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World Bank and IMF Policies Caused Food Crisis

The IMF changed its economic direction and took a market radical neoliberal economic course at the beginning of the 1980s with the rise of monetarism. Hunger in the world can only be overcome with long term sustainable strategies, not with short term horizon of Wall Street.

By Christine Wicht

[This article published May 6, 2008 is translated from the German on the World Wide Web,  http://www.nachdenkseiten.de/up-print.php?p=3202.]

News and photos of unrest and disturbances of citizens resisting higher food prices circulate around the world. The World Bank forces a speedy resolute process. Jean Ziegler, UN special envoy for the right to food, World Hunger Relief and the Foodwatch organization condemn the use of food for production of bio-fuel and agricultural subsidies in the US and the European Union. World Hunger Relief estimates the number of people suffering hunger at over 850 million. According to data of the World Bank, the prices of food have soared 83 percent worldwide in the past three years. Greater production of bio-fuels, droughts and changed food habits in up-and-coming countries like China are cited as important reasons. However one of the main causes, the structural adjustment program (SAP), is kept secret.

Dominick Strauss-Kahn said: "Hundreds of thousands of people starve and children suffer malnutrition. The economies of states can be destroyed. This is a question of democracy and not only a humanitarian and economic question." This statement of the IMF director cannot be surpassed in cynicism since the IMF is largely responsible for causing this catastrophe.

When the IMF was founded in 1944 under the influence of Keynesianism as a result of the world economic crisis, it had the following goals:

Improving financial cooperation between states
Strengthening international trade
Stabilizing currency relations and currencies
International cooperation in monetary policy
Developing an international currency system
Financial assistance to overcome states' payment problems
Preventing dislocations in the balance of payments of states
Balanced economic growth

The IMF changed its economic direction and took a market radical neoliberal economic course at the beginning of the 1980s with the rise of monetarism as the dominant economic school influenced by the Chicago Boys around Milton Friedman. With this change of course, the IMF bid farewell to its original goals.


From that time on, credits were only given with massive conditions, the so-called structural adjustment programs (SAPs). In the last 20 years, the IMF has enforced its policy of neoliberal SAPs in over 150 countries. With enforcement of the principles of free trade in goods and services, competition orientation and above all deregulation and privatization of public functions, the IMF has given access to new markets and economic power to corporations of rich member countries. This policy often had a fatal effect on the living conditions of the populations of states "promoted" by the IMF. Overexploitation of the environment cannot be denied. SAPs prescribe pushing back the state and privatizing public enterprises. In this way, contracts for businesses and investments from the rich industrial countries are made possible. International corporations dominate important markets.

National economies are consciously and systematically forced into permanent economic dependence. In his book "Global Brutal," Michel Choussudousky describes the division of labor between the sister organizations the IMF and the World Bank. Political negotiations on exchange rates and budget deficits fall in the IMF's sphere of competence. The World Bank focuses on its representation in the "promoted" countries, promoting reform processes and influencing many governments of borrowing countries. The reforms to be implemented regarding industry, agriculture, health, education etc. come in its sphere of competence.


Whoever does not bow to the "conditions" of the IMF receives no credits any more from the Fund. A negative rating by the IMF means the country is on a black list since other donor countries usually rely on how a country is rated by the IMF.

With its economic policy based on the SAP, the IMF drives whole branches of industry into bankruptcy which for some developing countries means state bankruptcy or at least more indebtedness. Debtor countries are brought into permanent dependency. Forced "liberalization" of markets is another step into the helplessness of debtor countries since the donor countries flood the market with their - often enormously subsidized - goods. In many cases, local goods become very expensive compared to the cheap imports, cannot be sold and established branches of industry or trade atrophy. The consequences are job losses and poverty. To promote exports from their own country and raise the price and thereby reduce imports, only the devaluation of national currencies remains. These devaluations have the result that the costs for basic goods, medicine and fuel on whose import these countries rely soar so intensely that more and more citizens cannot meet their basic needs. In addition, building industrial mega-projects in combination with the SAPs often drive farmers out of their small farmer structures and rob them of their foundations for life. They can no longer feed themselves.


Since human memory, the reclamation and exchange of sees has been in the hands of farmers. Transnational corporations always searching for new markets have infiltrated this tradition on the way to the international commercialization of seed through the TRIPS agreement. The origin and substance of the TRIPS agreement show that protecting those who already have "intellectual property" in certain seeds were central. The rules of the agreement clearly favor the commercialization interests of corporations in industrial countries. Transnational corporate representatives boast that TRIPS goes back to their initiative. 13 US corporations including well-known businesses like Bristol Myers-Squibb, DuPont and Monsanto participate. In many developing countries, the agricultural basis was destroyed and hunger and poverty spread even more intensely.

Patenting seeds is connected with genetic engineering driving farmers into greater dependence on agricultural conglomerates.


