Part 3 transcript

Robert Manne:

Our third speaker is a very distinguished economist, Sisira Jayasuriya, who is Professor of Economics, I’m pleased to say, at this university.  He was previously at the University of Melbourne. Sisira is a real expert in the areas of economics trade and aid, particularly to do with Asia.  His home country, Sri Lanka … when I was looking through his publications this morning I was interested to see he also is an expert on cricket, which I suppose is fitting.  Sisira is working with not only La Trobe University, but he is a lead consultant with the United Nations Food and Agricultural Organisation and is doing as part of a study of food security in Asia at the moment and no doubt will say something about that.  I also want to say something which is a bit off-topic about him.  I’ve come to know through looking into it a bit that Sisira is also a man of great, what I call civic courage in that he has written and spoken in Australia about the civil war in Sri Lanka and has received incredible, sort of pressure, from the non-Tamil population here and maybe elsewhere who don’t wish the full truth of that situation to come out, so he’s not only concerned himself with fundamental questions of food security, but he’s also shown that he has civic or political courage, so I’m very pleased that Sisira is part of this university.  He’s also on the Board of the Ideas and Society Program and I’m very, very pleased that he’s speaking with us today.

Sisira Jayasuriya:

Thanks Rob for those very kind remarks.  I wish I was talking about cricket – it would be much nicer to talk about cricket.  And following up on two speakers as a dry economist is never a good act to follow.  But this has been an area of interest for me all of my professional life.  My first job after my PhD I worked for the International Rights Institute in the Philippines for some years and I had no background in agriculture before that.  But since then I have continued to maintain an interest in this area and what has happened in the last couple of years, particularly 2007-2008 has really brought out a lot of issues that are interesting to somebody interested in policy in general and also interested as an economist.

Now May has in a sense covered the big picture of what happened in food and agriculture, particularly in relation to food security, beginning with the food price increases of 2006 which spiked in late 2007, early 2008.  My own current research that I’m involved in with the FAO is looking at the impact of the global financial crisis on food security in Asia.  We are placing that in the global context so we are looking more broadly at what has been happening in Africa, which is the other big area of food insecurity.

Let me briefly make a couple of points on this.  One, the global food price crisis was the really big shock.  Not since ’72, ’73, ’74 did we get such a big increase in real food prices, which immediately meant that a huge chunk of additional people in the world faced hunger.  Something like 600 to 800, depending on how you define, how you estimate, have been suffering hunger if you look at, say, twenty years back.  The MDG goals were to halve this number.  The FAO had a view that they would like to halve the absolute number, then the countries got together and said we’ll at least try to halve the proportion of human beings who will suffer hunger by 2015.  What was brought home in 2007-2008 was something which should have been clear before that but which was really drawn into sharp relief, was that goal is not going to be achieved. 

The number of people hungry has actually been increasing.  The proportion started to decline a bit, but that has been reversed and in 2007-2008 something like another 100,000 million people were facing acute hunger.   And as May pointed out, a lot of them are women and a lot of them are children, girls in particular. 

What did the global financial crisis do?  Initially a lot of people including the court that Tim Costello cited, said that the global financial crisis would immediately make this even more acute, that the number of people suffering hunger would go up dramatically, but in fact it did not happen to anything like that extent, because one, the effects of the global financial crisis on Asian economies, particularly the south Asian economies where the bulk of the world’s hungry people live, was relatively benign. It wasn’t good, but it wasn’t anywhere near as bad as we expected.  Two, globally, one of the effects was that food prices came down.  Together with all other commodity prices, food prices came down.  So the second half of 2008 through to 2009 food prices have been lower than they were in 2007-2008.  However, to get back to the point that May pointed out, we haven’t gone back in terms of food prices to what they were in say, 2000.  We’re back about where they were in 2006.

