Please don't miss today’s Debt Rattle, May 8 2008: Broken Levers
Ilargi: I don't want to impose anything, but I think it's good that we all get better informed about who owns the food in the world. This article is not bad in that regard. I have talked before about the "heads of the five families", and the EU-US chemical industry taking over the world food industry as a means to sell their products. See also the last article -from India- in today's Debt Rattle.
Liberalizing Food Trade to Death
by Shawn Hattingh
People across the world, from Mexico to Mozambique, have once again been taking to the streets in protest. The reason is to demand that their most basic need be met: access to food. With food prices skyrocketing over the last few months, billions of people around the globe have been relentlessly driven towards starvation. The various states in which these protests have taken place have reacted swiftly and brutally. They have deployed security forces armed with shields, batons, water cannons, stun grenades, tear gas, rifles, and even machine guns against the protestors. Hundreds of people have been killed.1
Billions of people are struggling to afford food because of the huge disparities and inequalities that have been exacerbated by the current economic system -- neo-liberal globalization. Over the last 30 years, almost all states across the world have adopted neo-liberal economic policies. Neo-liberal policies have favored giant corporations' interests over those of people and have enabled a handful of companies to gain a virtual monopoly over the human food chain and make massive profits. The poor, however, have suffered consequences of neo-liberal policies: if people can't afford the prices these monopolistic companies charge, they don't get food.
The World Has Not Always Been This Way
Prior to the advent of neo-liberalism in the late 1970s, most governments across the world assisted small-scale farmers within their borders, providing them with various forms of subsidies. For example, in Africa, Asia, and Latin America, various state-run entities were created to offer small-scale farmers assistance in the forms of research, cheap credit, marketing services, transport,, and processing services.2
Many states even subsidized the seeds, compost and equipment that small-scale farmers needed.3 Third World states also applied high import tariffs on staple foods such as maize, potatoes, rice, beans, grain, and poultry, to protect small- and medium-sized farmers from dumping and cheap imports.
A number of states also played an active role during this period in helping small-scale farmers establish cooperatives. The result was that between 1950 and 1980, small- and medium-sized farmers met most of the food needs of their own countries. Even many countries in the South had enough affordable food for their entire populations.4 To help consumers, most governments also regulated the prices of agricultural goods and even subsidized certain food products so that the poor would be able to afford them.5 With the advent of neo-liberal capitalism and free trade, however, this situation was turned on its head.
Hello Neo-liberalism; Goodbye Food Sovereignty
In the early 1980s, the US, International Monetary Fund (IMF), and the World Bank (WB) used the debt stranglehold that they had over Third World countries to force them to adopt neo-liberal economic policies through Structural Adjustment Programs (SAP). This period saw most Third World governments being forced to sell off their public assets to multinational companies; allow foreign companies to move money in and out of their borders; end food subsidies; create export-processing zones; smash workers' rights; dismantle environmental laws; and implement wage freezes. Under SAPs, almost all governments in Asia, Africa, and Latin America were also forced to reduce their import tariffs on agricultural goods, thereby creating new export markets for multinational companies. Linked to this,
Third World states were required to dramatically reduce the subsidies that they offered to small-scale farmers,6 who were producing for domestic needs. Of course, the US and European countries continued to subsidize their own farmers, mostly agribusiness corporations, and also maintained high tariffs on selected agricultural products -- those that their farmers were producing. The result was that by the mid-1980s small-scale farmers in the South were being forced to compete with subsidized agricultural products flooding into their countries from the US and Europe.7
Although the IMF, the US, and the WB demanded that the Third World states end any form of assistance to small-scale farmers, they encouraged these same states to continue assisting agricultural corporations and large-scale farmers that were exporters. From Brazil to Kenya, Third World states were pushed to grow export crops that were needed or desired in Europe and the US. For instance, Kenya was instructed to focus on growing flowers for export to Europe while Brazil was told to focus on soy beans for export to the US.8 Thus these states -- along with the IMF, the WB, and agricultural multinationals -- prioritized such export crops over food for domestic consumption.
As if the SAPs were not bad enough, almost all the states in the South became members of the World Trade Organization (WTO) when it was formed in 1995. In order to become members of the WTO, countries were required to become of full signatories to the WTO's Agreement on Agriculture (AoA). The AoA was written by an ex-employee of one of the largest agricultural multinationals in the world, Cargill, and is highly beneficial to the US and the EU and their corporations.
