 I'm going to talk about food crisis and responding to food crisis. And first the question is, which crisis am I going to talk about? And I'd like to spend a couple of minutes on trying to sort out what we mean by food crisis. And then I'll spend a few minutes trying to convince you that if we really want to understand government responses to any kind of food crisis that we may define, we need to pursue a political economy approach. If we don't do that, we won't be able to understand why they responded as they did, and therefore we cannot even attempt to predict how they would respond next time there is a so-called food crisis. So if you would just remember those two things from this, plus the last part of my presentation I'm going to share with you some empirical results from a study, a political economy study we did, jointly with the UN, UNU Wider and Cornell and Copenhagen universities, precisely about the response to the world food crisis increase in 2007 and beyond. So which indicator, what does it mean when there's a food crisis? Does it mean that there's a dramatic drop in food production or in food supply? Is that what it means? So if we have, say, a drop of 5% in the global food production, then we have a crisis. Or does it mean that the prices go up dramatically? Or does it mean that there is a dramatic increase in the prevalence of food insecurity, malnutrition or health? And depending on which of these we pick, are we looking at the global level? Are we looking at the national level? Are we looking at the community level? Or are we just looking at the household level? And the point I'm trying to make here is that when we talk about the global food crisis of 2007, 2008 and subsequently 2011 and 2012, we're talking about the world market food prices increasing dramatically, particularly food stables, the grains. Well, keep in mind that a very large share of what's being produced is not traded. So how relevant is it when the world market food price fluctuates? I'm going to show you some results from the study that I just mentioned. That indicates that in many cases what is a crisis for the Chicago market, futures market, or for the export or import of food may not be a crisis for those people that we're really worried about, namely those who are very vulnerable to the kind of thing that we just heard, to the nutrition problems, to the food problems at the household or the community or the national level. Because the intermarket transmission may not be very high. What may happen in the global market may not have much to say about what's happening in the national and the local market. So my conclusion on this is that we need to specify what we're talking about. It's not good enough just to say, well, we have a food crisis. What do you mean by that? Well, the rice prices tripled in the international market. Yeah, they did. That's true. Was that a crisis? We had more rice in the world than we ever had before. So it certainly wasn't a supply shortfall. What was it? Well, I don't have time to go into all of the explanations of it, but the point I'm trying to make here is we have to be very careful what we're talking about. That's all I'm going to say about that because time is short. But I want to talk a bit more about the courses of food crisis. It can be income fluctuations. It can be climatic fluctuations. It can be armed conflict, speculation and market manipulation. And yes, governments can create crisis for themselves and for the rest of the world. And there are other courses that we could add to that. Now, what do I mean by a political economy approach to this? What I mean is a very narrow definition of that. I want to know what makes the decision maker tick. What's the process within which those decisions are made? Why are those decisions made the way they are? What are the goals of those decision makers? Whether they are in government or outside? And can these goals be made compatible with the nutrition goals that we just talked about? Or the health goals or the food security goals? Are there win-wins out there? We don't know unless we know what makes that policy maker take the decisions that he or she is taking. And the problem with much of the literature today in this general area, including my contributions, so I'm not blaming anybody else, we have developed so many pathways between what is happening in the food system or in the general economy and what the impact on nutrition or food security might be. We have odors of pathways, flow diagrams coming up over there, right? And we have loads of recommendations to policy makers. But you know what? Not much is happening. Why is that? Because we have not done the research on what I just talked about. The decision making process and whether there are ways of combining those goals that decision makers currently pursue with those that some of us would like the decision maker to pursue. That's where we need a lot more, a lot more evidence. Some are instigators of these so-called crises, depending on how we define it. We can choose the definition as which it fit. And some are responders and I'm giving a list. Government agencies, some are instigators and some are responders. And I'll come back and talk about that when I talk about some of the empirical results from the joint UNU, wider Cornell Copenhagen study that I just mentioned. Civil society may be a responder, it may be an instigator. Private sector the same way. Farmers, individual farmers, now they respond. They don't have a whole lot of power but if they get together, again, in a couple of the case studies that we did in that study, farmers actually had quite a bit of power. The big, the Farm Association in Brazil for example, the Farm Association in South Africa had quite a bit of power. The agribusiness, sometimes the traders can get together and either instigate a crisis for others or they can respond. And then we have international agencies which in the case of the study that I referred to, didn't have much impact and I'll come back to that because there was one of the many interesting findings. Now we, the food policy analysts and advisors of course have, you know, we're just neutral. We're not instigating anything, we don't respond to anything. Of course we do. Of course we do. We are as biased as anybody else in picking what we want to do research on. I'm not arguing that the results are biased. I'm arguing that the choice of what we work on is biased. And the advocacy that we end up providing can be extremely biased, just as biased as some of the advocacy groups that admit to be advocacy groups. Agriculture resource organizations. Why do they continue to spend almost all their money on producing more calories for people who are already overweight and obese? Why don't they spend more money increasing productivity of fruits and vegetables and pulses and the kinds of things that will produce the micronutrients that we need so badly? Yes, of course they have priorities. The decisions they make have an impact on what the rest of the world is going to look like. Foreign direct investors are not going to get into landwrapping. I promise I won't because it