For the love of markets

As record high food prices have contributed to unrest in North Africa and beyond, the World Bank's unwavering faith in markets has stirred debate about how best to address the multitude of factors underlying a global crisis in food prices. Meanwhile, World Bank president Robert Zoellick continues to champion efforts to bring agriculture into carbon markets.

In January, Zoellick delivered a pro-market message addressing food prices in the UK newspaper the Financial Times. "The answer to food price volatility is not to prosecute or block markets, but to use them better," he argued, urging the G20 leaders to put access to food at the top of its agenda. He also emphasised that trade barriers contribute to spikes in food prices and that food aid should be allowed to move more freely.

This differs from both French President Nicolas Sarkozy, who blamed commodity speculators for the price increases and Nobel laureate economist Paul Krugman, who emphasised the impacts climate change is beginning to have on agriculture.

Incongruent conclusions

At end January, Olivier De Schutter, the UN Special Rapporteur on the Right to Food responded in an editorial to the nine measures Zoellick set out for the G20 to address the food crises. "Although welcome, these measures tackle only the symptoms of the global food system's weaknesses, leaving the root causes of crisis untouched," he concludes. "These measures may mitigate the consequences of peak prices, but they are inadequate to avoiding the recurrence of shocks." He instead argues that the G20 should support countries' ability to feed themselves and that the international community should work to establish food reserves and a global reinsurance mechanism. Support for farmers' organisations, protection for access to land and limitation of financial speculation are among the recommendations set out by De Schutter. He also highlights the need to defend the human right to food and to complete the transition to sustainable agriculture.

Despite widespread concern about market volatility, Octaviano Canuto, vice president of the Bank's Poverty Reduction and Economic Management (PREM) Network, has stated that there is no need for market regulation. This market-led approach is consistent with the Bank's Agriculture Action Plan (see Update 69) and the 2008 World Development Report on agriculture (see Update 61, 58).

In stark contrast, the UN's Conference on Trade and Development (UNCTAD) Least developed countries report 2010, proposes active international management of commodity markets, including food markets, to ensure that the poorest countries benefit. UNCTAD's proposals include "taxation measures to reduce speculation in global commodity markets", "innovative commodity price stabilisation schemes" and emergency finance to protect poor countries during commodity price shocks.

In addition, Zoellick's Financial Times commentary proposed giving countries access to fast-disbursing support as an alternative to export bans or price capping or fixing. Duncan Green of NGO Oxfam has taken exception to Zoellick's opposition to 'price fixing'. "If by that he means deliberate government intervention to stabilise prices for consumers and producers, [it] has been an effective tool... to reduce food insecurity and provide incentives for farmers to increase food production," he writes in a blog response. If Zoellick's speech is indicative of a wider approach, "the Bank seems to have a myopic focus on maintaining the integrity of trade and markets", concludes Green.

"The Bank has to wake up to the complex reality around it and abandon the view that markets alone will solve everything", adds Alex Wijeratna, a campaigner from ActionAid.

Zoellick's article also brings smallholder farmers into the debate.  However, he focuses on proposals such as sourcing some of the humanitarian food aid from them while larger structural issues remain unaddressed.

A new report on small scale farming from think tanks International Institute for Environment and Development and Hivos details the myriad of challenges smallholder farmers face and the ways in which they have often been detrimentally impacted by market bias and export orientation (see Update 58). "A strong push within the donor community, particularly from [the World Bank and IMF] but also from a number of bilateral donors, to deregulate and encourage private sector activity also led to a renewed emphasis on exports", notes the report.

Multilateral efforts

The Global Agriculture and Food Security Program (GAFSP), of which the Bank is a supervising entity, now has pledges of $925 million to deliver on food security commitments made at the 2009 L'Aquila G8 summit (see Update 71).  However, only $263 million had been received by July 2010, leading civil society groups to fear that there will be a shortfall of funds. In the US, 28 NGOs have written a letter to encourage President Obama to push forward $100 million of what they expect to be a $250 million US contribution in 2011.

The GAFSP's private sector window has raised concerns since it will be channelled through the Bank's private sector lending arm, the International Finance Corporation (IFC), which has been accused of supporting controversial agricultural lending. In November GAFSP meetings, the IFC agreed to make development indicators for measuring GAFSP outcomes available to NGOs. It also confirmed that environmental and social safeguards will apply to financial intermediaries, which seems to be in contrast to the IFC's stated policy (see Update 71).

Private sector lending

Following exposeés that the IFC was backing private sector investment that can lead to land displacement, the Bank joined with the Food and Agriculture Organisation (FAO), International Fund for Agricultural Development (IFAD), UNCTAD and others to devise principles for agricultural investment, focussed on land in particular (see Update 71). These principles were critiqued for not being strong enough nor participatory in their development. They are now to be discussed and negotiated by the multi-stakeholder Committee on World Food Security (CFS), with hopes of delivering agreed standards at a FAO meeting in Rome in October.

Continued market approaches

At the Cancuún climate talks in December 2010, the Bank held a high-level event to re-launch a "roadmap for climate and agriculture" (see Update 73).  Resulting from the meetings in the Hague in October last year, this was contentious due to the lack of participation and the heavy emphasis on bringing agriculture into carbon markets, among other issues. In addition, at the UK parliament in February, Zoellick called for the next round of UN climate negotiations in South Africa in December to focus on soil carbon sequestration.

According to US NGO Institute for Agriculture and Trade Policy (IATP) the Bank has yet to clarify a methodology for measuring amounts of carbon in the soil for it's first soil carbon sequestration project in Kenya, because it is too costly to measure. "More needs to be learned about the World Bank's methodology, its environmental integrity and the social impacts of the project," concludes an IATP briefing on agriculture released in December. "[T]he simplification of methodology in the Kenya pilot substantiates the idea that transaction costs are indeed high for such schemes."