The global food crisis has a common denominator with the still unfolding subprime mortgage debacle whose losses the International Monetary Fund now estimates at $1.1 trillion: greed. Predatory lending coupled with criminal profiteering was behind the subprime mess. It is the largest loss of wealth in modern U.S. history. And greed also played a big part in the pell-mell rush to move land out of food production and into ethanol biofuels. Corn at $6 a bushel is up 30 percent in four months. Wheat prices jumped 130 percent in a year, and wheat stocks are at their lowest in 60 years. Globally, rice hit historical levels, partly driven by Australia's six years of drought.
Indian Finance Minister Palaniappan Chidambaram said, "When millions of people are going hungry, it's a crime against humanity that food should be diverted to biofuels."
World Bank President Robert Zoellick said surging food costs could translate into "seven lost years" in the fight against worldwide poverty. Thirty-three countries are at risk of social upheaval, he warned.
The head of one of the world's largest oil companies told us, not for attribution by name, that commodity speculators also bought gazillions in oil futures to sit on them until the profit looked right, then dribbled them out at $110 to $117 a barrel, double the price a year ago. Cynical speculators reckoned drivers would rather cut down on food for the family than gas for the car.
The real estate crisis, says the IMF's Global Financial Stability Report, "is now spreading beyond the U.S. subprime market -- namely to the prime residential and commercial real estate markets, consumer credit, and the low-to-high grade corporate credit markets." Weaknesses in risk management systems and lack of "prudential supervision" are, the IMF added, at fault.
Hardest hit by food shortages are what the Rome-based World Food Program lists as the world's "ultra poor" (162 million who barely exist on less than 50 cents a day), the "medial poor" (323 million who subsist on between 50 cents and 75 cents a day) and the "poor" (485 million on between 75 cents and $1) -- or almost 1 billion people on $1 a day or less, from Darfur to Afghanistan. Most of them have been priced out of buying even subsistence-level rice. More than 25,000 people die from hunger every day across the world.
In Washington last week World Food Program chief Josette Sheeran lobbied for an additional $500 million. The White House kicked in $200 million for the U.S. Agency for International Development's food program. In Afghanistan $77 million is needed to feed 2.5 million, or 10 percent of the population, who cannot pay the higher costs for staples.
The WFP's budget shortfall for 2008 is forcing Sheeran, a former undersecretary of state for economic, energy and agricultural affairs, to decide whether to provide "40 percent less food or do we reach out to 40 percent less people," choices she says are equally unacceptable.
With wars in Iraq and Afghanistan costing $12 billion a month and Gulf countries pumping a cornucopia in the hundreds of billions of dollars a year, the WFP's humanitarian needs are chump change. They could easily be met with a tiny fraction of what some hedge fund managers made betting against subprime mortgages and those who held them. George Soros and James H. Simons each pulled almost $3 billion in 2007, according to Institutional Investor's Alpha magazine. John Paulson, also a hedge fund jockey, won the race to riches at $3.7 billion in 12 months.
In a full-page piece in the Financial Times headlined "Mind the Gap," John Plender, senior editorial writer and columnist, wrote, "As financial crisis leaves Anglo-American capitalism looking tarnished, a period in which rising inequality and stagnant average incomes seemed tolerable to voters is drawing to a close."
"You do not need to be a neo-Malthusian," echoed the FT's Victor Mallet, "to worry about the demands of a global population rising by 80 million a year."
Sheeran already knows from her peripatetic assignment that this global crisis quickly translates into less healthcare and education, less nutritious food, fewer meals and selling household assets in desperation. School attendance also declines when there is less to eat under the tents of refugee camps.
Sheeran heads a U.N. organization that employs 10,000 in 78 countries with a budget of $3 billion that rations food to some 80 million. Onetime deputy U.S. trade representative, she pushed the global food crisis to the top of the agenda for world leaders meeting in Washington for the spring meetings of IMF and the World Bank. She has also succeeded in making hunger the top priority for the next G8 meeting of industrialized nations in Tokyo July 7.
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