becomes a very emotional issue on my part but it's certainly that can have an impact as well. News media is just reporting what they hear and what they see and what they can find, right? No, of course they're not. They're advocacy groups just like the many of the rest of us. News media can have a tremendous impact on what decisions are made by those who can decide on how much is being produced, how much is being consumed and how much is traded. So what are the motivations of these decision makers? Legitimacy goals in all of the 14 case study countries that I'm going to report on in a minute. Maintaining legitimacy was priority number one for all of the governments. Did they necessarily admit that? No. You had to do a little digging in some cases. For the private sector, yeah, we want to be loved. We really want you to love us. So we have social responsibility programs and I'm not arguing that they don't do a lot of good stuff. Of course they do. We need them. We are part of the capitalistic system. Of course we need them, but they really go out of their way to kind of make us feel that they are really on our side and in many cases they are. Profit goals, of course, are driving decisions by many. And then, of course, everybody claims to be pursuing humanitarian goals. We want to protect food security, nutrition and health, and we want to make sure that we don't have any more poor people. In some cases, those are actually pursued. In other cases, they are just used as an excuse. Let me now talk a little about some of the empirical research from the joint study that I mentioned a minute ago. The study, which, as I said, was undertaken by the UNU wider Cornell University, Copenhagen University, and researchers from 14 developing countries, and one from the United States and one from the EU. The project was funded by the various organizations that participated, the wider and Cornell University as well as the Gates Foundation. This shows where the countries are. There will be a test after I stop where you have to put names on all of these countries right there. Actually, I do this to my students. I won't do it to you. So I already mentioned, so if we have a global or an international food price increase, does that, is that transmitted to national markets? It depends, but it's an important issue because if it isn't, Little Johnny's nutritional status is not going to be affected by what happens in the Chicago futures market unless somehow what the mother or father of Little Johnny is going to have to pay to get food. So I'm giving you three illustrations out of the 14 that we have. This shows a very high correlation between what happened in the global market and what happened at the national markets for wheat in South Africa and Bangladesh. You see there's a very close, very close correlation. This shows the international rice prices in the world market. They went roughly tripled up from $300 a ton to about $1,000 a ton in a matter of a few months. But look at what happened in China and India. Nothing really. Rice has went up a little bit, but not much. How did they manage that foreign trade? But worse than that. They managed the foreign trade so they could protect their own consumers at the expense of those who had to buy in the international market. They were part of pushing up the rice price by holding back exports, certainly India was. So you got that close relationship. And that's one of the findings from the study, of course, that national governments are really trying hard to be nice to the rest of the world, unless it pays better not to be. They really protect their own people first. Is that a big surprise? Of course not. It's not just developing countries that go around everywhere. This is a third illustration. There's no real correlation between what happened in the world market or corn or maize and what happened in the maize market in Malawi and Sambia during this period of time, as you can see. So depending on that price transmission, we have to be real careful concluding how many poor people are going to be worse off when the world market prices change. Just a quick anecdote. Sorry about time, but put that five thing away with you and the two and the one. When FAO wanted to get more attention because food prices were going up towards the end of 2007, they published numbers that showed that the prevalence of under nutrition, under nourishment is the term they use, which basically means lack of calories. Prevalence went up from 820 million people to a little more than a billion. A billion.03, I'll never forget. It's such a nice number. And they stuck with that number for a few months until some of us screamed bloody murder. I'm not claiming any credit for that, but there were quite a few people who said this just can't be. Because China and India, for one thing, they're protecting their markets. We don't have enough people out there. We don't have these 200 million additional people who could possibly suffer in addition to the 820. Then FAO did a little calculation and they brought it right back. So the new indicator is that nothing really happened in terms of prevalence of under nourishment during that period of time, which is probably close to the truth. Just an anecdote. Policy responses by those countries, there were two options basically followed. One was to decouple the world market and domestic prices. That's what China and India did. Secondly, to permit price transmission and compensate the losers. In the case of wheat, that's what Brazil and South Africa did. And I don't have time, of course, to give results from all the other countries. There were a number of interesting activities within each of those two. And again, I don't have time to go through them, but the book is on the table outside. There's a brief as well. The best news is that three days ago, the book became available in open access for free on the web. Thank you Oxford and thank you wider and thank you Finn. Three days ago, right Finn? Now it's available for anybody for free. Do I care? Yeah, you better believe I do. I'm an editor of the book. Political economy lessons. So whatever I don't have time to cover here, buy the book. And you have to buy it quickly because it's going to be out in paperback in a couple of months. So if you want to pay the big bucks, you should buy it while it's still available in hard copy. Protecting government. I already mentioned that pursuing domestic policies irrespective of international consequences when India and Egypt and Cambodia and a few other countries decided to hold back on rice exports. As I mentioned, the rice prices tripled. The Philippines is a traditional rice importer. And depending on what happens to the rice price, the legitimacy of the Philippine government may be questioned. So the Philippine government went into the market when the prices were very close to $1,000 a ton. And bought up enough rice to last for a while because according to the news media, the prices were going to continue to go up. You better buy while you can. Thailand and the United States were really nice. They said, sure, you can buy from us at $1,000 a ton. That would be just