A Millennium Lecture at the Hindu Media Resource Center of MS Swaminathan Research Foundation, Chennai, India, August 22, 2007

1. Globalization of Food and Agriculture
and the Poor: Driving forces,
Consequences and Policy Implications
Joachim von Braun
International Food Policy Research Institute
A Millennium Lecture at the
Hindu Media Resource Center of
MS Swaminathan Research Foundation,
Chennai, India, August 22, 2007

2. Overview
1. Issues and conceptual framework
2. Drivers of agriculture and food
related globalization and impacts
on the poor
3. Policy and research implications

3. Context of global change around
food and agriculture
1. Global economy‟s fast growth
2. Energy price and climate change
3. Health risks and agriculture
4. breakthroughs in science and
technology
5. Urban/rural change & migration
6. Governance and decentralization
a mix of opportunities and risks for the
poor in “globalization”

4. The problem with the globalization debates
Divisiveness between the two globalization
views:
1] economic-lens approach, narrowly
focused
2] unfocused systems approach,
neglecting opportunities
and both have particularly distorted and
dogmatic perspectives around
agriculture – food – poverty linkages

5. What is “globalization” of
agriculture and food?
A technical definition:
Global integration—across national
borders—of production, processing,
marketing, retailing, and consumption
of agriculture and food items

6. And what are the links to poverty?
Need for a conceptual framework that
connects globalization drivers to well
being at different levels…
• Global
• National and state
• Community and household
…to facilitate action

7. Conceptual framework: drivers and examples
of actions at different levels
MARKETS INVESTMENT INFORMATION SOCIAL
& & POLICY
CAPITAL INNOVATION
FLOWS
Exogenous factors
DOMESTIC GLOBALIZATION
Increased Improved ICTs
Aid;
LEVEL I
access to
Expansion human
outputs, Innovation &
of FDI right to
inputs, IPR
food
labor
Competition
Technology
policy
LEVEL II
POLICY
policy Pro-poor
Market
social
opening Political &
Public R&D actions
institutional
investments
changes
RIGHTS
HOUSEHOLDS
LEVEL III
PRICES
EMPLOYMENT
HOUSEHOLD CONSUMPTION
PRODUCTION
ENDOWMENTS
Source: von Braun, 2007

8. The slow changes in poverty
• Slow reduction in income poverty
• Increased vulnerabilities
• Stagnation in nutrition improvements
• Growing in-equities
despite of of massive expansions of
opportunities under globalization

9. Mixed Evidence: Poverty headcount ratio at
$1 and $2 a day (PPP) as % of total population
Share of people living on less than $2 a day
(% of population)
Share of people living on less than $1 a day
(% of population)
100
70 90
80
60
70
50
60
40 50
30 40
30
20
20
10
10
0 0
1981 1984 1987 1990 1993 1996 1999 2002 1981 1984 1987 1990 1993 1996 1999 2002
East Asia & Pacific Europe & Central Asia East Asia & Pacific Europe & Central Asia
Latin America & Caribbean Middle East & North Africa Latin America & Caribbean Middle East & North Africa
South Asia Sub-Saharan Africa South Asia Sub-Saharan Africa
Source: Based on data from the 2006 WDI database
Note: 2002 data are preliminary

10. Poor and ultra poor in Asia 2004
and percent in South Asia
1$ - .75$/day: 372 million (71%)
.75$ - .50$/day: 213 million (77%)
Below .50$/day: 29 million (70%)
Source: Akhter Ahmend et.al. IFPRI, 2007

11. Towards urbanization of poverty?
Urban and rural share of the poor (%)
1993 2002
18.88 24.67
75.33
81.13 urban share of the poor (%)
rural share of the poor (%)
Source: Ravallion et al., 2007
Note: Poverty line is set at $1.08/day

12. Regional Hunger Trends
45
40.3
40
GH I 1981
35 GH I 1992
32
GH I 1997
30 27.9 27.3
27 26.6 GH I 2003
25.4 25.1
25 22.5
20
15.1
15 12.6
11.9 10.9 11.4
9.4
8.4 8.0 7.9
10 7.5
6.6 6.0 5.6
5
0
Sub-Saharan So uth A sia So utheast N ear East & Latin A merica Eastern
A frica A sia N o rth A frica & C aribbean Euro pe &
F o rmer So viet
Unio n
Source: Wiesmann, 2006

