1. Introduction

1.1 The world is developing in remarkable ways, unforeseen even a decade ago, and these changes have important implications for food security. New states, new issues and new institutions are reshaping international political, economic and environmental relations even as the old ones remain, albeit in some attenuated form. Nevertheless, the new trends are clear: most countries are seeking economic policies that are more market-oriented and desire broader international cooperation and sustainable development together with the political structures to promote and support them.

1.2 The changes in the socio-political and economic environments can be characterized by the following:

• First, many developing countries had come into the 1980s with very high levels of external debt taken on during the 1970s at low and often negative real interest rates. By the early 1980s, their economic fortunes had been reversed with slowed growth rates, rising real interest rates and an appreciating United States dollar in which virtually all external debt was denominated. Their heavy debt burdens could no longer be sustained; indeed, many could not even meet debt service payments. Belt-tightening and policy reform became absolutely necessary with conditionality terms imposed by the World Bank and the International Monetary Fund (IMF) calling for reduced government spending, a reduction of government intervention in markets, the privatization of former parastatals and the correction of overvalued exchange rates, i.e. getting the prices right.
• Second, many countries, particularly in the developed world, found that the budgetary cost of farm support had become untenable. The process of policy reform was begun in order to limit budget exposure by more precise targeting of policy benefits, lower support levels, the decoupling of support payments from current production and generally reduced government presence.
• Third, with the breakdown of the command and control economies of Central and Eastern Europe and the former Union of Soviet Socialist Republics (USSR) came a difficult and painful process of transition towards more open, market-oriented economies. This transition process disrupted traditional trading patterns, drastically decreased real per caput incomes, reduced demand and disrupted production, processing and distribution from which a recovery has not yet been effected. Even the most basic legal and economic institutions have had to be created to allow and encourage the private sector to operate as part of a functioning market economy.
• Fourth, even countries not falling into any of the above three categories have been caught up in the general move to reduce the presence of government and to liberalize markets and trade.

1.3 The quest for new policies to shape contemporary institutions is taking place alongside a wider examination of the basic role of government in forms that are scaled down from those of the past. It has been prompted in part by governments’ own need to optimize resource efficiency in the face of growing deficits and in part by the demands of tax-weary citizens who find themselves with stagnating real incomes and who blame government for unsatisfactory economic performance.¹ Shifting international relations and a sharply altered global economic situation result in new challenges to national and global stability; meanwhile, local problems and conflicts go unresolved. Together, these issues shape food security.

1.4 Essentially, food security means that all people at all times have access to safe and nutritious food to maintain a healthy and active life. This definition implies three dimensions to food security, namely, availability, access and stability at various levels of aggregation, i.e. global, national, household and individual. Given this multidimensional framework, it becomes obvious that achievement of universal food security at the individual level, which implies achievement at the more aggregate levels, is constrained or facilitated by a combination of social, political and economic conditions. And, it is clear that the relevance of these conditions to food security at one level of aggregation is not restricted to the state of conditions at the same level of aggregation. That is, for example, the ability to achieve food security in one country can be affected by conditions (economic, political, and social, etc.) in other countries; as the world economy becomes more integrated, it becomes more difficult for a country to insulate itself from the decisions and actions of others. At the same time, this same integration offers the potential for spreading the effects of production shortfalls in one country over the world and thus greatly reduces the negative impact on food security in any one country.

1.5 Because they affect agriculture, global, national and local shifts in national political and economic relations and structures have implications for food security. First, how food is to be produced and distributed are fundamental concerns of national economies and contribute to ongoing policy debates about how to restructure economic and political systems.

1.6 Second, agriculture’s technological transformation increasingly links the input market to other sectors of the economy, while international trade joins producers in the national economy to consumers throughout the world.

1.7 Third, no other sector has such wide-reaching effects on the sustainability of the environment and natural resources: farming affects the world’s forests, soils, fresh water and fisheries.

1.8 Finally, war and peace, hostility and détente, confrontation and cooperation in political relations temper the global environment and influence food security. A principal benefit of the ending of the Cold War should have been disarmament from which a peace dividend might have been realized, as the high-income countries could have reduced to some extent their military expenditures with economic development and food security gains reasonably expected. Unfortunately, there is little evidence that any of the elusive peace dividend has been used to promote sustainable and equitable development. And the proliferation of regional and civil conflicts makes an increase in military spending more likely than a decrease among concerned regions. In addition, the end of the Cold War has reduced the incentive for developed countries to use economic assistance to win the hearts and minds of the developing world over to a particular ideology.

1.9 The global political environment influences the level and destination of resource flows, including international trade in food and assistance for agriculture and food production.

1.10 At the national level, politics govern policy priorities. Final decisions on the sometimes conflicting objectives of development, stabilization, national security and social equity reflect the relative power of a country’s various political factions and how national consensus is reached. The primary responsibility for the level of food security in any country depends on the political choices it makes. Bad government begets food insecurity, as was aptly remarked by the representative of Uganda at the FAO Council in November 1994.

1.11 This paper examines how international relations, economic structures, political systems and global issues are related to food security. After a review of the global political environment since the 1974 World Food Conference, discussion turns to the contemporary economic environment and how trends in market liberalization in the transitional economies and structural adjustment in the developing and industrialized countries are affecting national-level food production and consumption. Also explored are the food security implications of the recently concluded Uruguay Round of the General Agreement on Tariffs and Trade and the global trend towards regional trade blocs, as well as issues of natural resources and the environment. Finally, the policy implications for achieving food security are drawn, along with a blueprint for the future.

2. The political environment in historical perspective

2.1 The two decades since the 1974 World Food Conference have brought about enormous changes on the world’s political stage. In the mid-1970s, the end of the Viet Nam war helped to ease political tensions worldwide, especially among the superpowers, and a flurry of treaties in the 1970s greatly relaxed East-West tensions in Europe.

2.2 While there was wide divergence among countries and regions, the 1960s and 1970s marked a period of overall positive economic growth for many developing countries. Between 1965 and 1973, economic growth in the developing world reached 3.9 percent annually, an all-time record. This figure declined to 2.9 percent from 1973 to 1980, largely because of the oil crises. In the period from 1980 to 1990, which was characterized by high debt problems, there was a rapid drop-off to an economic growth rate of 1.2 percent.

2.3 The 1970s also witnessed a period of reaffirmation of the developing countries’ role in the global economic and political scene. In the wake of the oil embargo in 1973 by the Organization of Petroleum Exporting Countries (OPEC) and subsequent pricing policies, many developing nations, especially those with oil resources, renewed efforts to reduce their political and economic dependence on industrialized countries and to become more articulate and exert more power in the conduct of world affairs. The oil-rich countries also attempted to utilize their newly found economic power to set the terms and write the rules affecting trade, the transfer of technology and foreign assistance. The ideas of a united Third World, which Indian prime minister Nehru and other legendary leaders had fostered, gained ground, as did the concepts of a more just New International Economic Order (NIEO), non-alignment and self-reliance.

2.4 A number of initiatives for common action emerged from developing-country meetings in Algieria in 1973 and Sri Lanka in 1976, resulting in Technical Cooperation among Developing Countries (TCDC) and Economic Cooperation among Developing Countries (ECDC). But the achievement of food security in most developing countries and now in the transitional economies implies the need for major social transformations. The elimination of hunger requires the eradication of poverty through equitable and sustainable growth, which in turn requires significant changes in social relations, production structures and technologies. Economic decisions, both macro and micro, affecting accumulation, production and consumption are needed that are responsive to the objective of food security. This can only happen if the political will is present to make the difficult economic choices and to modify existing institutions or create new ones to support that end.

2.5 Before the 1980s, when economic growth was almost universal and rapid, development strategy focused on the redistribution of growth benefits to include those who were deprived. The mid-1970s marked the emergence of a new policy approach to development that was based on empirical studies that showed it was possible for economies to have rapid growth and attain a more equitable distribution of income simultaneously. For a while, equity considerations were placed high on the agenda as was the achievement of basic needs in developing economies. But, in the 1980s, negative growth in many countries, particularly in Latin America and Africa, left little to redistribute. Thus the recent emphasis on free markets, trade liberalization and minimal government intervention carries with it the hope that these approaches will somehow also revive and stimulate economic growth. Unfortunately, the evidence that might confirm this hope, and with it enhanced food security, is not yet available and, in the meantime, the emphasis on redistribution seems to have waned.