Specifically, the AoA stipulates that WTO members cannot impose quotas on agricultural imports, states that agricultural imports can be only controlled by tariffs,9 and requires all member states to reduce their import tariffs on agricultural goods. Through the AoA, all member countries in the South were required to reduce their tariffs on agricultural goods by 24% by 2005.10 The idea behind this was to create more export opportunities for multinational companies, such as Cargill.
The majority of countries of the South have been forced to drastically cut the subsidies they offer to their small-scale farmers due to the SAPs. The AoA, however, allows countries -- in the light of SAPs, only the US and the EU -- to continue subsidies as long as they do not directly distort trade. In effect, this has allowed multinationals, such as Cargill and Monsanto, to continue to receive massive subsidies from the US and the EU. In 2002, the US government passed the US Farm Act, which enabled the US state to provide American farmers, mostly large multinational firms, with $180 billion in subsidies over 10 years. The US Farm Act was considered WTO compliant.11
The Dire Consequences of Neo-liberalism
Up until a few years ago, free trade had led to low food prices internationally. With the advent of free trade, subsidized agricultural products from the US flooded into the countries of the South. Farmers involved in producing staple foods in the South, such as maize, beans, and grains, were especially hard hit. For example, maize farmers in the US have traditionally received massive subsidies, often to the tune of $10 billion a year, which allowed them to export their produce to countries in the South at exceptionally low prices.12
Most small-scale farmers in the South, who no longer received subsidies under the SAPs, could not compete with the price of this imported maize.13 The outcome was that millions of small-scale maize farmers around the world have gone bankrupt. In Mexico alone, it has been estimated that as many as 5 million small-scale farmers and farm workers have been forced to leave their farms and move to the urban areas due to cheap imports flooding in from the US.14
Bankruptcy has not only been limited to the maize sector -- small-scale farmers across every sector have been destroyed by free trade. Hundreds of millions of small-scale farmers and farm workers in the South have been driven from the land. In fact, millions upon millions of hectares of farm land has been abandoned in the South. The result has been that most countries in the South are no longer able to meet their own food needs; they have to import food from the US and the EU -- which of course benefits multinational companies.
The advent of neo-liberalism and free trade, with its tailor-made policies for large corporations, has helped a small number multinational companies gain a virtual monopoly over global food production, distribution, and sales. The fact that 6 corporations control 85% of the world trade in grain; 3 companies account for 83% of the trade in cocoa, and 3 corporations control 80% of the global trade in bananas illustrates this.15 Through this monopolization, multinationals are now able to control the prices of food products. They pay smaller farmers very little for their produce, and they charge consumers astronomical prices for the processed end products.
This system has seen companies in the agricultural and food industries making massive profits. The performance of a number of corporations in 2007 highlights this point: last year Nestle posted a profit of $9.7billion16; Archer Daniels Midland (ADM) recorded a profit of $3.1 billion; while Cargill raked in $2.3 billion in profits.17 This all took place in a world where 850 million people are suffering from chronic malnutrition because they can't afford food.18
Part of the monopolization over the human food chain has involved multinational firms from the US and the EU using global free trade regime to swoop into South to take over entire markets or set up export operations.
Indeed, large-scale farmers and multinationals have been involved in buying up the land that small-scale farmers in the South have been forced to forsake. For instance, Parmalat and Nestle used neo-liberal policies in South Africa and Uruguay to enter into these countries through buying existing local dairy companies. Initially, they subsidized their ventures in these countries through their international operations. This allowed them to start a price war, which eventually drove many small-scale producers out of business, and these companies gained a virtual monopoly over the dairy industry in South Africa and Uruguay. Once they had achieved this, they began raising the prices of their products.
In South Africa, Parmalat and Nestle were directly involved in price fixing. At one end they paid small-scale farmers, who had managed to remain in production, a pittance for their dairy products. Once processed, Parmalat and Nestle colluded to charge consumers exorbitant prices at the retail end.19 These two companies also used Uruguay and South Africa as bases to export regionally into Mercosur20 and SADC.21 In doing so, they gained complete dominance over these markets.
The biggest multinational companies have also been buying massive tracts of land in Brazil, Argentina, Paraguay, and Bolivia as small-scale farmers leave their land due to neo-liberalism. These countries have been at the heart of the massive, and ever expanding, soy industry. In Brazil alone, soy plantations -- mostly owned by multinationals -- expanded from only 705 hectares in 1940 to 18 million hectares in 2003. Most of the soy from these plantations does not go towards meeting the food needs of the people in these countries; it is rather exported to the US and the EU as animal feed for cattle. It is estimated that an average steer in the US and the EU consumes approximately 2,700 pounds of grain or soy before it is slaughtered.
