A Dangerous Munch Crunch

If the global economic crunch has directly affected your personal finances, consider the ripple effect on the world’s poorest countries. A scramble over food—a battle to afford the basic grains—may well be the world’s next big security risk.

The World Food Program this month updated a needs assessment for developing countries in light of the global financial tailspin. Leaders of the top industrialized countries, at a G8 agricultural meeting in Italy, read the forecast with some alarm. Just a year ago, there were riots in more than two dozen countries when food prices spiked to record highs. Emergency aid and subsequent robust harvests helped deflate that crisis. Now authorities see food risks spiraling again as wealthy countries struggle for economic equilibrium.

What happens when rich people steer away from risk, consumers stop spending and credit dries up? The faraway poor suffer the nastiest end of a financial whiplash. The WFP's report, relying on World Bank and International Monetary Fund figures, told this story:

Remittances in emerging countries—money sent home by family members working abroad—have shrunk significantly with the downturn. Primary exports in poor countries, and particularly African nations that sell goods such as copper and coffee, have fallen. Capital investments in emerging markets are shriveling.

WFP spokeswoman Brenda Barton told me that global food production has long been on the radar of the industrialized world as a humanitarian concern. Now sensitivities appear to have changed. U.S. agriculture secretary Tom Vilsack told the Financial Times at the G8 ministers meeting that global food output was coming into focus as a security risk. “This is not just about food security, this is about national security,” Vilsack said.

WFP is waiting to see if food production and hunger actually finds a place on agenda of the G8 summit now planned for July. High food prices persist—albeit lower than the crisis days of 2008—and the world’s hungry are not diminishing in number, Barton said.

More than a billion people go hungry everyday and the number is expected to climb under the current bleak economic conditions. To get a better idea of the problem, look at this data from WFP's April 24 fact sheet. Global cereal prices have fallen since the spike of 2008 but they are still 66 per cent higher than 2005.

“Unfortunately, there are always political and other forces at play when it comes to food,” Barton explained. ”It helps when there are riots on television and people see the human effect of high prices. But it was really straight-forward last year when people saw this as a price issue.

“Now, with the financial crisis, the situation has become much more complicated and far more difficult to track all factors,” Barton said. “And when you see this as a matter of security, well, that takes it to a whole new level.”