2.6 The idea of an assertive and united developing world capable of resisting external intervention by both of the dominant political blocs of the time was frustrated by developments that led to growing diversity among the developing countries and by the ideological and political confrontations among them. Often, while professing solidarity, countries moved to uncoordinated initiatives, sometimes in tune with varying outside patrons and sometimes not. Meanwhile, it became increasingly obvious that there were no short cuts to successful nationhood and self-reliant development and no recipe for a successful developing-country bloc.

2.7 The 1980s saw a return to Cold War tensions. The conflict in Afghanistan, regional conflicts in the Near East and Central America, extended civil wars in Angola and Mozambique, the prolonged Iraq-Islamic Republic of Iran war and internal conflicts in Cambodia are examples. The tensions resulted in a renewed and extravagant armaments race. To this day, the developing countries continue to increase their military spending. The United Nations Development Programme (UNDP) reports that the developing economies have increased their defence expenditures by 8 percent annually since 1960, and sub-Saharan Africa, the region that can least afford it, has increased the portion of its regional gross domestic product (GDP) devoted to the military from about 0.7 percent in 1960 to approximately 3 percent today. Most of these funds are not used in guarding the country from outside attack, but in fighting factions of their own citizens. Every dollar spent for the military is one less for the provision of economic development and food security. Ideological confrontations and open conflict form the basis for much food insecurity.

2.8 In Central and Eastern Europe and the USSR of the 1980s, the twin objectives of military strength and socio-economic progress proved increasingly difficult to achieve simultaneously. The resulting strains on centrally planned economic systems precipitated the major transformations that began in the late 1980s.

2.9 Meanwhile, in many of the developed countries, the global recession of the early 1980s was followed by an unusually long period of sustained growth, stability and integration that strengthened their position in world affairs.

2.10 Events of the latter part of the 1980s and early 1990s were among the most momentous of the century. In a short period, radical political and economic transformations swept across Eastern Europe and the republics of the former USSR. The principles of centrally planned economic management were abandoned in favour of a more market-oriented approach. The political complexities of the transition were compounded by the revolutionary and unprecedented character of the institutional change and the absence of a supporting political and economic conceptual framework. For most of these former centrally planned economies, the initial phase of the reform translated into profound and polarizing dislocations.

2.11 Some feel that the nadir has now been reached. To date, privatization has been accompanied by unemployment, reduced production, lack of credit and consumer and producer subsidies, political instability and growing inequality in income and resource distribution. These phenomena challenge food security in the region. Problems associated with transition, especially in the former USSR, have required the mobilization of human and financial resources and have become a predominant concern of the international community. In addition, they have tended to divert funds from sub-Saharan Africa, where development programmes have done poorly, where population growth has consistently outrun economic growth and where food security is most in jeopardy.

2.12 Experiences in Central and Eastern Europe and in Central Asia contrasted sharply with changes in China, where economic reforms began in 1978. While land remained in the hands of the state, the Household Responsibility System (HRS) broke communes into individual farms and, in a major ideological shift, encouraged profit maximization. The HRS (together with some supplementary measures that were introduced at the same time) contributed to the lifting of millions of families out of poverty during the 1980s when people realized that they could consume and invest the products of their labour rather than ceding them to the state. Farm production rose rapidly as a result, ultimately helping to fuel the economic boom of the mid- and late 1980s and the 1990s.

2.13 For most of Africa and Latin America and the Caribbean, the 1980s represented a decade of economic and financial crisis. Indeed, a long period of recession and adjustment followed Mexico’s admission that it had overborrowed and underinvested in the 1970s; in 1982 it could not continue to make payments on its debt. The debt crisis spread quickly to other countries, revealing that much of Latin America was in similar financial straits; political fragility accompanied the economic problems. Many governments lost the capacity to resist external political and economic pressure, and room for domestic-policy manoeuvring was severely circumscribed. Pressing day-to-day financial concerns forced many countries to postpone the long-term development, equity and poverty-alleviation objectives that afforded such bright hope in the 1970s. Concomitantly, the process of regional cooperation and integration slowed or came to a complete standstill.

3. Global relations and food security issues in the 1990s

3.1 As the 1990s unfolded, a new pattern of international relations began to emerge. While the end of the Cold War reduced political tensions among the superpowers and prompted some cutting of military expenditures by both the developed countries and the former centrally planned economies, saved resources were not added to developing-country growth efforts.

3.2 An increasing number of governments espouse democratic principles, popular participation in governance and economic liberalization. Popular participation is often implied to be the equivalent of participatory democracy, with no groups or classes excluded. This, unfortunately, is often not the case. Nevertheless, the United Nations reports that, in 1993, elections were held in 45 countries, and nearly 75 percent of the world’s population now lives in countries with democratic and relatively pluralistic regimes. The end of apartheid and the introduction of majority rule in South Africa is the most outstanding recent event in this process.

3.3 The first half of the 1990s has also seen the emergence or aggravation of other trends and influences. More and more small states are emerging, requiring new forms of extranational arrangements and development assistance. Conflicts such as those in Bosnia-Herzegovina and Chechnya are recent and dramatic manifestations of an emergent nationalism that has created new, as well as exacerbated old, political, economic, religious and ethnic problems. Violence and war have continued unabated in various parts of the developing world. Of the 82 armed conflicts recorded between 1989 and 1992, only three were between former sovereign states; the remainder involved civil disturbances of one type or another in which food production, distribution, commerce and consumption were disrupted.

3.4 While violent conflicts often cause severe food insecurity, social hardship has in turn been at the heart of many domestic armed conflicts. The tragedies of civil war in Rwanda and Somalia with their dramatic sequel of human suffering, refugee problems and famine are examples. In 1994, some 14 African countries were in a state of war and another 18 were experiencing systemic violence (Smith, 1994). Emergency food shipments are frequently needed in the wake of these armed conflicts to maintain some level of food security.

3.5 These upheavals will continue to challenge global stability and strain donors’ capacity – and resolve, since donor fatigue is a real phenomenon – to deliver needed relief. In some cases, ethnic and political tensions run deep; when analysed, many even find their roots in problems of income and resource inequality, lack of access to land and a shortage of employment opportunities. Events that began publicly in Chiapas, Mexico, after 1 January 1994 provide an example, as does increasing pressure for justice on the part of indigenous peoples in Bolivia and Ecuador.

3.6 External-assistance flows have been falling. Official development assistance, which accounts for two-thirds of the resource flows to low-income countries, declined from 0.35 percent of donors’ GDP in 1983 to 0.29 percent in 1994, the lowest level in more than 20 years. This unfortunate trend, which will most likely continue in the coming years, reflects pressure for fiscal consolidation in donor countries, a reduced political rationale for official assistance after the fall of the Berlin wall and changing views on the developmental role of aid vis-à-vis private financing in the current era of economic liberalization.

3.7 Agriculture has been particularly hard hit by the reduction in assistance flows. Total commitments to agriculture in 1994 were 11 percent below the previous year’s levels and no less than 23 percent below those of 1990. The share of agriculture in total official development financing declined from 13 percent in 1990 to around 10 percent in recent years.

3.8 The consumption of illegal drugs, together with the criminal and corruptive influence of the organizations and individuals involved in drug trafficking, has emerged as another major contemporary problem with negative implications for individual and collective food security. The spread of illegal drug consumption is accelerating, with the number of addicts now reaching millions in several countries. Their own physical and mental health, their capacity to contribute to society and their families’ chances for a better life are endangered if not annihilated. Illegal drug trade, involving billions of dollars, diverts resources, empowers corrupters and destabilizes entire regions or segments of societies. The production of drug crops generates relatively high returns to producers, which poses a major constraint to national actions and international cooperation aimed at constructively containing and reducing drug production.

3.9 It has been documented time and again that both the resources and technologies are at hand to eliminate dire poverty and eradicate hunger. The only element lacking is the political will to do so. Until governments are willing and politically able to give the highest priority to the elimination of hunger and the poverty that is its root cause, the hungry will remain in developed and developing countries alike. This means winning widespread support among the interest groups that currently exert power and influence and also empowering those groups that, for lack of control over resources or of access to effective political participation, are on the margins of the political and social economy.

4. Population changes and food security

4.1 Population growth² is probably the single most important global trend influencing food security. It took nearly 1 million years for the earth’s human population to reach 1 billion people. During the next ten years, another 1 billion persons will be added. The relationship between population growth rates and economic development is a chicken-and-egg phenomenon. Rapid population growth rates most certainly make economic development and per caput income growth more difficult. But the factors that have been shown to slow the rate of population growth are those associated with broad-based economic development: increasing per caput incomes; rising educational levels; growing employment opportunities, especially for women; and an increase in secure access to food, health services and other basic needs.

