News - April 17, 2008

Food price hikes sow unrest

Grain prices have risen by 120 percent in the last year, reported the Dutch daily NRC Handelsblad this week, and rice prices rose by 75 percent in two months. The IMF and the World Bank are concerned, predicting that 100 million people will be pushed back into poverty. They have even suggested that if the rich countries do not go to their aid, there is a risk of civil war. Is their concern justified?

Professor Erwin Bulte, professor of Development Economics:
‘I was surprised that the IMF is predicting such disasters. There have been riots, but I haven’t heard scientists talking of wars yet. And, I wonder what the IMF and World Bank can do about the prices. Of course they pose a threat in the short term to poor people in urban areas. If you already spend a large portion of your income on food, it’s a disaster if prices double. That’s why it’s good that the IMF and World Bank call on rich countries to give money for food aid. It’s also bad news for the countries that are net food importers, as many African countries are. But in the long term, I think price rises can have lots of advantages. My immediate reaction honestly was: it’s about time.

‘The high prices are good news for farmers. They should stimulate lots of farmers in poor countries to become more market oriented. Many farmers in developing countries work very extensively: they make sure that they can live off their land, but do not produce more than that. This is often because they don’t have access to markets to sell their produce, and they don’t have access to fertilizer or other inputs needed for more intensive farming either. If we can manage to change this by improving the physical and institutional infrastructure, the high prices can be turned into an opportunity.’