fine. So they did. So you see how much damage one country's policy can do to another. I'm not saying it was the wrong thing for the Indian government to do. It probably was the right thing for them to do. But it wasn't a good thing for the rest of the world. Unitary government decision making is unusual. You would have the Ministry of Finance doing this and the Ministry of Agriculture doing something totally different. Sometimes they were both publicized and they were attempting to implementing policies that would go against the other. Path dependence was quite common. There wasn't very much innovative policy making in response to these food price increases. They pretty much went back to the archives and pulled up the past policies. The relative power of stakeholder groups would vary a great deal. Which one are you with? Is it the five one? Thank you. That's good. The relative power of stakeholder groups varied a great deal from one country to the other. In some cases, the millers, the wheat millers or the rice millers could be an important group. In other cases, as I mentioned earlier, the large farmers could be an important group. So it all varied depending on the country. But again, this points out the importance of a political economy approach because if you don't understand the relative power and the relative influence and the agendas of each of those stakeholder groups, you're not likely to be able to predict what's going to happen next. Increasing urban bias is nothing new. What this study showed was that there was more focus on the urban lower middle class than the rural poor when the prices went up. Why? Even though many of the rural poor were net buyers of food, I should add. The reason, of course, was the obvious one. You want to keep your legitimacy as a government that may be more or less stable. You want to make sure that the lower middle class in the urban area is happy. And one way to make them happy, of course, was to compensate them for the food price increase. And there were different ways of doing that. You have to get hold of the open access to see those. Smallholders versus larger farms. We had lots of discussion with policy makers and former policy makers in these 14 countries. And many of them said, yeah, yeah, of course we're focusing on smallholders. Of course we are. Absolutely. That's what the donors want. That's what we're doing. They didn't. They really didn't. They focused on large commercial farms in almost all other countries. Mutual mistrust between government and the private sector. That's something I must admit. I did not expect the strength of that mistrust. They were playing games on both sides to make sure that the other side didn't get the information until it was too late. And again, I could go into more detail if we had time. I mentioned that foreign agencies, foreign organizations and national organizations had very little influence as opposed to the structural adjustment period. Remember the tremendous impact or the tremendous influence by the development banks and by the bilateral organizations for countries to change their policies in the structural adjustment period. In this particular case there was virtually no interest in influencing the government. Whatever the government wanted to do would be supported or not by international organizations but very little pressure put on the governments but a lot of support from the World Bank, for example. A lot of support in helping the governments getting through this. I thought that was an interesting finding until I realized that the structural adjustment of course included a lot of money that these development banks had somehow invested in there. So there was a very good reason for being very concerned about structural adjustment but maybe not for the food price increase because after all that just means fewer people can eat. Now here are some of the, this is Danish sarcasm by the way in case you didn't recognize it. Finn would recognize it. Recommendations, how many minutes, which one have you lifted so far? The two? We have this one. We have this one, that's good. You're a good man, thank you. Recommendations real quick. Protect price signals. Many other countries try to de-link what happened in the world market and what happened in the national market and when prices would go up internationally you would hope that somehow there would be a signal sent to the national producers to produce more food but it wasn't in those cases where these prices were de-linked. Where they were de-linked because these price increases didn't go to the farmers. When prices went down governments were much more likely to let them pass through to the farmers which again shows an urban bias. There was an emphasis on targeted compensation over price intervention. It's a little bit of the same question and keep in mind that the targeted compensation was in almost all cases targeted to the lower middle class urban consumer. Now there's a lot of targeting that didn't work but where there was an attempt made that was the target. Risk management tools missed at almost every level all the way from the farmer, the consumer, the trader and all the way up or down the system as you like. Seeking high levels of price transmission, the point I already made, protect the price signals and low levels of trade restrictions, kind of components of the same of the same issue. Now you're going to call me a free market economist. No, I'm really not. I like trade but I like it to be regulated for the benefit of the masses. What can I say? Increasing supply resistances for food, much more investment in rural infrastructure and other factors that are hindering supply response by farmers extremely important. But only of course if prices are permitted to pass through to the producer if not there's not much point in increasing the price elasticity if in fact the price doesn't change. Improve the management of cereal stock. Some of the governments decided to buy up stock or buy up grain when the prices were going up because after all the news media said the prices were going to continue to go up. And therefore you had to buy up now where that pushed the prices up even higher of course. India increased its grain stock from about 20, 25 million to about 80 million tons of grain much of which was done while the prices were still going up. Now was that rational behavior on the part of the Indian government? It depends on what your price expectations are. If you think the prices are going to continue to go up, you better get in there and buy while you can. Of course it turned out that the prices did not continue to go up. We need a more competitive behavior in the supply chain. It isn't just a national versus international price transmission. It's also a matter from the producer to the consumer what's happening in the value chain. I'll skip the rest of them because if not I'm never going to talk to me again. So let me just end with the source I already mentioned. This is the book. It's out on the table. As I said it's now available, open access. It will be available as a paperback in a couple of months. Thank you very much for your attention.