4.2 Structural characteristics of the world’s population are also changing in ways that affect food security. At present, over 800 million people are chronically undernourished because they lack food. Twenty years ago, 80 percent of the population in developing countries lived in rural areas. In the early 1970s, only one city in sub-Saharan Africa had more than 500 000 inhabitants; by 1990, 10 percent of the region’s population lived in cities of more than 1 million people. By the year 2000, nearly 40 percent of the population is expected to live in urban areas.

4.3 In the next 30 years, the number of people living in cities in developing countries will quadruple from 1 billion to 4 billion individuals. This imposing shift towards a more urban world calls for a different set of institutions, markets, infrastructure and food policies. These structural changes also modify farm labour supplies and pose important challenges for food security. For example, in sub-Saharan Africa, the steady migration of males to cities and other areas to look for wages or a job in the informal sector makes women responsible for farm work. Women produce 75 percent of the region’s food (Saito, 1994). Raising agricultural productivity and output and improving household food security demands a greater emphasis on women farmers by donors and governments alike, including policy reforms to improve women’s access to land and credit, their ability to contract labour and their willingness to adopt technology and utilize technical assistance.

5. Food security in a changing world: the economic environment

5.1 The period since the 1974 World Food Conference has seen three different economic performance scenarios for the developing countries: high growth in the mid-1970s; crisis in the late 1970s and most of the 1980s, with the exception of Asia; and spotty recovery in the 1990s.

5.2 The first scenario, a high-growth period during the 1970s, began at the end of the Second World War and was primarily attributed to the locomotive effect of developed-country growth on developing countries through international trade links. This long period was also marked by relatively stable commodity prices and increasing import substitution, while official development assistance to developing countries was also on the rise.

5.3 The global economy underwent a drastic change following the 1973 and 1979 oil shocks, the first of which coincided with the failure of monsoons in South Asia; cereal crop shortfalls in the United States, Europe and the former USSR; and a sharp increase in feed imports by the latter. The developed countries attempted to inflate away the effects of the oil and commodity price shocks by increasing their money supplies. World liquidity increased further as the major commercial banks recycled the petrodollars deposited by OPEC countries. As a result, real interest rates fell markedly.

5.4 Many oil-importing developing countries managed to reduce the potential negative effects of the oil shocks and maintain their overall public and private consumption and investment levels by borrowing heavily at favourable terms. This enabled them to grow at relatively high rates despite the adverse international environment.

5.5 However, some expenditures that were undertaken with borrowed funds were not bankable; others, such as those for infrastructure, were not designed to reach a positive cash flow in the short term. In fact, a significant portion of them were undertaken so injudiciously that they yielded small returns, and the cash flow that they generated could not meet the debt service. Meanwhile, loans continued apace, while both developing and developed countries avoided (or postponed) adjustment to the first oil shock.

5.6 Following the second oil shock in 1979, the OECD countries, led by the United States, altered their macroeconomic stance dramatically, opting for strict monetary policies (with a much more permissive fiscal policy) in order to control inflation. Interest rates rose and the United States dollar appreciated. As a result, many developing countries found themselves caught between a serious and unexpected contraction of capital inflows and a simultaneously large increase in external payments that had to be made with an appreciating dollar. Since the recently expanded foreign debt was primarily to private lenders on a short-term, floating-rate basis (as opposed to previous periods when lenders were largely official and lent on a concessional longer-term basis), the hike in interest rates precipitated the debt crisis. By 1982, many developing countries were paying more in debt service than they received in capital inflows.

5.7 In addition, inappropriate policies in a large number of developing countries, including unsustainable fiscal and monetary policies and severe economic rigidities arising from past inward-oriented development strategies, prevented their economies from adjusting to the external shocks of the late 1970s and early 1980s.

5.8 Inward-oriented policies, which came largely from import-substituting industrialization (ISI), the predominant development strategy of the time, were losing momentum prior to the crisis. A major characteristic of ISI was the relative neglect and, in some cases, discrimination against agriculture, both in terms of price incentives relative to other sectors and in the allocation of public investment. Macroeconomic policies (overvalued exchange rates) and trade policies (border protection of industry) discriminated against agricultural producers by shifting the internal terms of trade away from the farm sector. Sectoral policies that aimed at subsidizing agricultural producers were usually unable to compensate for the negative effects of unfavourable macroeconomic and trade policies.³

5.9 The economic crisis had detrimental effects on the food-insecure. The economic recession associated with the crisis deprived the most food-insecure of employment opportunities. Meanwhile, an already overextended public sector could not meet its development and social safety-net objectives in the face of decreased domestic savings and constant cash outflows to meet debt service and repayments.

5.10 For many countries, especially in sub-Saharan Africa and Latin America, poverty increased during the 1980s, reversing the trend of the previous 20 years. Although most indicators of social performance (literacy rates, disease eradication or at least suppression, longevity, secondary-school attendance, infant and childhood mortality and population growth rates) continued to improve for the developing countries as a whole, for some, especially in sub-Saharan Africa, they deteriorated.

5.11 Poverty, on the other hand, continued to have its greatest incidence in rural areas of developing countries with the landless and the near-landless constituting the largest single group of those afflicted by poverty. Some 30 million people in developing countries are landless and an additional 138 million are near-landless, and numbers in this category are growing throughout the developing world, especially in South Asia. Landlessness and near-landlessness are prime determinants of food insecurity in rural areas. Resources to accommodate the poor are shrinking with the expansion of arable land growing at an inferior rate to that of the rural populations.

5.12 It was thought by some Latin American policy-makers in the 1960s and 1970s that if governments were responsive to peasant demands for land reform, food security in the various countries might be enhanced. In East Asia, the late 1940s and the 1950s brought sweeping land reforms in Japan, the Republic of Korea and Taiwan (Province of China) which helped to stimulate production (rental units became ownership units resulting in peasants having more interest in producing) and equity. It was averred that, in Latin America, the effect might be similar. Earlier reforms in Latin America had occurred in Mexico, Bolivia and Guatemala, but the example of Cuba and certain foreign-aid policies of the United States, which conditioned foreign aid on land and tax reforms, returned the issue to centre stage where it remained for the next few decades. By the 1990s, issues of a dirigiste land reform were displaced by the idea that the land market could supply the peasantry with the property needed, and there was some effort (led by Mexico in 1992) to marketize land reform. Currently, international agencies, worried that very little land is actually going into peasant ownership, are realizing that some direct subsidies for land purchase may be necessary.

5.13 Furthermore, governments often compromised the income effects of land reform by turning the domestic terms of trade against agriculture or by spending for the reform in a profligate manner without the needed government savings to back up the land purchases and administrative and technical support for land reform. This economic populism tended to instigate inflation, which lowered the incomes of the rural and urban poor. In general, recent land reforms in developing countries have increased food security, but most increases have not come from the peasant sector that received the land (Thiesenhusen, 1995).

6. Changing the economic paradigm

6.1 The economic development paradigm that dominated developing-country thinking from the end of the Second World War until the late 1980s emphasized the shortcomings of markets in allocating resources and the role of an active government in planning and controlling most aspects of economic life. Several interrelated forces contributed to the abandonment of this paradigm.⁴ First, in the industrialized countries, the failure of activist demand management policies to counter the negative effects of the oil shock on growth and employment raised serious questions about government effectiveness in generating sustainable growth. Second, the disappointing performance of most developing countries during the late 1970s and early 1980s revealed the susceptibility of their economies to external shocks and the weakness of the policies meant to manage them.

6.2 The pressing need to overcome the economic and financial crisis prompted a reassessment of the comparative ability of governments and markets to allocate resources efficiently and to create the conditions for sustainable growth. It was overwhelmingly decided that freer markets promote more efficiency and provide for better growth prospects. At the same time, fiscal pressures associated with the crisis and international lending institutions forced many governments to reduce or reorient the public sector’s role in economic activity. Today, the widely accepted development paradigm emphasizes macroeconomic equilibrium and market-determined resource allocation.

6.3 In 1974, when the World Food Conference took place, the economic and social environment following the first oil price shock and the recession was such that a global dialogue was seen as necessary and desirable and that government intervention, individually and collectively, was fundamental to confronting what was perceived as the world food problem. Now, in the environment of economic liberalization, reduced government intervention and market-led policy orientation, the utility of a dialogue between governments appears more circumscribed. This is particularly true for problems that, while common to many countries, do not transcend national borders and therefore do not require international cooperation and coordination for their solution.

