Food security is the foundation for building social and economic development. It means that everyone has access, at all times, to enough food for an active and healthy life. It depends on agriculture to provide sustenance, incomes and livelihoods for the world's rural poor, 2.1 billion living on less than $2 per day. The year 2008 had been one of a food crisis. The year also witnessed the onset of a serious financial crisis in the most developed capitalist countries that has drawn international attention away from the food crisis. But unless measures are undertaken now to address the longer-term implications of the financial recession on food security in developing nations, the results will be more of a crisis, not less. When the global food crisis initially hit international headlines, it was termed as a silent tsunami. This crisis was not sudden and unexpected; the signs were clear for some time. Food shortages and high prices of food adversely affected billions of people, especially the poor in the developing world.

This is certainly a man-made crisis, governments in developing countries adopted market-oriented domestic policies by choice (thus becoming more loyal than the king) which created global supply and demand imbalances. Such policies not only neglected the agricultural sector but also allowed global prices to determine both cropping patterns and the viability of farming. This situation generated greater possibilities of speculative activity in food items. Farmers in developing countries have been affected adversely by a combination of exposure to import competition from highly subsidized agriculture in developed countries, removal of domestic protection of inputs and reduced access to institutional credit.

At the global level, the prices of basic food commodities have not risen faster for more than three decades. In recent years, international food prices had shown only a marginal increase until early 2007. However, subsequently, the prices skyrocketed, with around 40 % increase in world food prices in 2008 when compared to 2007. The first months of 2008 observed an accelerating trend with the later period noticing marked price volatility. Rice prices increased by about 150% in the first 100 days of 2008 to fall to just above the level at the start of the year. One cannot explain these erratic swings in prices arising primarily due to seasonal supply and demand factors or any other real economy tendencies. It is also the result of speculative activity in the markets. Despite the recent declines, the global prices of essential food items have remained largely above the levels attained a couple of years ago.

In most countries, including India, retail food prices have not declined commensurate to the decline in world prices. There have even been noticeable increases in some cases, albeit at a slower rate than before. The intensity of the increases in prices for food grains have varied depending on how well different governments have been able to mitigate the global impact in their countries and ensure domestic supply. In India, inflation has dropped to a 30 year low, but retail prices have pinched the pockets of the poor significantly, with most either doing without the commodity or replacing it with low-quality substitutes. Other poor countries have felt the impact sharply as well, where most people have to spend around half of their family budgets on food items. Countries like Haiti, Guinea, Mauritania, Mexico, Morocco, Egypt, Senegal, Uzbekistan, Yemen, Bangladesh, Philippines and Indonesia have witnessed food riots. Many countries have come to the brink of social unrest due to rising food prices and the resultant spread of hunger. Some countries, like Pakistan, have even resorted to having army troops guard food stocks and prevent seizure of scarce grain from warehouses. The role of multilateral institutions has also been negative as they encouraged policies that have led to the present situation. The World Bank estimated that the global rise in food prices could result in more than 100 million people in low-income countries falling back into deeper poverty.

One comes across varied explanations for the increase in global food prices. Former U.S. president George W. Bush called it a demand-led phenomenon. He blamed rapid economic growth and rising incomes in countries like India and China leading to growing food demand. The argument is further extended in that as per capita income increases, although people may spend less of their income on food, the absolute amount of demand continues to rise. It is also known that even when they directly consume less food grain due to changing food habits, the indirect demand for grain goes up more than proportionately. It is argued that a shift in demand for animal products means that livestock needs to be fed and cattle require even more grain than humans. This is only partially true. It must be acknowledged that some diversification has taken place in production and food consumption of the well-offs in China, India and other fast-growing developing countries. This may have led to greater absorption of food grains directly and indirectly. But due to deteriorating income distribution (a side effect of liberalization) the poor, who constitute a major segment of the population, have not been able to improve their standing.

Government neglect of the agricultural sector, in terms of much-needed investments in irrigation and related infrastructure development and agricultural research has led to a prolonged agrarian crisis in many parts of the developing world. More than a million farmers in India have committed suicide due to rising costs of raising crops and indebtedness. Jacques Diouf, Director General of FAO, has admitted that the situation is the result of inappropriate policies over the past 20 years. To add fuel to the fire, greater trade liberalization and a push towards market orientation that caught farmers unprepared have led to shifts from traditional food crops that were typically better suited to ecological conditions to cash crops that rely on purchased inputs. The quality of inputs and their availability is also poor, especially in India. Credit flow has also drastically reduced. All this is responsible for low, poor, and declining yields and falling productivity of land. Unless steps are taken to reverse these trends, which will take time, the global supply conditions are likely to remain problematic for some time to come.

Future trading in agricultural commodities is also a factor. Poor farmers hardly benefit automatically when global food trade is not only concentrated but also vertically integrated. When marketing margins are large and widening, direct producers often receive delayed benefits of the increases, and even then, not to the full extent. This is certainly known to be true in developing countries where large corporate players, both national and multinational, are able to control markets and prevent farmers from getting most of the gains of global price increases. But it is also true in the U.S., where giant agribusinesses rather than farmers, have been collecting the rewards of higher government subsidies and higher global prices.