The influence of these corporations in many parts of the world, for example Argentina, Brazil and Iraq, shows the seed industry can exploit crises and bind much of the population to their products. Naomi Klein describes this in her book "The Shock Doctrine." The greatly praised genetic engineering propagated in almost all parts of the world with the claim of solving the hunger problem in the world is increasingly Pandora's Box. In a new study the environmental organization GLOBAL 2000 summarized: the extolled benefits of genetic plants have not proven true. Pesticides in agriculture increased significantly. "Slow Food" tells about experiences with so-called "green genetic engineering." American and Canadian farmers - after a 10-year experience with genetically-modified plants - admit the harvest yields fell while the need for pesticides rose and the nutritional value of the products diminished. Several recent studies demonstrated that health risks were not eliminated with genetically-modified corn, rice or peas. Moreover the World Food Organization (FAO) has destroyed the legend that the world food problematic could be solved with genetically-manipulated organisms (GMO). An incalculable irreversible encroachment in the genetic structures of plants occurs that is fraught with risks under the claim of securing humanity's food. Poor countries have no advantages from genetic technology. The interests of the seed industry are obviously served with the license of genetic engineering.


Small farmers depend on intact, undamaged and good-quality soil and irrigation water for their food security. Although they live from what they grow, small farmers cannot pay the higher price for water in some poor countries. A sixth of the world's population, 1.2 billion people, has no access to clear drinking water. Water consumption rose with increasing industrialization and intensive agriculture. Around 70% of water consumption worldwide goes back to agriculture. According to data of the Food Organization of the United Nations, 40% of food is produced on synthetically irrigated fields. Through intensive agriculture, massive amounts of fertilizers and pesticides reach the soil and groundwater. Since water is a basic need of all persons and a driving force of economic development, it is also a lucrative business. With the shortage of this most important human resource, both prices and profits of corporations that control the "blue gold" soar. For years, food corporations like Nestle (with its brand-name products Perrier, Contrex and Vittel), Danone (Evian) and Hindustan Lever (a subsidiary of Unilever on the India market) have dominated a large part of the global market for water in bottles and canisters. In the third world, global businesses profit from the fact that citizens in many states have no functioning public water supply. Development policy often serves as a gateway for enforcing privatization and liberalization of the water supply internationally. As important creditors, the International Monetary Fund and the World Bank for years have demanded the deregulation and privatization of public functions. Debt reduction with the help of SAPs serves as the pretext. The World Bank and the IMF play an important role in the water privatization of poor countries. According to credit data of the IMF, the IMF in 2000 made privatization and market-based or cost-covering prices of water supply into conditions for twelve countries. Eight of the countries are in the region south of the Sahara; these countries are small, poor and heavily-indebted. The Fund granted Tanzania a debt remission in the framework of the IMF program for "reducing poverty and promoting growth." This debt cancellation was tied to the condition that the waterworks of Darussalam be transferred to private operators. Obligated to the World Bank, Niger must privatize its four largest state sectors water, telecommunications, electricity and crude oil. Rwanda and Central American Honduras faced similar demands. Nicaragua had to raise water and sewage prices and awarded water concessions to private operators in four regions of the land. The construction of dams forced small farmers to leave their land. Many residents are cut off from the water supply through dams like the dam in South Africa financed by the World Bank (Lesotho Highlands Water Project with the mega-dams Katse and Mohale). Since the costs for the dam were underestimated, the World Bank worked out a program for investments in the urban infrastructure which in a collateral government agreement prohibited subsidizing the water supply of poor communities (Source: "Blue Gold," Maude Barlow, p.205/206f).


The climate changes caused by the use of fossil sources of energy oil, coal and carbon dioxide and the constantly higher price for crude oil provoke the question about alternatives. In recent years, promoting energy production from plants was in vogue. The energy plants are mostly cultivated, sprayed and fertilized in a conventional way. More chemical agents enter the groundwater and contaminate the drinking water. Referring to a supposed environmentally-friendly energy production, controversial genetic engineering occurs in agriculture on a large scale. Beside the ecological damages through extensive cultivation (monocultures) of energy plants, another aspect of this form of energy production deserves criticism. While people starve to death, arable acreage used for energy production is lost for food production. Therefore the prefix "bio" is more deceptive packaging than an environmentally-friendly alternative to fossil energy. The soil and environment are damaged through extensive cultivation of energy plants. This is not defensible ecologically because the principle of sustainability is violated. Small farmers must yield to the industrial cultivation of energy plants even though energy plants are partly responsible for the energy distress of rich countries and hunger in several poor countries. The EU (European Union) still holds to the goal of gaining more fuel from useful plants.


