Solutions from a Hunger Crisis

The global food shortage could lead to lower trade barriers and innovation that may raise farm productivity

Egyptians scrambling for subsidized bread in Cairo Jason Larkin/Getty Images

by Steve Hamm

Browse Issues

Browse the BusinessWeek Archive

Outside a subsidized food store in Lahore K.M. Chaudary/AP Photo

Haitians demonstrating against the Prime Minister in Port-au-Prince Eduardo Munoz/Reuters

Story Tools

• post a comment
• e-mail this story
• print this story
• order a reprint
• digg this
• save to del.icio.us

The global food crisis has brought on riots in about a dozen countries and left many panicked world leaders scrambling for answers. Alarming increases in once-affordable basic food staples such as rice, corn, and wheat have made millions more of the world's poor vulnerable to hunger and malnutrition. Past food market emergencies have been mainly regional in scope. This one has affected both rich and poor countries around the world and will be far from a passing turbulence.

Consider that food prices globally have climbed 83% in the past 36 months and are expected to stay high through 2015, according to the World Bank. "This is hitting everyone, but it's hitting hardest people who live on less than $1 a day," says Josette Sheeran, executive director of the U.N.'s World Food Programme, or WFP.

Depressing stuff. Step back, however, from the alarmist headlines and doomsday talk-show chatter. There are sensible measures, though hardly easy ones, that can be taken to prevent widespread hunger and social unrest from becoming a permanent feature of the early 21st century. Right now, the WFP and other relief agencies have been rounding up pledges of emergency aid from governments. The U.S. has promised $200 million, and Japan, $100 million. That helps, but it isn't a lasting solution to the crisis. What's needed are more enlightened global agricultural policies and smarter, more efficient farming technologies—and in both realms there is cause for optimism.

The food crisis seems to have strengthened resolve to kick-start World Trade Organization (WTO) negotiations aimed in part at lowering trade barriers for food. Innovation will play a role, too: A new wave of improvements in farming methods could eventually produce a major increase in agricultural productivity, especially in the heavily populated regions of Asia and Africa.

TRADE BREAKTHROUGH?

The cause of the current food crisis is multifaceted. A prolonged drought in Australia's wheat belt, combined with richer diets and massive increases in fuel consumption in the surging economies of China and India, set the stage for higher food prices everywhere. The soaring cost of oil makes producing and distributing food more expensive. At the same time, the increased use of corn for ethanol, while not creating shortages, has helped drive up the price of bushels.

If the crisis has an upside, it may be that the runup in global food prices has given some negotiators at the WTO in Geneva hope for progress in the current round of global trade talks. The so-called Doha Round of trade negotiations calls for rich and poor nations to reduce subsidies for farmers and tariffs on food imports. Talks broke off twice in the past two years amid acrimonious disagreements over subsidies and price controls.

But diplomats now expect to hand in a draft agreement to the world's trade ministers in May. One reason for hope: It's hard to justify crop price supports in a world experiencing instances of social unrest because of global food inflation. India's minister of commerce and industry, Kamal Nath, has expressed optimism about a trade deal, and a senior U.S. trade official says pressure to solve the food problem "should make it easier to reach an agreement." But he cautioned that the ministers will consider the trade-offs and may balk. "The reality is some people are still stuck on the lines of the past," he says.

Trade restraints worsen the food squeeze. Export restrictions by poor countries such as India and Indonesia take away the international market for local farmers' crops, reducing the incentive for farmers to grow more. Meanwhile, rich countries' subsidies and import curbs mean too much of the world's food is produced in high-cost regions such as North America and Europe, both big exporters. When shortages develop, the rich-country crops are too costly for poor nations to afford.