Much of the resulting meat is purchased by companies such as McDonald's to meet the ever growing demand for fast food and a US style diet . Indeed, the reality is that there is not a shortage of food. Rather, food is literally being taken away from the poor in South America, Africa, and Asia to feed cattle and wealthier consumers that devour these animals as fast food.22
Another factor that has been driving up food prices has been the emergence of the biofuel industry, which neo-liberal policies and policy makers have promoted. The biofuel industry is controlled by a handful of argibusiness multinationals such as Cargill and Mansanto. Due to the fact that much of Cargill's substantial profits are now derived from converting maize into fuel, the executive director of the company has described the biofuel industry as a "gold rush."23 Recently, huge maize, soy, and palm oil plantations in Africa, Asia, and Latin America have shifted away from producing these products for animal feed to producing them for biofuel for the US and the EU. Even in the US it has been estimated that as much as 25% of maize produced in 2007 was being used to produce biofuels.24
Many of the maize, palm oil, and soy biofuel plantations in the South are on land that used to be owned by small-scale farmers who were producing food for local needs. Added to this, vast forest areas have been cleared in countries such as Brazil and Paraguay to raise new plantations. Massive amounts of pesticides and herbicides are used on these plantations, which has often led to the poisoning of produce and animals in neighboring areas.25 In fact, the environment in the South is being destroyed and millions of people are going hungry because of the demand for biofuels in the US and the EU.
With the advent of neo-liberalism, the global food market has been completely deregulated. Before the 1980s, countries around the world controlled the price of food to ensure that it was more or less stable. To do so, countries built up massive food reserves. When prices were high, countries sold off some of their food reserves to bring prices down. When prices were low, countries bought food for their reserves in order to stabilize prices.
Since the 1980s, this system has been dismantled. Countries have run down their reserves and have let the price of food products float according to supply and demand in the global market. This means that they no longer intervene to stabilize prices. Internationally, the food commodity prices are determined by companies and speculators through trade, mainly on the Chicago Commodities Exchange. Some of the biggest traders on commodities exchanges, such as the one in Chicago, are giant corporations such as Cargill and ADM.
Recently, due to the sub-prime crisis, speculators and investors have shifted their money into these commodity exchange markets, seeing a chance to make massive profits out of speculating on food commodities. Sensing this, and knowing that countries' food reserves were depleted, large corporate traders started withholding supply over the last few months in the hopes of higher prices in the future, whilst playing off currency differentials. In response, investors started buying grain futures in the hope of making profits, which drove prices even higher. The consequence has been that the price of maize tripled in the last two years.26 Of course, corporations and speculators are profiteering from the higher prices; while people around the world stare starvation in the face.
The Elite's Solution
The WTO, the IMF, the WB, the US, and the EU have proposed several solutions to the current food crisis. The main solution that they have offered is further trade liberalization. Thus, they have proposed that the remaining protective barriers that countries have, in the form of tariffs, be completely dismantled. This, we are told, will drive down food prices. Needless to say, agricultural multinationals are positioning themselves to benefit from this.
Far from driving the price of food down, further trade liberalization will extend multinational corporations' control over the human food chain and food prices.27 Such a drive for further liberalization reveals the callousness of the neo-liberal ideologues in charge of the US, the EU, and the international institutions they control. Seeking to tout further trade liberalization as a cure to the current crisis is simply malicious considering that free trade is actually the cause of the problem.
The likes of Bush and Brown have also been promoting the idea that genetically modified (GM) crops will bring an end to hunger. The reality is that GM crops are not an answer. They have often proven to be less productive than unaltered crops. Moreover, the health dangers of GM crops could be catastrophic in the long run. The real reason why Bush and Brown have been campaigning for GM crops is to pander to the desires of their corporate backers. Multinational corporations, such as Monsanto, stand to benefit massively from the expansion of GM crops as they hold the majority of patents on these crops.28 The growth of the GM sector will simply increase the already substantial power of multinational corporations at the expense of the peoples of the world.