Now the financial crisis, the very, very short period we’re looking at, there was the global financial crisis, we then translated it into an economic crisis in a number of places, but in Asia, that did not happen to anything like the same extent, because of various government programs, stimulus packages in China, India in particular, as well as in other places.  So what does it mean?  Does it mean that the problems are over or that we can basically to saying, things will be fine from now on?  No.  One of the things that the 2006 to 2008 food price crisis highlighted was that there has been systematic global underinvestment in food, beginning in the 1980s.  1970s and 1980s were a period when real food prices fell globally.  They were on a declining trend right through until the early 1990s from about 1974.  The reason was that in the ’60s and earlier there was concern about food insecurity.  Those political concerns, particularly in the west, that communism would win in Asia because there would be massive starvation among the poor.  So a huge amount of money went into research to develop new technologies to invest in irrigation, to increase food production as a means of averting what was then considered to be imminent famine.  And we did ?? [9.48] because ’73, ’74 we had a food crisis in Asia, we also had a political crisis in pretty much every country in Asia.  Food price increases translated into riots.  In Indonesia the Suharto government was tottering, demonstrations, and the ’70s was a period of massive investment globally.  National governments and international donors, the World Bank and so on, poured money into food production.  With all the problems of distribution and distortions in markets and so one, we had a situation where global food prices fell, hunger was going down. 

The problem was, and economies have a lot we could be blamed for this, prices go down for ten or fifteen years, then you look at returns to investment and you say, well, real prices are going down, so investing in these kinds of things, investing in food production, isn’t a very attractive thing to do.  There are lots of other things one can do.  So from the 1980s the World Bank for example, scaled down, and in the ’90s it pretty much disappeared, funding for investment in food production.  National governments, the same thing.  We find investment in food production going down throughout the developing countries, both by governments and by donors.

So now we have got this situation where suddenly we have this massive sharp increase in food prices.  The reality was, 2007-2008 was a sharp spike in food prices.  Nobody expected those high prices to last, but what it really brought out was, it drew people’s attention to the fact that real food prices had been increasing for quite a while before that.  It started to trend up.  Hunger was going up.  The percentage of people hungry, not simply the absolute number, the percentage of the global population was going up.  And the global financial crisis hit, this whole thing went off the agenda again.  Early 2008 until the middle of 2008 there were big meetings, conferences, everybody talking about the global food crisis and the number of hungry people and the financial crisis came, it has been off the agenda.  The FAO talks about it a bit, occasionally the UN will make some statements about it, but basically this is off the agenda again.  And what I would like to point out here is, it’s not a simple issue of investment, there are also issues of markets and here I might actually defer with some of the points of emphases with May, May said this has brought out the fact that we are getting into a very volatile situation – there should be more storage of food.  India, as Tim pointed out, India has been sitting on and accumulating massive reserves of food.  Then the food crisis hit globally, India did not use these reserves. What India did was, it banned exports of rice.  India is a net exporter of rice.  Vietnam, another exporter, followed suit.  Thailand, Vietnam, India, all said, we’re not going to export.  Cambodia, also, which had been a rice exporter, said we are not going to export.  So the global trading system broke down instead of these policies making the situation better globally, what it meant was that all the countries which are net food importers had to face even higher prices than before, running around scrambling, and of course, now, everybody, all these countries are thinking that what they need to do is to have much higher levels of storage.

As an economist, let me tell you that too much storage is a waste.  In India, who are sitting on massive, massive piles of food, which are not being released. An Indian economist, a colleague of mine, said, India has got to the point where they are starving the kids and fattening the mice.  So, there are policy issues involved here.  And this is not simply a matter of investment, it is how you handle issues at the global trading arena, at the local levels, how you handle investment and distribution, there’s a whole range of issues, and I think we don’t have all the solutions.  One of the things is I would like to make a plea to students, there are lots of issues that require brain power and research and I hope that some of you  realise that this is an issue that is not going to go away.  One in seven of human beings lives in hunger and solutions are needed and I hope that you will respond and you will think of it as a career in life, because this is one of the biggest economic and moral issues as was pointed out.  Thank you.