The Food Crisis Is Back

Fears over global hunger are back, and this time there are two drivers—not only volatile commodity prices, but also job losses and plunging incomes around the world. A study released last week by the International Labor Organization predicted that if current economic conditions continue through the new year, 200 million workers, mostly in developing countries, will be pushed into extreme poverty by loss of jobs or lowered wages. "Our message is realistic, not alarmist," says ILO Director-general Juan Somavia. "We are now facing a global jobs crisis."

And, by proxy, a potential food crisis. Even though agricultural commodity prices are down from their peak last summer, hunger is likely to increase this year in sub-Saharan Africa and South Asia, which have the world's harshest labor markets and highest hunger levels, as well as in the Caribbean and parts of Central Asia. At a global food security summit in Madrid last week, UN and government officials blamed worsening unemployment and dramatically decreasing remittances from abroad, which account for as much as a quarter of GDP in some poor countries.

Debilitated public finances won't help either. Historically, aid promises are often reneged upon in financial downturns. Of the record $18 billion in food pledges made by developed nations during the height of last year's food crisis, very little has yet to materialize, says UN spokesman Tim Wall, though he cautions that it's too soon to know for certain. What's more, as economies deteriorate, poorer countries will be less likely to continue subsidizing food prices for their own populations. The International Monetary Fund projects that emerging market GDP growth will fall to 3 percent in 2009 from 3 percent last year.

That's problematic, because food prices are likely to begin spiking again toward the end of this year or early next. Agricultural goods, unlike other commodities, are still more expensive now than they were 12 months ago, before the first food crisis began. A Chatham House report released last week notes that even the recent fall from peak prices is only temporary, as future supplies are likely to be constrained in part by a continuing lack of investment in agriculture. The economic downturn means small farmers can't afford to plant to full capacity, and there are early signs that the credit crisis has dried up some of the private investment that was supposed to spark a second Green Revolution. As always, it will be the poorest that suffer first.

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