6.4 In this environment, the role of governments has been greatly restricted, even as global interdependence increases. Governments today can legitimately negotiate international codes of conduct, behaviour protocols, market regulatory agreements, multilateral assistance levels and the like in cases of international market failure. They can agree to cooperative action against international threats such as crime and terrorism. They can agree on the rules of the game and the use of dispute settlement processes in such existing fora as the World Trade Organization (WTO) or the international court. But when it comes to basic resource allocation, accumulation, production and consumption within the framework thus set, governments have, in principle, abrogated the major responsibility to market mechanisms while retaining the responsibility and authority for ensuring that the formal and informal institutions needed to allow those mechanisms to operate freely and fairly are in place and functioning. Further economic, trade and political liberalization, and, equally as important, institutional development, will need to take place before this transformation is complete.

6.5 What does all of this mean for food security? First and foremost it means that food security is a national, local and individual responsibility. Only national governments have the ability to create the stable political, macroeconomic, legal and regulatory environment within which private-sector activities can flourish. It is governments that have the responsibility, albeit with assistance from international agencies and non-governmental bodies, to provide the safety nets needed to protect those vulnerable groups in society that have no recourse to the resources needed for their own support.

7. Dealing with the crisis: policy adjustments and food security

7.1 Pressure from the major financial lending institutions, including the World Bank and the International Monetary Fund (IMF), forced many recalcitrant countries to adopt economic liberalization policies. Organizations lending to debtor countries conditioned their loans on such policies as macroeconomic austerity and currency devaluation. In addition, a series of structural measures to remove supply-side economic bottlenecks was imposed, including the removal of administered input and output prices and drastic reductions or elimination of subsidies for various sectors including agriculture. A large number of developing countries continue to implement stabilization and structural adjustment programmes that were begun in the 1980s.

7.2 During the mid- and late 1980s, the conditionality required by the IMF and the World Bank on stabilization and structural and sectoral adjustment loans was perceived as stringent, rigid and unbending. The resultant belt-tightening and austerity were often associated with wrenching drops in real incomes and levels of living, primarily hurting those least able to adjust. Some countries rebelled at the severity of the adjustment measures imposed by both the IMF and the World Bank, often in the face of civil unrest in opposition to the imposed austerity. By the early 1990s, the World Bank and the IMF began to show more flexibility in their approach to stabilization and structural and sectoral adjustment, recognizing that unless reforms were both appropriate for the specific conditions and could receive the political support of the people, through proper attention to the social dimension, they were unlikely to be implemented for long enough to work.

7.3 The debt issue continues to plague countries in all regions and, indeed, is becoming more intense, despite all efforts towards debt rationalization. Most disturbing is the situation in sub-Saharan Africa, where, although its absolute external-debt level is the lowest of the developing regions, it is the highest as a proportion of regional GDP (110 percent in 1993), and increasing. The debt problem, not yet resolved despite numerous debt relief and reduction initiatives, has many deleterious implications for food security. Debt-servicing obligations reduce the ability of countries to import food and non-food items that could increase domestic food production and consumption and constrain resources that might otherwise be available for financing development and social welfare schemes. The debt problem has evolved in nature and characteristics. The crisis of the 1980s, mostly in middle-income countries, initially concerned commercial debt and, as such, was perceived as a threat to the stability of the global financial system. Private financing virtually stopped for several years before rebounding forcefully, but much more selectively, in the 1990s. The Brady Plan, among other initiatives, contributed towards alleviating the debt burden in a number of countries. The 1990s have seen a different type of debt problem, which also had its roots in the 1980s, that of low-income countries borrowing from developed-country governments and multilateral creditors. Much of this lending took place to help poor countries cope with falling export commodity prices, rising world interest rates and escalating repayment schedules to commercial banks. Of particular concern is the continuing aggravation of the debt burden in many countries in Africa – 25 of the 32 severely indebted low-income countries are in sub-Saharan Africa. While Latin America and the Caribbean and Asia have seen an improvement overall, serious difficulties are also being faced by a number of countries in these regions as well.

7.4 The structural adjustment policies have an impact on domestic food security in several ways:

• the policies focus on economic efficiency and fiscal prudence entailing a preference for targeted non-distorting interventions as opposed to economy-wide price-distorting policies;
• the policies reduce public-sector involvement in food production, storage and distribution (e.g. parastatals and other state distribution channels) and increase the role of markets and non-governmental organizations (NGOs) in the implementation of food security interventions;
• the surrogate role of the state (mainly in terms of encouraging public investment) is concentrated on actions having the highest potential for promoting overall growth.

7.5 The effects of policy reforms on the poor and the food-insecure are most likely to be different in the short term and in the long term. Who benefits and who loses depends on the income, resource and education profile. In the short term, the stabilization effects dominate. Reductions in the social safety nets (including cuts in the public payroll and welfare-type programmes that benefit the poor) and higher prices for imported items (including basic goods such as food, medicines and fuel) because of devaluation have, at least, short-term detrimental effects on the weakest segments of the population. This shift may also transfer resources from the domestic agricultural sector and leave poor farmers without production credit. In many countries, of course, farmers are net consumers of purchased foodstuffs, and they and city consumers alike are affected by rising retail prices for necessities.

7.6 Important determinants of who loses from stabilization and to what extent depends on whether both poor people and those better off own or at least have clear access to productive resources, whether they can take advantage of opportunities in the formal and informal labour markets and whether they have access to government subsidies or other programmes. For instance, low-income urban residents who depend directly or indirectly on public-sector employment may become food-insecure as a result of reductions in government public-works programmes and cuts in subsidies for food and other goods and services (such as fuel, electricity and health services).

7.7 For the rural poor the situation is often even more complex than for the poor living in cities. While the effects of reform programmes on the agricultural sector are expected to be positive overall, mainly through higher prices to agricultural producers, the distribution of gains and losses among rural people depends on whether they are net food sellers or buyers, whether they are producers of export or subsistence crops and whether they have access to land, labour, credit, input and product markets (Binswanger, 1989).⁵

7.8 In the medium and long terms, the effects of policy reforms are determined by the extent to which they contribute to growth resumption.

7.9 The impact of external conditions, institutional and political factors and pressures and the degree of economic crisis and pre-reform distortions brought about by inappropriate monetary and fiscal policies vary from country to country. Likewise, there are differences in the commitment to change and the political will to carry out often unpopular policy reforms that counter well-entrenched interests. Sometimes nationalistic pressures prevent governments from appearing to have yielded under the pressure of an international organization.

7.10 Countries are at different stages in the adjustment and policy reform process. Several have graduated from the stabilization phase and are implementing structural reforms. Some countries have built credible macroeconomic policies and have managed to attract foreign loans and private investment. Some have succeeded in generating overall growth, although substantial segments of the population are not yet participating in its benefits.

7.11 The package of policy reforms involved in structural adjustment programmes has evolved over time. Experience demonstrates what works and the amount of time required to achieve change. Today, more emphasis is given to social impacts of reforms and to assistance in creating the necessary conditions for growth (including financing infrastructure, education, extension and training, and the creation of market institutions such as market information systems and communications networks). The basic orientation of those programmes continues, nevertheless, to be towards a stable macroeconomic environment, more reliance on market activity and more open trade regimes.

7.12 The effect of structural adjustment on food security, both nationally and at the household level, depends on the stage of the reforms and the impact on various groups within the society. In the initial implementation stages, the impact on food security is likely to be adverse since the correction of economic distortions will tend to cause prices to rise and real incomes to fall. As reforms take hold and growth resumes on a more sustainable basis, the food security situation will improve in general, although some of the more vulnerable groups may be left behind.

7.13 To the extent that policy reform moves the economy towards market liberalization and openness, resources will be allocated more efficiently, jobs will eventually be created, economic growth will be facilitated and food security will be enhanced, in most cases, at least, at the national level. To ensure enhanced food security at the household level, additional policies and programmes will often be required that promote a more equitable distribution of incomes and access to productive resources and employment.

8. Crisis and adjustment in developed countries and the implications for developing countries

8.1 The adoption of market principles and the pursuance of sustainable macroeconomic balances are not confined to the developing countries. Developed-country policies have also been increasingly oriented towards reducing fiscal imbalances, privatizing public enterprises and exposing their markets to foreign competition.