The People's Solution
In Latin America, a number of states with progressive governments, such as Venezuela, Bolivia, and Nicaragua, have tried to address the food crisis through breaking with the dictates of neo-liberalism. These countries along with Cuba have attempted to establish a viable regional alternative to free trade in the form of the Bolivarian Alternatives for the America's (ALBA). Through ALBA, these states have created 5 major agricultural projects that are producing soy beans, rice, poultry, and dairy products. The goal of these projects is to guarantee food security in the ALBA member states. In fact, Venezuela has used these projects to provide free or subsidized food to millions of people.29
It has also redistributed 2 million hectares of land to small-scale farmers. Linked to this, the Venezuelan state has increased its spending on agricultural production by 728% over the last three years. More recently, the ALBA states launched a $100-million fund for staple foods such as maize and rice to ease the impact of the recent food price hikes on the poor in these countries. To avoid private speculators, these states agreed to establish a public food distribution network and to regulate the price of food.30
Unfortunately, the vast majority of other states in the South, which do not have progressive governments, have largely failed to take similar steps for the benefit of their populations. In these countries, it seems that people themselves are going have to take action on a massive scale if they are going to avoid chronic food shortages and malnutrition.
The recent protests that have erupted across the world are a sign that people have indeed started to take action to change their own lives and gain access to food. The poor of the world, as consumers, are rising up and demanding their right to food and the dignity that accompanies it. This struggle, however, is not new. Movements such as La Via Campesina, the MST, the Zapatistas, and the Piqueteros have been fighting for the right to food for decades. The latest bout of protests, however, points towards the fact that the struggle for food may become more widespread and intense.
The aforementioned movements' struggles have also been a fight to create alternative economies, outside of capitalism. Indeed, these struggles have clearly articulated that the right to food for everyone cannot be achieved through capitalism. Such an understanding has seen movements such as the Zapatistas31 and MST32 invading the land in the Chiapas and areas of Brazil. On this land, these movements have established cooperatives and collectives to meet people's food needs. Through this, they have created their own economies based on democracy, solidarity, and equality.
They have also established alternative trade networks to improve the lives of the people. In the urban areas of Argentina, movements such as the Piqueteros have also invaded land and established urban farms. Along with this, they have created their own neighborhood kitchens to ensure that all the people in these areas are fed.33 The idea behind these actions has been to prioritize local production to meet needs locally outside of the global corporate controlled economy.
If hundreds of millions of people are to avoid starvation in the coming months, it seems that the actions of these movements will need to be adopted and adapted by people across the world. The power of corporations to control the food chain needs to be broken, and only the people can do that. Indeed, only the people through their own actions can create a world of freedom, democracy, dignity, and equality -- a world where people don't starve if they don't have money.
2 María Elena Martinez-Torres, "Survival Strategies in Neoliberal Markets: Peasant Organizations and Organic Coffee in Chiapas," Geraldo Otero, ed., Mexico in Transition: Neoliberal Globalism, the State and Civil Society, London: Zed Books, 2004.
3 Munhamo Chisvo, Trade Liberalisation and Household Food Security: A Study from Zimbabwe, Catholic Institute for International Relations, 2000.
5 Centre for Rural Lagal Studies, "Briefing Paper: Agricultural Trade, Globalisation and Farm Workers," January 2003.
7 South Centre, "Mounting Inequities under WTO's Agreement on Agriculture," South Bulletin 53, 15 March 2003.
9 Madeley, Hungry for Trade, op. cit.
10 Arze Glipo, "The WTO AoA: Impact on Farmers and Rural Women in Asia," Advocacy paper prepared for the 2003 WTO Ministerial meeting, September 2003.
11 South Centre, op. cit.
12 Oxfam, "Dumping Without Borders: How US Agricultural Policies are Destroying the Livelihoods of Mexican Corn Farmers," Briefing Paper 50, 27 August 2003.
15 Madeley, Hungry for Trade, op. cit.
18 World Watch Institutue, "State of the World 2005: Trends and Facts -- Cultivating Food Security," January 2005.
19 Ann Crotty, "Dairy Firms Face R100m Fine in Price Fixing Probe," Business Report, 8 Dec 2006.
20 Madeley, Hungry for Trade, op. cit.
23 April Howard and Benjamin Dangl. "The Multinational Beanfield War: Soy Cultivation Spells Doom for Paraguayan Campesinos," In These Times, 14 April 2007.
25 Howard and Dangl, op. cit.
26 Organic Consumers Association, "The Food Crisis: Global Markets and Deregulation Strike Again," Environmental News Network, 23 April 2008
27 Organic Consumers Association, ibid.
28 Madeley, Hungry for Trade, op. cit.
30 James Sugget, "ALBA Summit in Venezuela Responds to the World Food Crisis and the Bolivian Crisis," Venezuelanalysis.com, 24 April 2008.
31 Amory Starr, Global Revolt: A Guide to the Movements Against Globalization, London: Zed Books, 2005.
Shawn Hattingh is a research and education officer at the International Labour Research and Information Group (ILRIG) in Cape Town.