The U.S. is now debating the role that the large influx from hedge and index funds into commodity futures are playing in the present situation, when both commodity price levels and their volatility have reached unprecedented heights. India and China had reduced public stocks, though in India they are moving upward again of late. The IMF and World Bank should shoulder a major part of the blame as they were involved in encouraging or forcing developing country governments to reduce wasteful and expensive holdings of food grain stocks. It takes time to build public food reserves and cannot be quickly created to ensure a reduction of speculation-induced price rises. Such speculation is not likely to dissipate easily. As the global financial system has hit the bottom and the U.S. struggles to overcome and regulate the financial system, investors will continue to search for other avenues of investment to make up their losses and find new sources of profit. Commodity speculation has increasingly emerged as an important area of financial investment. The bail out packages are not enough because they will not be entirely used to raise demand. The U.S. needs to put in massive recapitalization of its banking system so that it starts lending again. There is reluctance on the part of the corporate sector and banking institutions to accept regulation, but it is ultimately necessary.

Another fall out of the food crisis is the willingness of some governments to re-consider genetically modified crop production. For instance, the Mexican government which had earlier banned GM crops is considering lifting the ban on genetically modified maize. Similar bans may be lifted in the EU and some countries of Africa to reduce aggregate shortages. Food dumping of rice and maize ruined many small economies like Haiti, South Korea, Ethiopia, and Malawi and so on.

The Financial Crisis

As analysts rightfully pointed out last year as the spike in food prices began to soften while the financial crisis began to raise the warning flag: The financial crisis and the food crisis are actually two sides of the same coin. As international attention has been hijacked by efforts to contain the global financial crisis, it would be extremely detrimental to neglect the root causes of food insecurity and the structural malaise that sustains it. The implications of a return to the sharp food price inflation that shook the world last year would be worse given the current financial climate. Already, the impact of the financial crisis is severe in many developing countries. Investments are being kept on hold on infrastructure projects and with banks in bad shape credit lines have dried up.

Some commodity prices have dropped for two main reasons. One is the expectation of favorable crop prospects and the second is owed to the slowing world economy. Fluctuations in food markets was due to the credit crisis among major food producers in the U.S., EU and Brazil. The result could be that there are cut backs on planting crops followed by a reduction in harvests in major exporting countries. The reality is that the financial crisis is threatening food security across the globe, and states are having to seek viable longer-term solutions. The combined effect of rising unemployment, consumers with little or no income or credit and low stocks of grain could trigger another spike in global food prices-and growing public unrest. Governments in developing countries may have to bend to calls for more transparent and equitable agricultural policy that addresses widening gaps in income distribution. Workers are already returning home from the U.S., Middle East, Europe, Australia, Hong Kong and other major emigrant employing countries and workers' remittances are falling. Domestic unemployment also means that workers are returning home in India and China. India is vastly affected in this regard.

To exasperate the problem, the financial downturn has delivered a blow to consumer purchasing power. More people are finding themselves having to rely on cheaper food with lower nutritional value, which could lead to more malnourished people, especially in underdeveloped and struggling countries. As a result of the global financial crisis, international development and food aid promised to much needed destinations is unfortunately expected to decline severely. Already low standards of living in poverty-stricken communities will only deteriorate further.

Concern among Southeast Asian countries that the global economic meltdown may lead to a drop in agricultural investment has not abated. The threat of massive layoffs and wider socio-economic implications that could further restrict the already tenuous access to food of the poorest segments of society is worrying. The region is still reeling from last year's steep increases in the price of rice, triggered by growing demand and rising fuel prices. Although prices have fallen since then, anxiety over food security remains, especially among the 10-nation ASEAN bloc comprising Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam, a region of more than half a billion people.

The overwhelming uncertainty that has taken hold of international markets and the global recession is tempting countries towards protectionism and towards reassessing their commitments to international development aid. At this juncture, developed countries must take measures to avoid reducing aid to developing countries and carry through on their commitments, especially regarding financing earmarked to relieve agricultural sectors. Nor should they introduce protectionist trade measures in response to the global financial crisis. World agriculture (especially as far as developing countries are concerned) needs urgent and sustained attention to tackle the persistent challenges of hunger and rural poverty. It would be unfortunate if these were to be lasting trends and should the mobilized political will seen in 2008 towards enhanced international support for developing countries agriculture evaporate. Minus long-term strategic planning, we could be facing a crippling food crisis in the coming year(s). And those hit the hardest will be those who are already struggling. On the upside, the current crisis has provided the opportunity to correct the ills of policies in developing countries and also restructure financial institutions at the country level and also international institutions like the World Bank and the IMF. The time to develop alternative strategies and policies is now. State heads have to show statesmanship to keep economies going.

The global financial crisis should not make us forget the food crisis. Agricultural self-sufficiency is part of the solution, but a more reliable and equitable system is necessary. In late 2008, the former UN secretary general, Kofi Annan warned world leaders that the global financial crisis should not be used as an excuse for inaction in the worsening battle against wrenching hunger across the developing world. Let's hope the near future will bring greater action rather than mere pledges that mostly remain unfulfilled.

Surjit Singh is director of the Institute of Development Studies, Jaipur in India.