8.2 As in the developing countries, policy reforms are aimed at improving resource efficiency and reducing the risk of a financial crisis. Reforms are often undertaken with pressure from an increasingly aware electorate that is dissatisfied with heavy taxation and the distribution of the tax burden and with public-sector performance, which they define as overly bureaucratic at best and hopelessly unresponsive and inefficient at worst. There is also growing concern in the developed countries about intertemporal allocation of financial and natural capital and intergenerational equity. Since raising taxes is politically risky and discourages investment, governments are more apt to attempt to reduce budget deficits by curtailing government spending by means of privatizing public enterprises, selling other government assets and curbing public assistance (and sometimes education, health and infrastructure) programmes. Severe structural reforms have taken place in some industrialized countries in the last few years, while, in others, reforms and/or reductions have been planned but not yet implemented.

8.3 The ending of the Cold War, the increasing integration of the world economic system and the reduction in macroeconomic disequilibria and public spending in industrialized countries will continue to have significant economic and social repercussions on matters of food security. Reductions in both trade protection and subsidization have seen the decline of several industries previously categorized as strategic. In addition to agriculture, energy, defence, aviation and natural resources have felt the consequences of the new political and economic realities. Some have become the focus of trade disputes among industrialized countries themselves.

8.4 As in the case of reform programmes in developing countries, industrialized nations are at different stages of stabilization and structural adjustment. Some countries have not yet succeeded in achieving the political consensus needed to carry out the necessary adjustments. Others are beginning to see the growth dividends of previous restructuring efforts, often won at some social cost, especially unemployment. Whether job loss is a short-term phenomenon or will develop into a chronic problem is not yet known.⁶

8.5 Policy changes in industrialized countries may entail negative effects for the developing countries in the short term (for example, fiscal restraint in developed countries will probably affect the level of foreign aid). In the long term, however, developing countries stand to gain from the economic boom in high-income countries that is forecast to result, mainly as trade increases and the resultant development instigates a higher level of food security.

8.6 The most radical movement towards market-oriented economic reform has been that undertaken in the last few years in the former centrally planned economies of Central and Eastern Europe and the former USSR. In the initial stages of reform, local food-insecurity situations emerged, caused by declining real earnings combined with both the removal of most internal subsidies and price controls for food and the loss of social safety nets that were an integral part of socialized industry. Problems for those countries were exacerbated by the decline in regional trade following the demise and eventual dismantling of the Council for Mutual Economic Assistance.

8.7 The medium- to longer-term economic prospects in these countries are uncertain; they will also be uneven. A number of countries in Eastern and Central Europe are more advanced than others in the scope of their reforms. These countries have laid the foundations for economic recovery and resumed economic growth. Overall, prospects appear more uncertain for the countries of the former USSR, where the complexities of economic transition have been compounded by political problems and the persistence of collective forms of economic organization.

8.8 Another important constraint to the transition process, especially in agriculture, is the inadequacy of the legal and institutional infrastructure necessary to support the functioning of competitive markets. Markets cannot function in a vacuum. They require information, rules that govern the behaviour of market participants, and the establishment and enforcement of grades and standards. Most transitional economies have invested great effort in the privatization and distribution/restitution of land. In some cases, the process chosen has resulted in landownership structures inconsistent with efficient agricultural production. In a number of cases, land markets have not evolved because of institutional or legal deficiencies (such as titles not being issued or boundaries of parcels not established and registered). Commodity markets have often been slow to evolve beyond local markets because the absence of uniform and enforced grades and standards makes it impossible to buy or sell without both parties and the commodity being present in the same location. Market information is still limited by the need for government agencies to complete the transformation from performing the market function themselves to providing the services necessary for private firms to perform these functions.

8.9 In the countries with economies in transition, the prospects for recovery of domestic food production in the mid- and long term depend on how complete and effective the reforms are and when the turnaround in the overall economy occurs. The resulting changes in domestic demand and supply will influence both agricultural output and participation in world food markets.

9. Changes in global economic relations: international finance and trade aspects

9.1 The trend towards globalization, liberalization and integration has extended to the world’s financial markets, as well as to markets for goods and services, both of which play an important role in food security. There has been an unprecedented expansion in the number and volume of financial transactions across borders, much greater in fact than the liquidity needed for trade balancing. The Bank for International Settlements estimates that the daily turnover in foreign-exchange transactions now approaches US$1.3 trillion (The Economist, 1995). At the national level, such flows are an important indication of how macroeconomic policy performance and political stability are judged by markets and domestic and international investors.

9.2 Short-term movements of capital across borders (portfolio investment) respond to differences in the expected rates of return of debt and equity instruments in different countries and to the risk associated with such instruments. Thus, at the national level, capital movements depend on real interest rates, actual and expected exchange rates and the confidence of investors in the ability of the government to maintain a stable macroeconomic environment. Recent experience demonstrates the inability of governments acting individually (or even in tandem) to fend off movements in exchange rates; even massive interventions in the financial markets have little effect. Thus, the credibility of governments and their policies (of which political stability is an important determinant) is a key factor in financial market stability. There is little governments can do to stem the outflow of short-term capital if investor confidence is shaken.

9.3 The amount of direct, private, foreign and domestic investment, on the other hand, reflects the confidence in the expected long-term overall performance of economies and of government policies. Foreign direct investment is far less volatile than short-term portfolio investment, which can literally be withdrawn overnight, leading to a financial crisis.

9.4 When short-term capital flows in large volumes across borders, while at the same time the economy is undergoing a programme of liberalization, the freedom of individual governments to use monetary and fiscal instruments to pursue domestic objectives may be compromised. But this lack of independence is not necessarily a negative phenomenon. Markets tend to reward liberal and prudent economic policies and political and economic stability. Countries that achieve stability frequently benefit from increased financial flows, which helps them alleviate balance-of-payments constraints.

9.5 Capital mobility (including the possibility of capital flight) underscores the need for prudent fiscal, monetary and exchange-rate policies. The “margin” that governments have in committing macroeconomic policy errors is very narrow, especially when private capital that flows into those countries is mainly invested in liquid, short-term instruments that can quickly reverse direction. On the other hand, economies may gain significantly from these capital inflows if consistent interest and exchange-rate policies are followed and investors believe that a country’s financial situation is predictable and stable.

9.6 External private capital flows to the developing countries increased dramatically from 1990 to 1993, then stabilized following the Mexican crisis and the rise in interest rates in the United States, before resuming their upward trend. These flows have eased the financial constraint and created growth and developmental opportunities in the recipient countries. However, having accrued mainly to a limited number of Asian and middle-income countries in Latin America and the Caribbean, they cannot be expected to compensate for the reduced official aid to low-income countries. Further, the Mexican crisis and the experience of several recipient countries underlined the potential risk of accumulating excessive foreign liability in the face of volatile financial markets; and the undesirable side-effects of large capital inflows in the form of inflationary pressure and losses in external competitiveness linked to currency overvaluation.

9.7 The present system of floating exchange rates, combined with free capital movements, has resulted in periods of extreme exchange-rate instability (in addition to the short-term “noise” in the movement of nominal exchange rates) such as that from 1980 to 1987. Discussions regarding a “central” exchange-rate control system are still in progress. For such a system to succeed, a central authority with the power to impose macroeconomic coordination is needed. It is unlikely, however, that nation-states will be willing to compromise policy independence by accepting a central authority (International Monetary Fund, 1994).

10. Liberalizing international trade: significant steps forward

10.1 The trend towards market liberalization has manifested itself in international trade⁷ through a number of bilateral and multilateral agreements culminating in the conclusion of the Uruguay Round of Multilateral Trade Negotiations. Two of the provisions included in the Uruguay Round of GATT have a direct effect on food security: the Agreement on Agriculture (AOA) and the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries.

10.2 The AOA prescribes rules concerning policies that directly or indirectly affect food production and consumption and international agricultural trade.⁸ These rules fit within three broad categories:

• rules having an impact on market access by foreign suppliers, including tariffication of non-tariff barriers (such as quotas, variable levies, minimum import prices, state trading measures, etc.), reduction of the resulting tariff equivalents and the provision of minimum access for imports where there are no significant imports at present;
• rules affecting policies that provide domestic support to agriculture. (A wide range of policies deemed to be non-distortionary are exempt from this set of rules and there are no limits to increasing such support. Examples include general services to agriculture, food security stocks, domestic food aid and “decoupled” payments to producers);
• rules that determine the limits (in both monetary and quantity terms) to which exports may be subsidized (export competition rules).

10.3 Under the AOA, developing countries receive “special and differential treatment”, including smaller required reductions of tariffs as well as trade-distorting domestic support and export subsidies and longer implementation periods. (Fewer restrictive measures apply to very poor countries.) Whenever countries implement trade liberalization policies under structural adjustment programmes, the provisions of such programmes are usually more stringent than those of the GATT agreement.⁹

10.4 While the AOA represents movement towards freer trade in agricultural commodities, it is only a partial liberalization agreement; protection continues. Reductions in agricultural supports are modest and spread over several years, but the AOA begins a process towards more transparent and somewhat less-sheltered agricultural trade.

