Institute Notes: A Dialogue on Overcoming Hunger and Poverty

Is GM the Answer?

The debate to feed the world hungry through increased production using genetically modified (GM) crops is back. At one point in the past, GM crops were seen as a crucial way to reduce poverty and hunger. But these days there is more controversy over their safety and environmental impacts.

In a great resource on increasing food prices, The Financial Times asks two very important and timely questions:

1) “Are GM crops the answer to the challenge farmers and consumers face as changing weather patterns disrupt agricultural production;” and

2) “Do GM seeds increase crop yield as demand raises?”

Here are the answers from two opposing groups on the prospects and problems of GM crops. A recent report from International Service Acquisition of Agro-Biotech Applications (ISAAA’s) indicated that GM crop in the world will double by 2015.  ISAAA’s “mission is to contribute to poverty alleviation, by increasing crop productivity and income generation, particularly for resource-poor farmers, and to bring about a safer environment and more sustainable agricultural development”. Their report also highlights overall agricultural use in the world have shown a tremendous increase in the past 10 years. 

Subprime Mortgages and Poverty

It’s hard to escape the depressing news about the subprime mortgage collapse. Almost every day it seems to get a little worse. Before things get better, it's apparently still going to get worse. Realtytrac.com reports there were 233,000 forclosures in January. Multiply this number over the rest of the year and we're talking about 2.8 million forclosures in 2008. That's a lot of pain in America.

Just when you think you've heard it all, Bread for the World Institute enters the fray. Our new study reports there is something else to be concerned about that so far we think has flown under the radar. Homeownership, Subprime Loans and Poverty examines the poorest counties in all 50 states and the District of Columbia. In almost every state, we find subprime mortgages in high-poverty counties make up an astonishingly high percentage of all home mortgages loans.

Let’s look at Illinois. The following chart is from our state fact sheet for Illinois:

What you see here are the highest poverty counties in Illinois listed across the bottom of the chart, their corresponding poverty and subprime rates running vertically, and that thin black line in the center of the chart is the state subprime average. You can see how much higher the subprime rates in these counties are compared to the state average.

Our study includes fact sheets for all 50 states and the District of Columbia. State after state, as you look at these charts, you see virtually the same pattern, and so you get a pretty clear picture from the study of where things are worst. The most reliable indicator of where to find high subprime loan rates within any state is where the poverty rates are highest.

Our study is the most comprehensive treatment to date showing how widespread subprime lending is in poor communities. Hunger is an ever-present risk in these communities, a risk sure to be exacerbated by epidemic numbers of foreclosures. I'm not sure any of us have really come to grips with what this will mean in communities and for the nation as a whole.

FY'08 DA Budget, Part II

In a posting on February 15 I noted the alarming implications of the restrictions imposed on the DA budget by initiatives, directives and earmarks for other programs that, for whatever reason, have not succeeded in securing such earmarks. Among the latter are economic growth in general, and agriculture in particular, thereby undercutting prospects for countries to achieve sustained development on a scale that would enable them to take over responsibility for the social sector investments currently favored by the donor community. Also squeezed out are funds for democracy and governance, administration rhetoric notwithstanding.

Global Food Prices and U.S. Policy

In yet another ratcheting up of attention to the soaring cost of food and the implications for the world’s poor, the head of the UN’s World Food Program, Josette Sheeran (formerly an Under Secretary of State), advises that it is considering plans to ration food aid. Food prices rose 40 percent last year, due primarily to rising demand. The FAO has estimated that, as a result, poor countries could see their cereal import bill rise by more than a third this year, with Africa projected to see a nearly 50 percent increase. Sheeran notes that, “If food is twice as expensive, we can bring half as much in for the same price. . . . It will take increased contributions to make sure we can meet those already assessed needs.” This is especially critical in many conflicted and remote areas where the WFP is the only source of food for many people.

Alleviating Food Shortage through Commodity Exchange Market in Ethiopia

As in many African countries , agriculture is the lifeline of Ethiopia. Of the 80 million people in the country, 10 million are farmers. Farmers grow cereals including wheat, maize, sorghum, barley, sesame, and the Ethiopian grain "teff." One barrier faced by Ethiopian farmers is market access. In some cases farmers travel more than 12 miles from their homes to get information about food prices. Often this information is incomplete or the farmer does not know the price but sell their products to local traders which do not benefit them.  Fortunately, there are ways to change this.