13. Overview
1. Issues and conceptual framework
2. Drivers of agriculture and food
related globalization and impacts
on the poor
3. Policy and research implications

14. 1) Markets and trade

15. 1. Trade: Stagnation of developing countries‟ export shares,
more global integration on the import side
Agriculture trade in percent of production
Export/Production 1960s 1970s 1980s 1990s 2000-02
Latin America and the Caribbean 23.6 24.7 24.5 26.7 31.4
Sub-Saharan Africa a 28.5 23 17.2 15.3 13.2
Asia Developing 5.4 5.7 6.4 6.4 6.4
All Three Regions 12.1 11.8 11.3 11.0 11.6
Import/Production 1960s 1970s 1980s 1990s 2000–02
Latin America and the Caribbean 6.7 8.6 11.2 14 15.7
Sub-Saharan Africa a 8.1 9.4 12.6 12.3 13.5
Asia Developing 7.1 7.7 9.2 8.9 8.8
All Three Regions 7.1 8.0 10.0 10.1 10.5
a Does not include South Africa.
Data source: World Bank, WDI 2005

16. Regional trade trends
Agriculture trade in percent of total merchandise trade
Agr. Exports/Total Merchandize 1980 1990 2000 2003
Latin America and Caribbean 27.8 26.1 17.4 20.6
Sub-Saharan Africa a 19.8 20.0 15.2 16.9
East and Southeast Asia 13.3 7.7 3.7 3.8
South Asia 33.8 18.6 10.8 10.6
Agr. Imports/Total Merchandise 1980 1990 2000 2003
Latin America and Caribbean 11.6 12.3 9.0 10.3
Sub-Saharan Africa a 15.4 16.3 17.1 17.9
East and Southeast Asia 14.2 8.0 4.8 4.7
South Asia 13.8 10.3 9.3 9.3
Data source: FAO, 2004; Note: a Does not include South Africa

17. But: global increased trade in processed
and high-value goods
World export value (billions of US$)
100
90 Coarse Grains
80 Fruits & vegetables
70 Meat
60 Milk
50
40
30
20
10
0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Data source: based on data from FAOSTAT 2006

18. Small farms and small businesses
can participate
+25 jobs
From a 2 ha. rice farm to fruit
processing firm
in Uttar Pradesh: training (her),
banking was key;
and the road

19. Estimations of welfare benefits of trade
liberalization: studies 1999 - 2006
Source: Bouët, IFPRI, 2006

20. Two emerging global agro - markets
• Biofuels
• Carbon trading
Both entail opportunities and risks for the
poor‟s food security
Both require scaling up of R&D, incl. bio-
technology, to facilitate food security of
the poor and protection of resources

21. The biofuels boom
World ethanol and bio-diesel production, 1975-2005
40
35
4.0
30 3.5
Billion liters
25 3.0
Billion litres
20 2.5
15 2.0
10 1.5
1.0
5
0.5
0
0.0
1975 1980 1985 1990 1995 2000 2005
1991 1993 1995 1997 1999 2001 2003 2005
Ethanol > 90% of biofuel production;
Bio-diesel: EU is the largest
Brazil & US dominate ethanol market
producer & consumer
Source: Worldwatch Institute, 2006

22. Plans
annual growth in biofuel production …2010/12
• Ethanol: Biodiesel:
- USA: 16% USA: 19%
- EU: 45% EU: 37%
- Brazil: 8% Malaysia: 248%
- India: 15% Indonesia: 143%
- China: 3% Thailand: 70%
Source: USDA, 2006; 2007

23. Biofuels change the world food equation
Biofuel expansion will…
• accelerate globalization of agriculture
• raise land values, thereby draw capital
into rural areas
• create some jobs
• increase food prizes

24. Prices: Agricultural and energy prices
increasingly correlate
500 Corn 70
450 Rice
60
Sugar
400
Oil seeds
350 50
Crude oil (right)
300
40
250
30
200
150 20
100
10
50
0 0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
…and price variations are up
Source: IMF, 2007; OECD, 2005; World Bank, 2007

25. Carbon markets and Clean Dev. Mechanism
Allowances:
2005: 7.9 Bill. $ 2006: 24.6 Bill. $
Project based
2005: 2.9 Bill.$ 2006: 5.5 Bill.$
Agriculture only 1% of CDM offsets
Developing countries about 10% of CDM
Challenge: inclusion of the poor in this emerging
market