10.5 One of ways in which the AOA will affect developing countries will be through changes in prices of temperate-zone products relative to those of tropical products. A strengthening of the world prices of temperate-zone products is expected compared with smaller increases or even reductions in the prices of tropical commodities. Increases in prices of temperate-zone foods and export-subsidy reductions imply increases in food import bills paid by net food importers (the majority of developing countries) accentuated in low-income countries accustomed to importing food at subsidized prices.

10.6 The Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries is aimed at alleviating possible problems arising from higher import prices of food during the implementation of the trade-liberalizing reform programme on agriculture. While the provisions of the decision are potentially of great significance to developing countries that may be adversely affected by the Uruguay Round Agreement, the modalities under which it will be implemented are not clear and need to be further elaborated.¹⁰

10.7 The move towards liberalization and lower price-support activities may result in a reduction in government-held food stocks, and whether they will be replaced by private-sector stocks is an open question. However, support to food-security stocks undertaken in a prescribed fashion has been exempted in the AOA. While industrialized countries can afford to build large public stocks, this action is often too expensive for developing countries. The probable reduction in government stocks in industrialized countries will influence food aid availabilities. While other factors are reducing the amounts of grain available for food aid, there is no reason to believe a priori that bona fide food aid will be adversely affected by the agreement.

10.8 The overall impact of the AOA on developing countries depends on their net trade position, the implementation of compensating measures to counter higher world food prices and the long-term effects of possible overall higher growth following trade liberalization. Estimates of overall income growth attributable to the Uruguay Round range from US$109 billion to $510 billion from GATT estimates, to $213 billion according to the World Bank/OECD estimates.

10.9 Countries receiving preferential treatment for their agricultural exports can expect a reduction in the preferential margins as a result of lower most-favoured nation (MFN) tariff rates, assuming that tariffs under the existing preferential schemes, the Generalized System of Preferences (GSP), Lomé, and the Caribbean Basin Initiative, remain unchanged. FAO calculates that the potential value of preferences granted by the European Union, the United States and Japan attributable to the agricultural sector in 1992 was US$1.9 billion. This value is expected to decline by US$0.8 billion as a result of the Uruguay Round reduction of MFN tariff rates.¹¹

10.10 Another effect of the AOA on food production in developing countries is related to the risk faced by producers caused by international market price variability. With a reduction in policy stocks as a result of domestic policy reforms, the price effect of a market shock initially is likely to be larger. However, with more countries opening their markets to world price signals through tariffication as a result of the Uruguay Round, shocks arising from unexpected production shortfalls or bumper harvests would be absorbed by the greater number of country markets, thus cushioning the after-effects of such shocks on world prices. A reduction in risk caused by the attenuation of erratic and unpredictable price movements may be an incentive to increase food production in developing countries where farmers have very few, if any, instruments to hedge against risk.¹²

11. Perspectives on regional economic integration ¹³

11.1 A major new characteristic of the world trading system is the expansion of regional trading agreements (RTAs). Examples are the completion of the Single European Market in January 1993, the protocol between the European Economic Community (EEC) and the European Free Trade Association (EFTA) to form the European Economic Area (EAE), and the launching in January 1994 of the North American Free Trade Agreement (NAFTA), which extended the United States-Canada Free Trade Agreement to Mexico. Other Latin American countries are negotiating free trade with NAFTA members and/or are strengthening and expanding trade agreements among themselves. The United States is proposing the creation of an Enterprise for the Americas Initiative, wich would liberalize trade and investment flows in North, Central and South America.

11.2 In part, the revival of trading blocs reflects an adjustment to the end of the Cold War and the declining importance of superpower rivalry and security considerations in trade. The resurgence of RTAs represents a means of competing for investment funds and is also a reflection of the continuing globalization of industry, manufacturing and service operations. For a time RTAs represented a response by countries that desired free trade and were of the opinion that the GATT talks were proceeding too slowly. Thus far, the most successful arrangements have been among the developed countries, but there have also been promising developments in RTAs between developed and developing countries.

11.3 An important question that arises from the proliferation of RTAs is their role in enhancing or undoing some of the discipline imposed on country policies by the Uruguay Round Agreement. While, in principle, RTAs (especially free-trade associations) could establish and maintain open trading arrangements with other countries or blocs (open regionalism), the danger exists that rules will be written to serve the narrower interests of countries belonging to the arrangement at the expense of the outsiders. In such cases, within-bloc liberalization diverts more trade than it creates. Such practices are not allowed by the GATT disciplines, which rule that RTAs should not create or raise trade barriers against other GATT members. Therefore, the question boils down to the ability of the newly formed World Trade Organization (WTO) to enforce such rules.

11.4 For developing countries, participation in RTAs may be a mixed blessing. Small and economically weak developing countries that form trading blocs with developed ones are unlikely to carry much weight in establishing rules. On the other hand, experience with RTAs involving only developing countries has not been very encouraging because of their generally weak economic structure and their lack of countervailing power.

11.5 There are wide differences among RTAs in the way they treat agriculture. In Europe, a common agricultural policy and a free regional market includes 15 countries and accounts for a large part of world agricultural trade. For its part, NAFTA promises a tariff-free zone in ten years. Agriculture is currently only partially treated in many RTAs,¹⁴ since trade concessions often clash with domestic policy objectives. Despite this problem, trade diversion on a large scale seems unlikely. There is scope for increasing intraregional trade in the Southern Common Market (MERCOSUR) and the Association of Southeast Asian Nations (ASEAN) by removing internal trade barriers, while in other continents substitution away from interregional supplies is limited.

11.6 In general, the direct effects of the organization of RTAs on food security through their impact on agriculture will depend on the extent to which those agreements will dominate world agricultural trade and the way in which they will behave towards other regions or countries. If the trend towards proliferation of RTAs continues, pressures will be created to define more acceptable policy frameworks (domestic and trade-related) to deal with agriculture within the RTAs. This development will have implications for the behaviour of individual bloc members towards non-members (in the case of a free-trade area) or of the bloc as a whole (in the case of customs unions). If RTAs become more liberal as a result, then the overall outcome will be welfare-enhancing on a global level.

11.7 The effect of RTAs on food security will depend, at least in part, on whether they behave so as to enhance (liberalize) trade and thus contribute to global resource use efficiency and income. If they do, their existence at the very least increases the potential for increasing access. Should they become a means of circumventing reforms agreed to multilaterally in the GATT/WTO, they will have the opposite effect on food security. Beyond this, it is not possible to generalize about the effects of RTAs on food security.

12. Issues of natural resources and the environment

12.1 During the period since the 1974 World Food Conference, international attention has been directed towards issues concerning natural resources and the environment at both the national and international levels. For developing countries, natural-resource pressures (such as land degradation, erosion, water scarcity, deforestation and irresponsible fishing) have the potential to compromise agricultural growth and food security seriously. There is increasing awareness about global environmental issues. For instance, the conservation of biological diversity or the depletion of the ozone layer are global environmental problems, while transboundary fluxes of rivers may be of concern to only a few countries. Nations increasingly understand that most of these problems cannot be resolved by one country or group; they transcend national borders, spreading instability and suffering throughout the region and around the world. Too often, the concerted action needed has not been forthcoming.

12.2 The transboundary and global nature of numerous natural-resource and environmental problems has created the need for coordinated action at various levels to address them. As a result, a number of agreements have been signed by countries involving sharing of environmental goods and conserving global resources, in which, through a system of bargaining, compensation and punishment for non-participants, countries agree to follow policies that address concerns shared by all of the signatories.

12.3 The 1992 United Nations Conference on Environment and Development (UNCED) represents an important expression of the international community’s recognition of these matters. In many parts of the developing world, expanding populations and shortages of fertile land, water and forests are already contributing to the expulsion of farmers from agriculture, thereby creating a class of environmental refugees.¹⁵

12.4 International agreements negotiated to improve environmental problems and trade matters ultimately affect production decisions at the producer level and purchase decisions at the household level. For example, the overwhelming majority of world fish trade is from developing to developed countries. The 1995 United Nations Conference on Straddling Fish Stocks and Highly Migratory Fish Stocks represents a determined effort by countries to reconcile global interests concerned with fishing on the high seas.