Last year an Ethiopian economist, Eleni Gebre-Medhin, outlined her ambitious plan to create the first commodities market in Ethiopia. In her inspiring speech she says, “imagine the farmer goes to a warehouse where you have constant updates with the latest market prices”. This plan would create “wealth, minimize risk for farmers and turn the world's largest recipient of food aid into a regional food basket”. Eelni states that "there is no place in the world and no time in history that small farmers have had to bear the burden of risk that African farmers bear today."  I had to admit, I was overjoyed listening to her speech and think that this is an important step to help the country on its way out of poverty.

The FY 2008 Development Assistance Budget

While the final sectoral breakdown is not yet known and Bread for the World is still digging into the numbers, the overall parameters of the record $1.64 billion in development assistance are clear. And while the overall level of funding is greatly to be commended, it comes with earmarks (or “program marks”) that overly restrict the allocation of resources. At least $1.36 billion of the total (83 percent) is earmarked – the highest percentage in recent years, if not ever. These earmarks all reflect important objectives: potable water and sanitation, biodiversity, basic education, energy efficiency, micro credit, livelihood programming for Afghan women and girls. However, they mean that all other programs – agriculture and food security, democracy and governance, trade capacity building, natural resource conservation, educational exchanges – have to compete for a meager $275 million (or less, since the final earmark tally is not yet in).

A Real Partnership or a Photo Opportunity? You decide!

President Bush is expected to depart today for a visit to five African countries that have clearly shown that when given an opportunity and resources, Africans can succeed in their fight against poverty, diseases and corruption.

This trip is billed as a chance for the president to affirm his administration's commitment to supporting human development and security on a continent that has been ravaged by the HIV/AIDS pandemic, failed democracies and poor human rights records.

FAO warns on Food Prices in Africa

The BBC and the Financial Times are carrying stories on the UN Food and Agriculture Organization's recent warning that prices of grains, particularly wheat and maize (corn), have increased dramatically in the last year and could rise by 49% in 2008. This is likely to lead to a slight reduction in food consumption in some developing countries. 21 of the 36 countries facing food crises this year are in Africa. In addition to wheat and corn, the prices of almost all food commodities are rising, including rice, dairy and meat.

The reasons for rising prices vary by commodity but increased demand in developing countries, poor weather and in the case of corn, the rapid increase in corn-based ethanol production in response to climate change (although the benefits are questionable). The impact of high food prices also varies. Farmers who are net food sellers (i.e. sell more than they buy), will benefit from higher prices and may increase production as a result. In Africa and in much of the developing world, many farmers are smallholder farmers, i.e. own or rent and work small plots of land. They are in general net food buyers and are likely to be worse off in the short run as a result of higher food prices. Urban populations and particularly poor people in urban areas, and the rural landless population are also worse off as a result of higher prices.

Dealing Wisely With Recession

Robert Reich, the former Secretary of Labor in the early years of the Clinton Administration and now a professor at Berkeley, and for my money one of the smartest commentators on the US economy, has a terrific editorial in the New York Times today about why the widely anticipated U.S. recession could be far more painful and prolonged than previous ones. Fortunately, Reich also has some good advice for policymakers about what they can do to address the situation wisely.

According to Reich,

To get the economy rolling again, we need to get inject money into it, but where will it come from. The tax cuts in the stimulus package put forward by the Bush Administration and Congress is not likely to do this.

Much of the current debate is irrelevant. Even with more tax breaks for business like accelerated depreciation, companies won’t invest in more factories or equipment when demand is dropping for products and services across the board, as it is now. And temporary fixes like a stimulus package that would give households a one-time cash infusion won’t get consumers back to the malls, because consumers know the assistance is temporary. The problems most consumers face are permanent, so they are likely to pocket the extra money instead of spending it.

So what’s a policymaker to do? According to Reich, first let’s get our heads around the causes of the problem. It requires some clear thinking about trends over the last three or four decades, not something Americans are predisposed to do, especially about the economy. Reich's analysis of the precedents that got us to this point are, as I see them, right on.

The time has come for African leaders to show if they truly believe in Democracy

African Union heads of state began their 2008 summit in Addis Ababa, Ethiopia, as the crisis in Kenya was spinning out of control.  The summit’s original agenda which was to discuss industrial development in Africa was pushed to the back burner. The new focus of the summit was shifted to dealing with the deadly crisis in Kenya and the challenge facing the body’s other peacekeeping missions, especially in Sudan.