Institute Notes: A Dialogue on Overcoming Hunger and Poverty

Financial Crisis Implications for Developing Countries

With all the attention focused on the state of the U.S. economy and steps being taken or planned by the current and incoming administrations to deal with it, it’s easy to lose track of what the turmoil and gathering global recession mean for the poor countries of the world. Yet it’s here, as always, that the worse effects of any negative global trends are manifest.

What began as a downturn in the U.S. housing sector has now become a global crisis, spreading to both rich and poor economies. According to a recent World Bank report, economic growth rates are forecast to decline in every region of the world. The greatest proportional decline will be in our back yard – Latin America – where economic growth is predicted to slow by over half.  

Real GDP growth forecast for developing regions (percentage change from previous year)
Region	2008	2009
East Asia and the Pacific	8.8	6.7
Latin America & Caribbean	4.5	2.1
Middle East & North Africa	5.7	3.5
South Asia	6.3	5.4
Sub-Saharan Africa	5.4	4.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developing countries – at first sheltered from the worst elements of the turmoil by the fact that its financial markets are relatively isolated – are now being hammered by dwindling capital flows, huge withdrawals of capital leading to losses in equity markets, and skyrocketing interest rates. The poorest countries are also being hit by slower export growth—global trade is expected to decline by 2.5 percent in 2009—reduced remittances by migrant workers (due to slowing economies in rich countries), and lower commodity prices.

 

As a consequence, an estimated 100 million additional people have been forced into extreme poverty. According to the Bank, with every one percent decline in developing country growth rates, approximately 20 million more people are added to this rapidly swelling number.

 

What is to be done? Stabilizing the financial sector in wealthy countries is a necessary step in a global recovery. Avoiding protectionism is another. In more immediate terms, enhanced social safety nets and increased humanitarian aid are going to be necessary to cope with the effects. In the face of our own recession and financial uncertainties it’s going to be difficult to maintain our global aid commitments, much less expand them. But that’s just what is needed.

 

As we in the U.S. take a day to give thanks for the blessings we have, let’s keep in mind the literally hundreds of millions around the world on the very edge of existence.

Income Inequality Everywhere

BBC reported today the release of a new report dealing with income inequality in rich countries. The news is disappoinitng but probably not surprising. Income inequality is rising everywhere although some countries are doing worse at stemming it than others. Inequality is measured by the gap between the richest and the poorest earners. "The report found that the income of the richest 10% of people was, on average, nearly nine times that of the poorest 10%." The report examines the 24 countries that make up the Organization of Economic Cooperation and Development (OECD), among them the United States, United Kingdom, Germany, France, the Scandinavian countries, Mexico, Turkey and others. From 1985-2005, income inequality rose by 7% across all OECD countries.

 

World Scientists’ New Proposal to Feed the Poor

The International Assessment of Agricultural Science and Technology for Development (IAASTD) launched their report, April 15. Four hundred experts on agriculture and development worked on the report which outlines ways in which “agriculture can feed a world with an exploding population and a changing climate, while reducing poverty and environmental degradation”

The report is a result of a four year assessment involving scientists from more than 100 countries. It engaged non-governmental organizations, consumer groups and the private sector. The central question of IAASTD is core to what Bread for the World’s mission. The report is extensive (it is more than 2000 pages) and looks at the potential of agricultural knowledge and science and technology to reduce hunger and poverty, improve rural livelihoods, and achieve environmentally, socially and economically sustainable development in poor countries.

The report’s release coincides with heightened concern over rising world food prices and the IAASTD report responds to this growing concern by arguing that global farming needs to change radically to avoid future food shortages.

The report advances several important arguments. Among them:

• In the past agricultural science has emphasized increasing agricultural production at the expense of environmental, social or economic sustainability.
• Trade liberalization in agriculture has not benefited all countries that have opened their markets. This is because some developing countries which have liberalized agricultural trade have not made improvements in basic infrastructure and institutions that are necessary to relieve hunger and poverty, and improve and protect the environment. And;
• Agricultural research and development efforts have focused on only a handful of crops without advancing knowledge or improvements in other staples foods, some of which are important to Africa, for instance tef in Ethiopia. In advancing agricultural science in similar countries, the IAASTD report acknowledges that “Genetic erosion is of particular concern in sub-Saharan Africa because many countries have a wide range of crops and livestock species that are considered relatively unimportant on a global level but are important as local staples.

The report also stresses that “we have little time to lose if we are to change course. Continuing with current trends would exhaust our resources and put our children’s future in jeopardy.”

Legal Empowerment and Poverty Reduction

This week the Center for American Progress and Georgetown Law Center organized an event titled “The future of Human Rights.” In general, the theme of the conference was on the importance of “soft power” to improve the credibility of United States and creating a better world. There was a consensus among most of the participants and the presenters that more attention should be given to development assistance, particularly to secure human rights, improve education and provide assistance to prevent and help those affected by diseases in disadvantaged and underprivileged areas and groups.

The event was filled with high profile presenters and speakers including former Secretary of State Madeleine K. Albright. It was my first time seeing her in person and I found her speech compelling. Her speech started with similar tone with what was reflected in the opening video which reflects how United States favorability rating have declined in the past decade and how it can be changed. Additionally, she outlined what the next president should do in order to restore the credibility of the United States, boycotting the Olympics was not among her recommendations. She did offer more presence and higher level involvement in the international development is key for United States to increase its credibility. She also outlined the three access of evil as ignorance, poverty and disease.

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. 

