Michel Chossudovsky is Professor of Economics at the University of Ottawa and Director of the Centre for Research on Globalization (CRG), which hosts the critically acclaimed website www.globalresearch.ca . He is a contributor to the Encyclopedia Britannica. His writings have been translated into more than 20 languages.
Poverty and chronic undernourishment is a pre-existing condition, prior to the recent hikes in food prices. The latter are hitting an impoverished population, which has barely the means to survive.
Food riots have erupted almost simultaneously in all major regions of the World:
With large sectors of the World population already well below the poverty line, the short-term hike in the prices of food staples is devastating. Millions of people around the World are unable to purchase food for their survival
These hikes are contributing in a very real sense to "eliminating the poor" through "starvation deaths". In the words of Henry Kissinger: "Control oil and you control nations; control food and you control the people."
In this regard, Kissinger had intimated in the context of the 1974 National Security Study Memorandum 200: Implications of Worldwide Population Growth for U.S. Security and Overseas Interests". that the recurrence of famines could constitute a de facto instrument of population control.
According to the FAO, the price of grain staples has increased by 88% since March 2007. The price of wheat has increased by 181% over a three year period. The price of rice has increased by 50% over the last three months (See Ian Angus, Food Crisis: "The greatest demonstration of the historical failure of the capitalist model", Global Research, April 2008):
Two Interrelated Dimensions
There are two interrelated dimensions to the ongoing global food crisis, which has spearheaded millions of people around the World into starvation and chronic deprivation, where people no longer have the means to purchase food.
First, there is a long term historical process of macroeconomic policy reform and global economic restructuring which has contributed to depressing the standard living Worldwide in both the developing and developed countries.
Second, these preexisting historical conditions of mass poverty have been exacerbated and aggravated by the recent surge in grain prices, which have led in some cases to the doubling of the retail price of food staples. These price hikes are in large part the result of speculative trade in food staples.
Speculative Surge in Grain Prices
The media has casually misled public opinion on the causes of these price hikes, focusing almost exclusively on issues of costs of production, climate and other factors which result in reduced supply and which might contribute to boosting the price of food staples. While these factors may come into play, they are of limited relevance in explaining the impressive and dramatic surge in commodity prices.
Spiraling food prices are in large part the result of market manipulation. They are largely attributable to speculative trade on the commodity markets. Grain prices are boosted artificially by large scale speculative operations on the New York and Chicago mercantile exchanges. It is worth noting that in 2007, the Chicago Board of Trade (CBOT), merged with the Chicago Mercantile Exchange, forming the largest Worldwide entity dealing in commodity trade including a wide range of speculative instruments (options, options on futures, index funds, etc).
Speculative trade in wheat, rice or corn, can occur without the occurrence of real commodity transactions.
The institutions speculating in the grain market are not necessarily involved in the actual selling or delivery of grain. The transactions may use commodity index funds which are bets on the general upward or downward movement of commodity prices.
A "put option" is a bet that the price will go down, a "call option" is a bet that the price will go up. Through concerted manipulation, institutional traders and financial institutions make the price go up and then place their bets on an upward movement in the price of a particular commodity. Speculation generates market volatility. In turn, the resulting instability encourages further speculative activity.
Profits are made when the price goes up. Conversely, if the speculator is short-selling the market, money will be made when the price collapses.
This recent speculative surge in food prices has been conducive to a Worldwide process of famine formation on an unprecedented scale.
These speculative operations do not purposely trigger famine. What triggers famine is the absence of regulatory procedures pertaining to speculative trade (options, options on futures, commodity index funds). In the present context, a freeze of speculative trade in food staples, taken as a political decision, would immediately contribute to lower food prices.
Nothing prevents these transactions from being neutralized and defused through a set of carefully devised regulatory measures.
Visibly, this is not what is being proposed by the World Bank and the International Monetary Fund.
Role of the IMF and the World Bank
The World Bank and the IMF have come forth with an emergency plan, to boost agriculture in response to the "food crisis". The causes of this crisis, however, are not addressed.
The World Bank's president Robert B. Zoellick describes this initiative as a "new deal", an action plan "for a long-term boost to agricultural production.", which consists inter alia in a doubling of agricultural loans to African farmers.
IMF/World Bank "economic medicine" is not the "solution" but in large part the "cause" of famine in developing countries. More IMF-World Bank lending "to boost agriculture" will serve to increase levels of indebtedness.
World Bank "policy based loans" are granted on condition the countries abide by the neoliberal policy agenda which, since the early 1980s, has been conducive to the collapse of local level food agriculture.
"Macro-economic stabilization" and structural adjustment programs imposed by the IMF and the World Bank on developing countries (as a condition for the renegotiation of their external debt) have led to the impoverishment of hundreds of millions of people.
The harsh economic and social realities underlying IMF intervention are soaring food prices, local-level famines, massive lay-offs of urban workers and civil servants and the destruction of social programs. Internal purchasing power has collapsed, famines health clinics and schools have been closed down, hundreds of millions of children have been denied the right to primary education.
