several decades of governments gradually withdrawing their support from local cereal producers — who are mainly small producers — and following the neoliberal requirements imposed by institutions such as the World Bank and the International Monetary Fund as part of the “structural adjustment programs” and programs “to reduce poverty”. In the name of the “fight against poverty”, the institutions have convinced governments to carry out policies which have reproduced or even reinforced poverty.

Furthermore, during the last few years, many governments have signed bilateral treaties (especially free trade treaties) which made the situation worse. The World Trade Organisation Doha round of trade negotiations also had dire consequences. The developing countries gave up the trade barriers which protected the local producers from competition from foreign agricultural producers, mainly large North American and European agro-exportation companies. These then swamped local markets with agricultural products sold for less than it cost local farmers to produce them. This bankrupted local producers, many of whom migrated to the big cities of their own countries or the industrialised countries.

The global food crisis lays bare the workings of our capitalist society — the pursuit of maximum private profit in the short term. Capitalists see food as nothing more than merchandise to be sold for the highest possible profit. Food, an essential element of survival for human beings, is transformed into an instrument of pure profit. This sinister logic must be brought to its knees. It is time to abolish the control of capital over large-scale production and marketing and give priority to policies of food sovereignty.

The effects of climate change have temporarily disappeared from the headlines, supplanted by the financial crisis. Nevertheless, the process is underway on a global scale and here too, interdependency is obvious. Indeed the populations of the “poor” countries will be much more affected than those of the “rich” countries, but no-one will come out of it unscathed.

The convergence of these three crises shows populations the need to free themselves from capitalist society and its productivist model. The interdependency of capitalist crises highlights the need for an anti-capitalist and revolutionary program on global scale. Only international and systemic solutions can make for a favorable outcome for the populations and the environment. Humanity cannot be fobbed off with half measures.

[Abridged from Translated by Elizabeth Anne in collaboration with Vicki Briault. Eric Toussaint is president of the Committee for the Cancellation of Third World Debt — Belgium and author of The World Bank: A Critical Primer, Pluto, London, 2008.]