12.5 Some international conventions such as those on biological diversity, forestry and climate change, however important, may have negative implications for the world’s food supply, at least in the short term. For example, the climate change convention raises the possibility of establishing carbon taxes and would result in higher energy costs, new input mixes and changing technologies. The combination would imply higher production costs for food producers and higher prices for consumers, resulting in losses in food security. Furthermore, since the transformation of forest land into agricultural land accounted for the majority of deforestation over the past ten years, international agreements that constrain forest conversion will alter future food production possibilities.

12.6 Food security is also very dependent upon water supply,¹⁶ and water resources are frequently an underlying cause of disputes, especially when they are scarce. The increasing value of water, concern over its quality and problems of access have made hydropolitics a matter of international concern. In Africa, Asia and Latin America, shared river and lake basins make up at least 60 percent of the total land area (Barrett, 1994). Water conflicts are only expected to intensify as the number of users burgeons.

12.7 Contemporary development also includes concepts of intergenerational equity and justice. For the first time in human history, the global community is collectively attempting to understand how today’s actions may affect the planet’s ecosystems 100 years into the new millennium. Incorporating this broad range of values into sustainable food production is appealing and necessary, but difficult in practice. The question frequently posed is: how can resources be used today to enhance food security considerably, but in such a way that their capacity to generate production for future generations at the same level is not diminished?

12.8 At the national level, governments are under pressure to structure incentives so that natural and environmental resources are managed in a sustainable manner. Policy measures vary among countries depending on the nature of the problems they face.

12.9 Both national and international aspects of environmental and natural-resource issues have significant bearing on the implementation of development policies in general and for food security in particular. National-level resource and environmental problems can present governments with difficult trade-offs between present and future growth and food security. The trade-offs can be particularly acute in the agricultural sector (including forestry and fisheries) where many resource problems of the developing countries are concentrated. In addition, international agreements constrain the range of actions taken by governments to influence natural-resource use.

12.10 In the long term there is no conflict between the sustainable use of the natural-resource base and food security since, for the foreseeable future, food production will be dependent on land and water resources. If these resources are degraded, future productive capacity will be reduced and global food security, and possibly national as well as local food security, will also be reduced.

12.11 In the shorter term, approaches, including policies, chosen to meet present food and income needs can have negative effects both on the resource base and on the environment in general. Conversely, actions to protect the resource base and the environment can reduce production and incomes and, therefore, near-term food security.

12.12 In the end, the focus of policy needs to recognize that resource degradation has different consequences for different countries and population groups. For the poor countries the consequences can be very serious, as their welfare depends heavily on the productive potential of their agricultural resources. At the same time, it must be recognized that resource degradation anywhere on the planet, particularly in the major food-exporting developing countries, can make the solution of the food security problems of the poor more difficult if it reduces global food production potential.

13. Employment problems and labour markets

13.1 Unemployment and underemployment have been characteristic of (or at least economists have usually assumed so) developing economies and especially of their agricultural sectors since the beginning of the post-colonial era. At least one early development model was based on the assumption of surplus labour in the agricultural sector. What is new in the 1990s is the emergence of relatively high rates of unemployment in a number of highly industrialized countries and in all of the transitional economies.

13.2 The presence of jobless and underemployed people has negative effects on food security. In an aggregate sense, they represent potentially productive resources, but they are not contributing to aggregate output. This waste of resources reduces aggregate income and, of course, leaves the affected individuals and their dependants without earnings, thus reducing access to food at the national and household levels. To the extent that the comparative advantage of these jobless and underemployed people is in agriculture, the aggregate availability of food is reduced. Of course a reduction in the national income reduces the ability to import food. Consequently, underutilization of labour (or any other resource) may reduce food availability regardless of the sector in which the comparative advantage rests.

13.3 There is not a total consensus on the causes of and cures for unemployment, but there are some areas of general agreement. In the developed countries, policies and institutions established over many years to protect the interests of workers have introduced rigidities into the labour market and increased the cost of labour. As the world’s markets have become more integrated and competitive and as structural changes occur, the labour markets are not flexible and efficient enough to reallocate labour and structural unemployment is the result. Changing policies and institutions is proving to be a slow and politically painful process in most countries, and safety-net approaches are being relied on to mitigate the food-insecurity problems in the interim.

13.4 The countries with economies in transition have undergone unprecedented economic and political restructuring with, in most cases, very inadequate policies or institutions to facilitate the functioning of an efficient labour market. Thus, it is no wonder that massive unemployment has resulted. This in turn has led to serious food insecurity and undernutrition in many of these countries.

13.5 The employment problems of the developing countries, especially in sub-Saharan Africa and South Asia, are in many ways more complicated and intractable and the food security consequences more direct and serious. Much more of the unemployment as well as underemployment is rural and agricultural and, thus, the negative impact on both availability and access dimensions of food security is direct. While agricultural labourers are without work or underemployed for much of the year, labour is a serious constraint to agricultural production because of the high seasonal requirements of the technologies employed. Labour markets are not well developed, but, at the same time, in the industrial and formal service sectors, some of the same policies and institutions that cause labour markets in the developed countries to be rigid and labour to be expensive have been adopted. This limits opportunities for seasonal or full-time off-farm employment for rural people.

13.6 Many countries’ macroeconomic policies (such as overvalued exchange rates and subsidized credit and inputs) have, in some cases, provided incentives for the adoption of labour-substituting technologies. Finally, most of these countries have invested very little in education or health services to increase the productive value and mobility of their human resources. Most have also failed to recognize that ensuring adequate nutrition is an investment in human capital as well as a current consumption expenditure.

14. A changing world economic environment: policy implications

14.1 The impact of the world’s changing economic environment on food security in developing countries depends on the constraints it places on the policy options of these same countries. In the global economy, national policies and the instruments to implement them will be increasingly conditioned directly or indirectly by outside events or pressures of globalization, economic integration, environmental and natural-resource treaties and the process of economic liberalization.

14.2 For example, loan conditionality requiring policy reforms directly constrains policy options in many developing countries. Even in the absence of explicit conditionality advanced by the donor countries, the threat of economic and financial crisis forces the governments of developing economies to take steps to reduce budget deficits and the public debt through public-spending reductions and/or tax increases. This is when governments have to make politically difficult choices as to how reductions in spending are to be shared among various segments of the population. To a large extent, the allocations depend on the relative power that various social groups can exercise on the government.

14.3 To combat poverty and food insecurity, governments are constrained according to the types of interventions that they can undertake. Budget austerity and efficiency considerations imply that general subsidies and assistance programmes that distort market incentives will be either severely limited or abandoned altogether. Since those policies have been found to be counterproductive in the past, other more targeted policies and instruments will be used in support of food security. The implementation of such acceptable policies will require removing institutional bottlenecks and upgrading the efficiency of the managerial capacities of the public sector.

14.4 In addition, the role of NGOs and the private sector to carry out food security programmes will be enhanced in the face of shrinking government budgets and services. Indeed, NGOs have proliferated in recent years and many have assumed important roles in the delivery of services and in the implementation of policy and programmes formerly reserved as the purview of government. While most NGOs are serious and responsible entities, they should not always be taken as reliable substitutes for the state.

14.5 As the global economy ushers in increasing economic cooperation and integration, domestic policies will be constrained by their obligations to adhere to the disciplines of regional or international agreements (including those relevant to natural resources and the environment) of which they form a part. In turn, a more limited range of domestic policies less susceptibile to political manipulation and considerations can be utilized. For agriculture, such agreements require discipline with respect to any domestic agricultural policies attempting to manage the price structure in favour of agriculture. The challenge for countries is to find low-cost, decoupled methods that give a boost to the productivity of the agricultural sector. Such interventions may include improving infrastructure and research and extension or assisting in the creation of market and credit institutions in the rural areas.

14.6 The accentuation of demographic and economic imbalances within and between countries, civil strife and natural disasters, the loss of jobs caused by transitions to alternative economic and political systems and the emergence and strengthening of economic cooperation and integration schemes have strongly affected international labour mobility and migration patterns. At present, over 80 million people are living permanently outside their own country and a further 18 million people are migrants as a result of political problems or natural catastrophes. Each year about 1 million people emigrate definitively and another 1 million seek political asylum. The accentuation of economic imbalances between rural and urban areas has also given rise to rural/urban migration within borders, which has assumed disquieting proportions in many countries.