IMF Shock Treatment
The Deregulation of Grain Markets
Since the 1980s, grain markets have been deregulated under the supervision of the World Bank and US/EU grain surpluses are used systematically to destroy the peasantry and destabilize national food agriculture. In this regard, World Bank lending requires the lifting of trade barriers on imported agricultural staples, leading to the dumping of US/EU grain surpluses onto local market. These and other measures have spearheaded local agricultural producers into bankruptcy.
A "free market" in grain --imposed by the IMF and the World Bank-- destroys the peasant economy and undermines "food security". Malawi and Zimbabwe were once prosperous grain surplus countries, Rwanda was virtually self-sufficient in food until 1990 when the IMF ordered the dumping of EU and US grain surpluses on the domestic market precipitating small farmers into bankruptcy. In 1991-92, famine had hit Kenya, East Africa's most successful bread-basket economy. The Nairobi government had been previously placed on a black list for not having obeyed IMF prescriptions. The deregulation of the grain market had been demanded as one of the conditions for the rescheduling of Nairobi's external debt with the Paris Club of official creditors. (Michel Chossudovsky, The Globalization of Poverty and the New World Order, Second Edition, Montreal 2003)
Throughout Africa, as well as in Southeast Asia and Latin America, the pattern of "sectoral adjustment" in agriculture under the custody of the Bretton Woods institutions has been unequivocally towards the destruction of food security. Dependency vis-à-vis the world market has been reinforced leading to a boost in commercial grain imports as well as an increase in the influx of "food aid".
Agricultural producers were encouraged to abandon food farming and switch into "high value" export crops. often to the detriment of food self-sufficiency. The high value products as well as the cash crops for export were supported by World Bank loans.
Famines in the age of globalization are the result of policy. Famine is not the consequence of a scarcity of food but in fact quite the opposite: global food surpluses are used to destabilize agricultural production in developing countries.
Tightly regulated and controlled by international agro-business, this oversupply is ultimately conducive to the stagnation of both production and consumption of essential food staples and the impoverishment of farmers throughout the world. Moreover, in the era of globalization, the IMF-World Bank structural adjustment program bears a direct relationship to the process of famine formation because it systematically undermines all categories of economic activity, whether urban or rural, which do not directly serve the interests of the global market system.
The earnings of farmers in rich and poor countries alike are squeezed by a handful of global agro-industrial enterprises which simultaneously control the markets for grain, farm inputs, seeds and processed foods. One giant firm Cargill Inc. with more than 140 affiliates and subsidiaries around the World controls a large share of the international trade in grain. Since the 1950s, Cargill became the main contractor of US "food aid" funded under Public Law 480 (1954).
World agriculture has for the first time in history the capacity to satisfy the food requirements of the entire planet, yet the very nature of the global market system prevents this from occurring. The capacity to produce food is immense yet the levels of food consumption remain exceedingly low because a large share of the World's population lives in conditions of abject poverty and deprivation. Moreover, the process of "modernization" of agriculture has led to the dispossession of the peasantry, increased landlessness and environmental degradation. In other words, the very forces which encourage global food production to expand are also conducive antithetically to a contraction in the standard of living and a decline in the demand for food.
Genetically Modified Seeds
Coinciding with the establishment the World Trade Organization (WTO) in 1995, another important historical change has occurred in the structure of global agriculture.
Under the articles of agreement of the World Trade Organization (WTO)), the food giants will have unrestricted freedom to enter the seeds markets of developing countries. The acquisition of exclusive "intellectual property rights" over plant varieties by international agro-industrial interests, also favors the destruction of bio-diversity.
Acting on behalf of a handful of biotech conglomerates, GMO seeds have been imposed on farmers, often in the context of "food aid programs". In Ethiopia, for instance, kits of GMO seeds were handed out to impoverished farmers with a view to rehabilitating agricultural production in the wake of a major drought . The GMO seeds were planted, yielding a harvest. But then the farmer came to realize that the GMO seeds could not be replanted without paying royalties to Monsanto, Arch Daniel Midland et al. Then, the farmers discovered that the seeds would harvest only if they used the farm inputs including the fertilizer, insecticide and herbicide, produced and distributed by the biotech agribusiness companies. Entire peasant economies were locked into the grip of the agribusiness conglomerates.
With the widespread adoption of GMO seeds, a major transition has occurred in the structure and history of settled agriculture since its inception 10,000 years ago.
The Globalization of Poverty and the New World Order
by Michel Chossudovsky
This book is a skilful combination of lucid explanation and cogently argued critique of the fundamental directions in which our world is moving financially and economically.
In this new enlarged edition –which includes ten new chapters and a new introduction-- the author reviews the causes and consequences of famine in Sub-Saharan Africa, the dramatic meltdown of financial markets, the demise of State social programs and the devastation resulting from corporate downsizing and trade liberalisation.
Published in 12 languages. More than 150,000 copies sold Worldwide.
The Globalization of Poverty in its First and Second editions has been published in twelve languages. Twelve English language editions and co-editions in the US, UK, Canada (2 editions), Australia, Malaysia (2 editions), South Africa, India (2 editions), Philippines (2 editions)), French (2 editions), German, Spanish, Portuguese (two editions, Brazil and Portugal), Finnish, Turkish, Japanese, Korean, Italian (2 editions), Arabic, Croatian.