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How to address the fight against global hunger

Among the multiple crises that have erupted around the world, the avoidable tragedy of growing hunger receives only fleeting mention. And any attention that it does attract is apparently not enough to prompt global policymakers to act.

Yet a new report from the Food and Agriculture Organization (FAO) of the United Nations makes for grim reading. According to the State of Food Security and Nutrition in the World 2023, an estimated 42% of the world’s population — more than 3.1 billion people — were unable to afford a healthy diet in 2021. Moreover, global hunger is still far above pre-pandemic levels, with about 122 million more people facing food insecurity last year than in 2019, and is on the rise throughout Africa, Western Asia and the Caribbean, owing partly to higher prices.

At the national level, a worrying pattern can be seen: the countries with the largest increases in food insecurity are also those engulfed in debt crises and experiencing the severest effects of climate change.

Now there is a growing awareness of the concentration of power in agribusiness and the ability of the sector’s behemoths to influence global food prices. In addition, speculative activity in commodity futures markets can affect food prices in spot markets.

Both factors were addressed in detail in the Trade and Development Report 2023, published by the UN Conference on Trade and Development, which confirms that “corporate profits from financial operations appear to be strongly linked to periods of excessive speculation in commodities markets and to the growth of shadow banking”. The report goes on to recognise that “during periods of heightened price volatility, certain major food trading companies gain amplified profits in the financial markets”.

Speculative activity is short-lived by nature. Thus, the sharp spike in global food prices (particularly for wheat) that began in late 2021, during the run-up to the Ukraine war, peaked in May last year and then dropped off just as quickly. Wheat prices in August this year, for example, were well below their August 2021 levels.

But in many countries, domestic food prices have remained high or continued to rise even as global prices fell. This is not new. Something similar happened in the wake of the global food crisis of 2007–08, when prices in many low- and middle-income countries increased even after global food prices had declined significantly.

Much of the problem can be traced to the ability to import food. The period from early last year onwards was marked by multiple cascading shocks that hit several food-importing countries particularly hard: the end of the moratorium on sovereign-debt repayment; the shift to tighter monetary policies and higher interest rates in advanced economies, which led to capital flight from developing economies; and upward pressure on import bills from higher energy prices.

The FAO has identified ten countries where food prices rose well above global trends in the period leading up to mid-September this year: Argentina, Ecuador, Ghana, Malawi, Myanmar, Pakistan, South Sudan, Sudan, Zambia and Zimbabwe. All have severe sovereign-debt problems and acute foreign-exchange shortages.

Apart from Ecuador (owing to its dollarised economy), these countries have also experienced large currency depreciations since the start of last year, ranging from 24% for Zambia to a whopping 344% for Argentina. Economic mismanagement is only partly to blame. Instead, large swings in cross-border capital flows, as a result of macroeconomic policies in the world’s major economies, are likely having a larger impact.

This implies that trying to control financial activity in global commodities markets, while necessary, is not enough to combat hunger. Policymakers will need to revisit other means of food-price stabilisation, such as national agrarian policies and international trade regimes that — soil and climate permitting — ensure domestic or regional self-sufficiency in staple food items.

Building up buffer stocks of grain to sustain domestic and regional supply is once again a salient issue and should be seriously considered. Social protection to prevent food insecurity will also be essential. That means policymakers must focus more on public investment, while also incentivising the private sector to invest in sustainable smallholder agriculture.

The fight against global hunger requires policymakers to understand and address its root causes. Regulating financial activity in volatile commodities markets is only one of the necessary institutional changes. Withstanding price fluctuations will also require helping countries and regions build up reserves of essential food items. ©2023 Project Syndicate

Jayati Ghosh is a professor of economics at the University of Massachusetts Amherst.

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