On Suharto's Death and Legacy

A fascinating post on Suharto's passing is up over at the CGD Blog. By now the news of Suharto's death is old news, but the post-mortem analysis of his legacy will undoubtedly last for some time to come. I know very little about Indonesia's long history (other than that it has been often violent and bloody). What I appreciate about this post is that it raises an important question about how to balance judgment about a ruler who did so much harm (to human lives) but managed to not only hold a country together but put it on a path toward development (one that has helped to lift many people out of poverty). It is a moral question, and one that, to my mind, defies a simple answer.

Green Revolution for Africa?

Last week the Bill and Melinda Gates Foundation announced that they plan to invest $900 million this year in programs related to agricultural development. A large part of this grant will go to improve seeds and soil in Africa; funding that can have a positive impact African agriculture.  So far Africa did not have its own Green Revolution; a region that needs such revolution more than any other continent in the world. In the 60’s and 70’s green revolution countries in Asia, Latin America and the Middle East were able to increase their food productivity which allowed them lift millions out of hunger and poverty with new technology in seed, fertilizers and irrigation system. But Africa missed out on the Green Revolution. "Africa is the only region in the world in which per capita food production has fallen steadily over the past 40 years explains Eric Solheim, Norway’s minister of international development. Better agricultural methods and increased production will be crucial”.

Why did Africa miss out on the Green Revolution of the 1960s and 70s? The answer is debatable but I think it is because of the diverse nature of African countries, unfavorable climate and poor productivity and technology. The agricultural sector suffers from lack of disease resistance crops, poor seeds and farming practices.

World Development Report Released

The World Bank released its annual World Development Report today, this years theme focusing on Agriculture for Development. Given that a large share of the world's poorest people live in rural areas and rely on agriculture for their livelihoods, it is a positive sign that the the Bank is returning to this important topic. (Incidentally, the last time the Bank focused on agriculture in their WDR was in 1982.)

Renewed attention to agriculture is needed to help developing countries increase economic growth, improve food security, and reduce hunger and poverty. Ample evidence exists to show that growth in agricultural productivity can result in pro-poor economic growth and poverty reduction.

Unfortunately, public investments in and attention to agriculture do not align with its importance. Developed countries have failed to reform their farm support programs to ensure that they do not distort trade and harm farmers in developing countries. In terms of development assistance, many developed countries are not providing adequate development funding for agriculture. A groundbreaking report by the Partnership to Cut Hunger and Poverty in Africa released in 2005 found that since 2000 US support to foreign agriculture development projects has largely been stagnant.

If this report succeeds in helping to renew the attention of the World Bank and donor countries to renew investments in agriculture, it will have provided a tremendous service to the development community and poor people around the world.

Growth and Poverty Reduction in Sub-Saharan Africa

This week top UN official hailed recent economic growth of sub-Saharan African (SSA) countries. Average GDP growth in 2000-2003 was 3.7%, which then increased to 5.6 % in 2004-2006. This year it is projected to hit 6%, “perhaps the most rapid growth overall in SSA that we’ve seen in decades.” Most countries in the region have adopted better polices and strengthened their exports, plus they have benefited from debt relief. All this increases the potential for achieving sustainable development. The good news has to be tempered by the realities of conflict and corruption that are still prevalent in the region, but what makes the recent growth trends especially promising is that the region is growing faster than the global economy. This is very important considering the region is not on track to meet all the Millennium Development Goals. Africa needs to be growing at 7% to reduce poverty.  Last year only a few countries in the region ( Angola, Mauritania, Sudan, Ethiopia,Liberia, Libya, Mozambique and the Republic of Congo) grew above 7%.

The fact that poverty is increasing in most of these countries makes the concept of pro-poor growth crucial. GDP growth is the key to poverty reduction; in fact, studies show that a 1% increase in per capita income will reduce poverty by 1-4%, depending on the initial conditions of the country, which is highly dependent on inequality and ownership among other things. In general, poverty reduction highly depends on economic growth. The recent growth if translated to development will decide if the MDGs are achievable targets for the region. African countries should continue adopting better policies, combat corruption and strengthen conflict prevention measures.  For SSA, the challenge is to speed up growth with equitable distribution to achieve the first goal: halving poverty and hunger.

Too Poor for Peace?

Up to 30% of the world’s population is in poverty because of war or conflict. This is the finding from Too Poor for Peace, a new volume edited by Leal Brainard and Derek Chollet. The book highlights the fact that the poor have little to lose in going to conflict or war. It is widely believed that poverty leads to weak institutions, breeds corruption, increases poor managements of resources and lowers the quality of leadership.  However, the opposite is also true, lack of peace leads to poverty. Conventional wisdom on the causes of conflict focuses on issues like ethnic diversity, but this book argues otherwise. They conclude that “poverty, environmental degradation and natural resource abundance, big demographic imbalances are drivers of conflict.” The authors note that “the fight against global poverty has become a fight of necessity, not just of morality”.

Yesterday’s Oxfam press release supports this argument. The release states that the cost of conflict for Africa is $284 bn from1990 to 2005. This is a lot of money to be spent in conflict where the money is needed desperately for other development projects. Africa received similar amount of money as foreign aid. During the same period 23 African countries have been involved in some kind of conflict. The press release, based on a study titled “Africa’s Missing Billions”, shows that “human tragedy, armed conflict costs Africa around $18bn per year, seriously derailing development”.

Both conflicts and poverty have become challenges of sustainable development in developing countries. To tackle poverty we should build peace. The number of poor people in conflict ridden countries is high. The question is which comes first; I think poverty is both the cause and the result of conflict. If reducing poverty is needed, effort should be made to reduce the number and scope of conflicts, particularly in less developed countries.