26. 2) Investment & capital flows

27. Drivers:
(2) Investment and capital flows
1990
Industrial countries Developing countries FDI in food and Agriculture
100
80
as % of world total FDI
60 1990 and 2004
40
20
0
Agriculture, hunting, Food, beverages and 2004
forestry and fishing tobacco
Industrial countries Developing countries
Transition countries
100
80
60
40
20
0
Agriculture, hunting, Food, beverages and
forestry and fishing tobacco
Source: based on data from UNCTAD, 2004

28. Poverty effects: FDI
FDI
Labor Intensive Capital / Knowledge
Sector Intensive Sector
Unskilled labor Skilled labor
Reduced Increased
Poverty Poverty
• Other: Economic growth through forward and backward
linkages + knowledge spillovers;
• government revenue from corporate taxes for pro-poor
investments
Vietnam: FDI in rural areas, direct impact on poverty
insignificant (Nguyen, 2003)
Source: von Braun (2007)

29. 3) Information & innovation

30. Drivers:
ICT and information flows
 Ongoing technological advances
 Privatization of national telecom.
monopolies in many developing
countries in 1980s and 1990s

31. Drivers: ICT Revolution
500
Fixed line and mobile phone subscribers
400 (Per 1,000 people)
300
200
100
0
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
150 Internet users
World (Per 1,000 people)
100 Low income
Middle income
50
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Data source: World Bank, 2006

32. Poverty effects: ICT
(macro-level results)
• ICTs reduce transaction costs + open
markets + additional network externalities
• Tele-density is positively associated with
growth:
- 10 more mobiles per 100 people increase
GDP p.c. by 0.6% (Wavermann et. al., 2004)
- Minimum threshold: around 15% to get
strongest growth effects, actual is only 6%
Torero and von Braun, 2006

33. Science and technology
• Rapid expansion of R&D spending
needed for agriculture
• CGIAR and new global networks to play
key roles

34. Global Public Agricultural R&D: 1981 and 2000
1981 2000
$15.2 billion* $23.0 billion*
100%
Middle East-North Africa
Latin America-Caribbean
80%
Other Asia-Pacific
60%
India
China
40% Sub-Saharan Africa
Developed
20%
0%
* in 2000 international prices

35. A changing environment for
innovation
• Introduction of patent rights for
agricultural inventions under TRIPS
agreement
• Bio-safety regimes and reduced exchange
(e.g. genetic resources)
- Technology spillover pathways to
developing countries for productivity
enhancement reduced
- Less global public goods research when
we need more of it (climate, etc.)

36. Relative roles of drivers?
• Markets and trade ?
• Investment ?
• Information and innovation ?
Strong demand (growth) forces change the
global food system
combined with
Institutional and organizational changes

37. The „corporate‟ global food system
Consumers
Agricultural Food
input processors Food
industry Farms and traders retailers
top 10: $37 bln Agricultural top 10: $363 bln top 10:$777bln
value added:
• Syngenta $1,315 bln • Nestle • Wal-Mart
• Bayer • Cargill • Carrefour
$4,000 billion
• BASF 450 million • Unilever • Royal Ahold
• Monsanto >100 ha: 0.5% • Metro AG
• ADM
• DuPont • Kraft Foods • Tesco
< 2 ha: 85%
Source: von Braun, 2005

38. 3. Policy implications for pro-poor
globalization: what can be done?
1. Domestic: the need for
complementary domestic policies in
developing countries to benefit from
globalization
2. International: the responsibility in
shaping the operation of a pro-poor
world economy in general and the
agriculture and food system in
particular

39. Re 1. national policies for pro-poor
globalization
• Peace and security
• Macro-economic policy
• Inclusion of the poor into the agri-food
value chain
• Enhancing the agricultural innovation
systems, R&D and education
• Public investment in rural areas, where
the poor are (ICT, and infrastructure)
• Social protection, nutrition and health
improvement

40. Re 2. international policies for pro-poor
globalization
• Global governance architecture of the
food system
• Global trade policy reform
• International capital and aid flows
• Employment and social policies
• Global agriculture innovation and
technology and environmental policy

41. A positive future for globalism with
a “values-based” approach
1. Overcoming divisiveness, between the two
globalization views: 1] narrowly focused
economic lens, and 2] unfocused systems
approach
2. recognition of interconnectedness of global
issues (poverty, environment, migration,
trade, failing states, terrorism, infectious
disease, political tensions)
3. commitment to international laws and
institutions and to domestic responsibilities