Tuesday, September 6, 2011

What's the Job of Government?

A must read article. Reminded me how the food crisis debate ended up in lobbying for FDI in retail sector. Read to know how govt is failing in the basic job - judicial allocation of resources. 

Some excerpts - 

In recent years, the financial markets have discovered the huge opportunities presented by agricultural commodities. The consequences are devastating, as speculators drive up food prices and plunge millions of people into poverty. But investors care little about the effects of their deals in the real world.

The problem is particularly glaring in Ethiopia, a country whose name is associated with starvation for many people. Even though 5.7 million Ethiopians are dependent on international food aid, the government sells or leases large tracts of fertile land to foreign investors. They, in turn, export most of the food they produce to other countries. Since 2007, the Ethiopian government has approved 815 foreign-funded agricultural projects. Saudi firms, multinational agricultural companies and British pension funds act as investors. Some 3.6 million hectares of land are up for grabs, much of it in the Gambela region, the proposed site of a national park. Now virgin forest is being cleared to produce food for other countries. Fifty kilometers (31 miles) outside the capital Addis Ababa, Jittu Horticulture, a subsidiary of a Spanish agricultural group, produces 180,000 kilograms (396,000 pounds) of vegetables a week. The produce is exported to the Middle East, supplying multinational oil companies and five-star hotels in Dubai, Qatar, Bahrain and Saudi Arabia. "We bring foreign currency into the country, enabling the government to buy wheat for the hungry," Dutch manager Jans Brins told the Berlin daily newspaper Tagesspiegel. "It's the government's responsibility to feed people who are unable to buy anything for themselves."

According to the UN assessment, what is needed is a reorientation toward a system of agriculture driven by small farmers who grow their crops at the local level, using both sustainable and environmentally compatible methods. The authors argue that through investment, these farmers must be given access to seeds, infrastructure, knowledge and markets -- and thus the opportunity to feed themselves and others. In their view, this is the only way to preserve the natural basis of feeding human beings and fight world hunger.

The original article - Speculating with Lives: How Global Investors Make Money Out of Hunger

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