14.7 Migrations have major food security implications for the migrants themselves and, through the impact of these, whether they are positive or negative, on the economies and agricultural sectors of both the recipient and the donor areas. In many cases, migration has been an important contributor to agricultural as well as overall growth in the recipient countries, remittances from migrant workers have represented sizeable sources of income, foreign exchange and rural capital formation and returning migrants have brought back skills and savings acquired abroad. On the other hand, despite the apparent paradox, in many cases migration has also created labour shortages and reduced agricultural activity in the countries or areas of origin. This has occurred in part because those who migrate are often more educated, skilled and dynamic than those who remain. Increasing migration has posed difficult problems of economic and social integration in many recipient countries.

14.8 The mounting gravity of these problems points to the urgent need to shift the policy balance towards tackling their root causes rather than reacting to the events. Actions to accelerate progress towards universal food security – adequate food supplies, stability in food production and access to food – including those designed to create sustainable business and employment opportunities, can help reduce the developing countries’ heavy losses of human resources. They can also help to contain the massive outlays being made in recipient countries to reduce the flows of migrants.

15. Looking back and ahead

15.1 What prospective lessons can be derived from the experience of the past two decades? The world is profoundly different from what it was at the time of the World Food Conference in 1974. However, several features of the old political order, and the ideologies behind it, are appropriate to be reviewed because of their contemporary relevance. Calls for developing-country solidarity, self-reliance and a new and more just economic order now manifest themselves in different ways. The solidarity principle has broadened to a global dimension as awareness of the interdependence of economic interests has increased. Solidarity and self-reliance may be seen as having evolved into a broader perspective of intraregional collaboration and integration. A more just economic order, at least concerning trade, was the purpose of the recently concluded Uruguay Round of GATT negotiations and the founding of the WTO. At the same time, however, official development assistance has lagged behind growing needs. Official commitments of external assistance to agriculture and, hence, to food security have declined in real terms in recent years.

15.2 Some political developments have also imposed perspectives radically different from those that existed in 1974. The principle of non-alignment has lost relevance in the current context of both East-West and North-South relations. No longer are there two big superpowers vying for hegemony in the developing countries. Developing-country solidarity has given way to a more pragmatic approach, in which self-interest plays a greater role in alliances and agreements. This new approach is exemplified by the Cairns Group, in which developed and developing country members worked together to pursue common objectives of trade liberalization.

15.3 The North-South rapprochement was also evident in the emergence of free-trade arrangements involving countries with markedly different levels of economic development and income. Most striking in this process is NAFTA; negotiations are now under way to broaden its scope and create other forms of North-South economic and trade agreements. North-South disagreements have also been moderated by the fact that a number of rapidly industrializing developing countries can now claim a developed-country status in some important respects.

15.4 The overall political balance has shifted towards a less polarized pattern of dominating influences, which reflects the growing relative weight of a highly industrialized Japan, a more integrated Europe and a dynamic East and Southeast Asia, with China playing an increasingly important role in the global political and economic scene.

15.5 These developments generally suggest better intercountry relationships overall and better prospects for global food security. The possibilities for improved food security at both country and household levels are, however, more problematic in this global context. Improvement in food security at the country level depends heavily on the ability of a given country to integrate its economy into the international community and compete in an interdependent world. Improved food security at the household level depends on the ability of individual household members to gain greater access to food. This, in turn requires access to employment opportunities and participation in the rewards of a growing and dynamic economy. For poor households without prospects, safety-net programmes are necessary to assure food security.

15.6 At the same time, the world faces extremely complex problems associated with the nationalistic tendencies of the countries with economies in transition and the upheavals caused by political, religious and ethnic conflicts. This process accentuates problems of food insecurity, specifically, and security, generally. Dismantling a nuclear arsenal of a destructive power that defies comprehension, doing it safely and avoiding proliferation in the newly created states and elsewhere are but one aspect of the problem; realizing and utilizing peace dividend resources in productive ways that inter alia help countries improve their food security situation is another. Helping new states stabilize and consolidate their political and economic situation is a further challenge. It is fundamental that the past 50 years of peace through fear give way to a new period of peace through shared wealth.

15.7 The international environment is now more favourable to economic growth than it was in 1974. Trade and capital market liberalization combined with capital mobility motivates developed and developing countries alike to improve their position by creating credible investment opportunities. But the prerequisites are political stability, stable institutions and macroeconomic policies that avoid large and protracted disequilibria. Creating such an environment is a challenge that each country must face.

15.8 There are special opportunities for profitable investment in developing countries that have a comparative advantage in low-skilled labour-intensive activities. Barring increased protectionist tendencies by the developed countries under the pressure of labour market adjustment problems, these opportunities should continue as more and more countries present themselves as credible and stable investment locations. Increased employment and income-earning opportunities, especially for low-skilled workers, cannot but help developing countries’ efforts to combat food insecurity.

15.9 Taking advantage of increased opportunities in the global economy will be a challenge that not all developing countries will be able to meet, at least not in the near future. Some countries are searching for the political consensus necessary to undertake economic reforms that may harm some domestic interests in the short term; others are struggling to rebuild their economies and to create proper institutions and infrastructure. Some countries will have to rely more on their own efforts, internally generated resources (savings) and official assistance for several years to come.

15.10 National-level policies to address domestic problems will continue to be restricted by international obligations assumed by international treaties and by the increasing influence on domestic policies of events in the international markets. Although countries could, in principle, isolate themselves from such influences, it is unlikely that they will do so, given the catastrophic consequences of such policies in the past.

15.11 In an ideal world, what would constitute the socio-political and economic environment most conducive to the elimination of food insecurity and undernutrition, that is, to ensuring food for all? It may be difficult to achieve agreement on all elements of such an ideal environment, but it would surely include most of the following:

• countries would adopt broadly participatory and pluralistic political systems under which governments would be responsive and responsible to the people;
• governments would find peaceful means of resolving internal conflicts and, with the assistance of an effective United Nations or other legitimate peacekeeping organizations, conflicts with other governments;
• governments would devote their limited resources to doing those things that markets do not do well and that are necessary for the efficient and effective functioning of the economy and society (these would include, but not be limited to, providing safety nets, such as food stamps, for those with only limited or no access to the market, assuring socially optimal levels of investment in public goods and providing appropriate incentives for the sustainable use of natural resources and the environment as well as the legal, regulatory and institutional structure to assure conditions for a competitive market);
• domestic and international markets would be liberalized to allow resources to be employed globally to maximize the sustainable level and rate of growth of economic activity;
• national and international means would have been found to assist the poor effectively to increase their capacity to be productive, thereby closing the gap between the rich and the poor without unduly reducing the incentive of the rich to be productive.

15.12 In the final analysis, food security in any country must be under the responsibility and the authority of the national government in conjunction with local authorities and working with concerned groups and individuals in the society. International coordination and liaison is necessary. The global community and international organizations can be helpful, but they are no substitute for the actions and political will to achieve food security within the country itself.

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Notes

¹ For a review of the United States case, see Cassidy (1995).

² See also WFS companion paper 4 Food requirements and population growth.

³ See also Krueger, Schiff and Valdés (1991) and Schiff and Valdés (1992).

⁴ For a more detailed discussion, see FAO (1993). See also FAO (1995b), Chapter 7.

⁵See also Bond (1983).

⁶ The need for restructuring in developed countries has not always been the result of changes in policy. Rapid technological changes and the concomitant obsolescence in some industries have often been at the root of the decline of certain industries. Such changes may also cause structural unemployment as industries move from low- to high- skilled jobs.

⁷ See also WFS companion paper 12 Food and international trade.

⁸ For a more detailed analysis, see Chapter 8 of World agriculture: towards 2010 (FAO, 1995b). For a discussion of the possible effects on developing regions and on major commodities, see 15c, and WFS companion paper 12 Food and international trade.

⁹ For a comparison of specific provisions of the AOA to those of structural adjustment programmes, see Konandreas (1994).

¹⁰ See also WFS companion paper 12 Food and international trade.

¹¹ For more details on declines in the value of preferences by region and commodity, see FAO (1995c).

¹² Whether a reduction in price variability as a result of supply shocks will occur or not remains an open question. Simulations using FAO’s World Food Model did not demonstrate reductions in price variability as a result of the Uruguay Round. What was found was that “...in the absence of adequate stocks, a shortfall in production will push up prices rapidly ...” and that “...The continuing problem of international food price instability will need to be carefully monitored in the future and the role of private versus public stockholding will need to be assessed”. For more information on the simulation results, see FAO (1995a).

¹³ See Josling (1994) and FAO (1995b).

¹⁴ The Closer Economic Relations Treaty (CER) between Australia and New Zealand constitutes an exception in that it fully includes agriculture.

¹⁵ See Homer-Dixon, Boutwell and Rathjens (1993).

¹⁶ See WFS companion paper 7 Food production: the critical role of water.