The effects of cultivating energy plants in Brazil are grave. Sugar cane is grown for ethanol production in Brazil. The ecological balance in Brazil is permanently disturbed since large parts of the primeval forest are cut down for sugar cane acreage. Thus the rainforest as an important protector of the atmosphere is destroyed in the name of an alleged ecological energy policy. In Indonesia, primeval forests are also decimated for growing palm oil plants. The fruit of palm oil is very valuable. No other economic plant produces as much vegetable oil. Over 80% of the world production of vegetable oil comes from Malaysia and Indonesia. Every year around 2 million hectares of primeval forest, equivalent to half of the Netherlands, is cut down. Hardly any rainforests still exist in Borneo; a large part was converted into plantations. Soya is grown on a large scale in South America for feed for cattle, pigs and chicken in China and Europe, for production of bio-fuel and as elements for pools, dyes and detergents. According to an IMF study, soy cultivation in Argentina, Bolivia, Brazil and Paraguay has more than doubled in the last ten years. The creation of soy fields has led to massive land expropriations and robbed countless small farmers of their foundation of life.


Since the middle of the 1990s, the World Bank has offered landless persons the possibility of buying and tilling the land of big landowners with the help of subsidies and credits. The crux of the matter is that a farmer can only call the land his own if he can pay back the credit plus interests. Experiences from Brazil, Columbia and South Africa show that many farmers fall in an indebtedness trap plunging them into even greater poverty.


For quite a long time, negotiations between the European Union and African-Caribbean-Pacific states (ACP-states) focused on "Economic Partnership Agreements" (EPAs). Economic cooperation is propagated with nice-sounding motives like "removal of poverty," "promotion of sustainable development," "advancement of human rights" and "furtherance of democracy." The ACP-states should open their markets more strongly for the economy of the EU and in a countermove obtain access to European markets with the help of "preferential tariffs." However small African farmers and local producers fear the collapse of local branches of production, loss of food sovereignty and increasing dependence on Europe. Because of the massive subsidy policy, many important products exported from the European Union are much cheaper than non-subsidized meat from the ACP-states. The delivery of highly subsidized frozen chicken pieces from the EU had disastrous consequences for the poultry market of Ghana and Cameroon and threatened the existence of African chicken producers. The kilo-price for imported chicken was up to 50% below the price of local chicken meat. The Evangelical Development Service published a brochure titled "Don't Send Chickens - How chicken meat from Europe ruins small farmers in West Africa and a strong citizen movement in Cameroon successfully resists."

Subsidized EU-agricultural products often dominate the markets of developing countries and destroy the economic basis and foundation of existence of small farmers there. For example, subsidized milk, onions, tomatoes, corn, rice and tomato paste are imported. The Senegalese protest against the effects of the fisheries agreement that the EU passed with the ACP-states. A study of the UN Environmental Program concludes that the revenues Senegal receives from the EU agreement in no way cover the revenue losses and damages to the fish resources.


The United Nations set the goal of cutting in half the number of starving persons by the year 2015. This goal now seems a long way off because of the striking developments these days. The current report of the FAO (World Food Organization) expects a new record harvest although this will not help Africa's inhabitants on account of the soaring prices. The farmer network Via Campesina warns of a change of course in good policy. According to this network, the landless and farm workers are especially affected by the rising world market prices for food. In addition, the higher prices for feed and fertilizer put farmers under pressure. The liberalization of the agricultural commodities market is cited as a reason for increasing poverty and hunger. The organization sees a way out of this dilemma only in returning to a sustainable family economy (source: Bread for the World).

This distress cannot be dissolved by emergency relief payments of the German government and other countries that are miniscule compared with the profits gained in the last 20 years with the help of SAPs.

Hunger in the world can only be overcome with long term sustainable strategies and plans, not with the short-term horizon of Wall Street and the investment- and profit interests of global corporations and investors. Returning to the independence of farmers in small farmer structures with cooperative organizations not oriented in profit maximization is imperative along with a fair land reform. Independence from the worldwide seed industry and its patent rights is also vital. This independence is one of the most important prerequisites for sovereign food production. Creating a world trade order that does not encourage the special interests of the corporations and financial institutions of industrial countries and damage the poorest countries of the world is the foundation for an improvement.

Instead of the past "one-size-fits-all solution" (Joseph Stiglitz) of the IMF and the World Bank, development strategies must be introduced appropriate to the differences and complexities of developing countries. The neoliberal economic policy propagated by the World Bank and the IMF, their "market fundamentalism," must be abandoned. Its breakdown is proven again in the current food crisis.

The voices of developing countries can hardly be heard as long as the World Bank and the IMF are dominated by the US and Europe. Therefore the role of the United Nations, the economic and social agencies of the UN in crafting development strategies must be strengthened.

Fair trade agreements that really promote development in poorer countries are crucial. Industrial countries may not repress local agricultural production any longer with their subsidized agricultural commodity products. They must pay reasonable prices for natural resources. Investments should be made in the infrastructures for the basic provision of poor countries instead of stabilizing corrupt dictators with weapon deliveries. The war against poverty could be won with a fraction of the money instead of wasting trillions in unwinnable wars as in Iraq and Afghanistan.

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