inflation

G-20 Searches for Answers to Food Crisis

Mariama Zachary and Akua Azaiz tend to cocoa beans on a drying table in Ghana. Photo: <a href="http://www.flickr.com/photos/48639212@N02/5574716960/">Gates Foundation (flickr)</a>
Mariama Zachary and Akua Azaiz tend to cocoa beans on a drying table in Ghana. Photo: Gates Foundation (flickr)

Food prices are exceeding record highs—prompting policymakers worldwide to take action. A recent meeting of the G-20 agriculture ministers has given reason for hope, but many obstacles to less expensive food remain.

According to the BBC, 44 million people were driven into poverty last year by food price volatility — increasing the risk of conflict and adding to human suffering. Rising food prices also threaten to derail the fragile global economy, acting like an extra tax on consumers, says World Bank head, Robert Zoellick.

"We have been in a period of extraordinary volatility in food prices, which poses a real danger of irreparable harm to the most vulnerable nations and people. High, uncertain and volatile food prices are the single gravest threat facing the most vulnerable in the developing world."

The severity of the crisis has prompted the G-20 and the World Bank to push forward a number of non-contentious initiatives, three of the most important being:

  • To reduce the impact of food price variability through loans . Called Agriculture Price Risk Management, the idea is to reduce farmer risk and thereby increase production of staple crops like wheat, rice, corn, and soybeans.
  • To reduce food price volatility via information sharing. Known as the Agricultural Market Information System, according to The Wall Street Journal, this initiative encourages collaboration among nations to mitigate the affects of panic buying and export bans (among others), which often exacerbate a food crisis. Click here to observe food price fluctuations around the world.
  • Eliminating export restrictions for food aid programs. The G-20 agricultural ministers agreed to abandon export restrictions on food aid bought by the World Food Program, states The Wall Street Journal.

Despite these promising developments, the most contentious issues will be left to future meetings. Of these, three of the most important are:

  • The restriction of bio-fuel production. Food production advocates want subsidies eliminated for grains grown for fuel, says the Christian Science Monitor. However, the delegates were unable to reach consensus on reducing farm subsidies for biofuel production.
  • Increased regulation of commodity speculators. Derivatives markets played a major role in causing the recent recession, and policymakers around the developed world are passing legislation to mitigate their harmful impact (including on food prices). Policymakers are stepping lightly, afraid over-regulation could stifle production.
  • Creation of an African food bank. According to The Christian Science Monitor, member African nations (and international backers) would build up a continental food reserve which could be tapped into when a supply shortage occurs. The risk of underfunding and the politics behind "who pays for what" could prove fatal to this proposal.

Of course, imbalances in population growth and food supply is a major problem too, but that's another story. In general, the G-20 and World Bank's increased focus on food prices has been well-received. "People are hungry for food and for action on a global level," says Robert Zoellick, according to the BBC.

Harrowing Hyperinflation

Topics: Governance
Countries: Zimbabwe

Zimbabwe's current hyperinflation rate sounds as flabbergasting as it is: 6.5 quindecillion novemdecillion percent.

That's 65 followed by 107 zeroes, and the number is doubling nearly every day. Zimbabwe's Harare Tribune says that bank withdrawals are limited to an amount that won't even cover half a loaf of bread.

Staggering inflation has made the currency practically worthless — causing locals to turn to foreign currencies like the U.S. dollar, the South African rand, Botswana pula or Zambian kwacha and reviving bartering, reports the UN news service.

From the Archives

An Inflation Reality Check

Previously filed under: Global Economy
While Zimbabwe demonstrates record breaking inflation, one may also look at Russia, Vietnam, Argentina, and Venezuela to see double digit inflation.

UN Plans to Ration Food Aid

Topics: Food
Food distribution line. Photo: L. Boscardi/UNHCR
Food distribution line. Photo: L. Boscardi/UNHCR

The UN is preparing plans to ration its food aid to people in need if new donations don't provide more money soon, according to an article in the Financial Times this week. Rising global food prices are putting serious pressures on the World Food Program (WFP)'s budget, to the tune of several million dollars each week.

"The WFP crisis talks come as the body sees the emergence of a "new area of hunger" in developing countries where even middle-class, urban people are being "priced out of the food market" because of rising food prices.

The warning suggests that the price jump in agricultural commodities - such as wheat, corn, rice and soyabeans - is having a wider impact than thought, hitting countries that have previously largely escaped hunger."

It is not just the UN that will have to ration its food aid. Countries like Egypt and Pakistan are reinstating or strengthening rationing systems for the first time in decades. Unfortunately, the crisis will be getting worse in the short term. According to the US Department of Agriculture "high agricultural commodities prices [will] continue for at least the next two to three years."

Where 10,000-Dollar Bills Mean Nothing

Topics: Informal Economy
Countries: Zimbabwe
Here's 60 million Zim Dollars, roughly the equivalent of US $400 (August 2007). Photo: <a href="http://www.flickr.com/photos/grahamking/1015478118/">GrahamKing (flickr)</a>
Here's 60 million Zim Dollars, roughly the equivalent of US $400 (August 2007). Photo: GrahamKing (flickr)

Imagine a place where you would rather use a $10,000 bill to light a fire than actually try to purchase goods.

Today, The Washington Post provides an excellent look at the Black Market in Zimbabwe, a country where 80 percent of the population lives in poverty. The article puts a very real face on the black market industry as Craig Timberg follows a trader around for the day.

The economy began its free fall when landless black peasants invaded white-owned farms in 2000 with the support of Mugabe, who said the redistribution would undo colonial inequities. The often violent process decimated the country's most crucial industry and biggest earner of foreign exchange, triggering hyperinflation that has rarely paused on its staggering ascent.

Today, it's not unusual to see a wadded-up 10,000-dollar bill lying on Harare's filthy sidewalks. Though officially worth about 33 cents in U.S. currency, the real value is about one-tenth of a penny.

Keywords: inflation

Do Higher Oil Prices Mean Poverty for Middle East?

Topics: Energy and Oil
Countries: Jordan

It seems counter intuitive-- how can higher oil prices possibly make oil rich countries like Saudi Arabia worse off? Well, these prices are certainly hurting the middle class.

Today's New York Times article is a must read on the subject:

Here in Jordan, the cost of maintaining fuel subsidies amid the surge in prices forced the government to remove almost all the subsidies this month, sending the price of some fuels up 76 percent overnight. In a devastating domino effect, the cost of basic foods like eggs, potatoes and cucumbers doubled or more.

In Saudi Arabia, where inflation had been virtually zero for a decade, it recently reached an official level of 6.5 percent, though unofficial estimates put it much higher. Public protests and boycotts have followed, and 19 prominent clerics posted an unusual statement on the Internet in December warning of a crisis that would cause “theft, cheating, armed robbery and resentment between rich and poor.”

The inflation has many causes ranging from a weakening dollar to global commodity demand, but the fact is that average citizens in many oil rich countries are not benefiting from high oil prices. From Yemen to Morocco, the higher food prices and shrinking government subsidies have resulted in protests and demonstrations with people blaming corrupt officials for higher prices.

From Harare: A Tale of Survival

Topics: Culture
Countries: Zimbabwe

The BBC is featuring a diary written by a woman living and working in Zimbabwe in which she describes the challenges of living a normal day-to-day life in the face of economic crisis and rampant inflation.

Monetary Flu Season

In a daily analysis from last week, Council on Foreign Relations senior fellow Benn Still suggested that the United States is “exporting inflation worldwide.” The latest action by the US Federal Reserve may have staved off inflationary disaster domestically but only to the detriment of other nations who peg their currency to the dollar.

Venezuela struggled with inflation rates over 20 percent in 2007 (Bloomberg). Argentina and Bolivia face similar concerns. Official data puts Russian inflation for 2007 at nearly 12 percent (Forbes). Several Gulf Arab states also find themselves with inflation over or near 10 percent. In China, rates near 7 percent registered in December 2007 represent the highest inflation in over a decade. China’s Prime Minister Wen Jiabao recently announced Beijing would freeze short-term energy prices in an attempt to curb consumer price increases (NYT).

Dark Clouds on the Horizon

Topics: Globalization

Nobel laureate economist Joseph Stiglitz paints a grim picture of the global economic outlook for 2008. Stiglitz warns that this is likely to trigger a backlash against the forces of globalization and that:

For those who think that a well-managed globalization has the potential to benefit both developed and developing countries, and who believe in global social justice and the importance of democracy (and the vibrant middle class that supports it), all of this is bad news.

In the end, Stiglitz believes that central banks will be able to restore order after a global slowdown in which the inflationary pressure is wrung out of the system.

From the Archives

Inflation Hits Aid Agencies' Capacity to Assist in Zimbabwe

Previously filed under: Africa, Global Economy
Non-governmental organizations face increasing pressure as humanitarian needs grow and supplies become more expensive.

From the Archives

Why Dollar Hegemony Is Unhealthy

Previously filed under: North America, Global Economy
The world's dangerous dependence on the US dollar may risk hurting the global economy.

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International Herald Tribune - Wed, 02/08/2012 - 08:26
India’s central bank and economic analysts predict that growth will fall sharply to 7 percent this fiscal year and remain sluggish.

Social responsibility and a new world order

Washington Post - Innovations - Tue, 02/07/2012 - 07:56
Just before the New Year, the London-based Center for Economics and Business Research announced that Brazil had overtaken the United Kingdom as the world’s sixth largest economy. Furthermore, it predicted that by 2020, India and Russia will also have overtaken all the European economic powers.

Aid for trade policy rears its ugly head

The Guardian's Poverty Matters - Mon, 02/06/2012 - 01:41
The UK government's dismay at not being granted the contract for Typhoon fighter jets in India is an indication that its controversial aid for trade policy is still very much alive.

Liberia's battle to put the lights back on

The Guardian's Poverty Matters - Sun, 02/05/2012 - 23:00
Ellen Johnson Sirleaf has set ambitious targets to restore the country's electricity supply. But will it meet them by 2015?

As Africa's consumers rise, so does inequality

Yale Global Online - Fri, 02/03/2012 - 10:17
Kenya struggles to spread the wealth from rapid growth.

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