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	UN Warns Austerity Plans damage Economic Recovery by Reuters / UN DESA   June 2011   UN warns austerity plans damage economic recovery - Reuters.   Austerity measures being adopted by many industrialized world governments in the wake of the 2008-09 financial crisis are undermining economic recovery, a newly released United Nations report warns.   Cuts in spending on health, education and other social programs in both rich and poor countries, it asserted, threaten to turn back decades of social progress, block new job creation and derail efforts to eradicate poverty.   "The growing pressure for austerity measures, ostensibly for reasons of fiscal consolidation, is putting at risk social protection, public health and education programs, as well as the economic recovery measures," the report said.   If governments give in to these pressures, they could jeopardize the sustainability of the recovery, which was at best uncertain and fragile, it declared.   "Continued support for stimulus and other recovery measures is needed to strengthen the momentum of output recovery and to protect the economic and social investments that underpin future growth."   The study, "The Global Social Crisis-Report on the World Social Situation 2011," was presented at the world body"s European headquarters in Geneva by its main author, U.N. Assistant Secretary-General Jomo Kwame Sundaram.   Sundaram, a development economist who has taught at both Harvard and Yale universities in the United States, told a news conference that Asian countries, including China, had made strong efforts to sustain economic recovery programs.   Their exports to the West had helped drive the overall post-2009 recovery, he said. But if demand from richer countries tailed off as austerity slashed disposable incomes, Asian economies would also drop back.   The report made no specific reference to the current problems of European countries in the euro zone and outside it, which have been heightened by the political and social turmoil in debt-burdened Greece.   But its thrust was implicitly critical of European Union member countries and the U.N."s International Monetary Fund (IMF), which are pressing Greece to push on with tough austerity measures as a condition for a bail-out loan.   Portugal, Ireland and Spain -- all users of the euro -- and Britain which stayed out of the common currency have all introduced austerity programs involving cuts in social services and are all facing varying degrees of social unrest.   The U.N. report said responses to the crisis had not addressed what had sparked it.   "For example, financial reform in major economies has not matched initial expectations and exposes the recovery to new abuses, excesses and vulnerabilities," it asserted. "There are signs that this is already happening.   "Progress in addressing other structural causes of the crisis have also been limited....income inequalities continue to grow, global balancing is limited and global demand remains depressed.   "The failure to address the root causes of the crisis will impede a sustainable recovery," the report said.   22nd June 2011   The global social crisis: key points. (UN DESA)   Over the period 2008-2009, the world experienced its worst financial and economic crisis since the Great Depression of the 1930s. In 2009 global output contracted by 2 per cent. Since then, the global economy has bounced back, due mainly to unprecedented coordinated actions by leading economies with fiscal and monetary measures. But this recovery has been uneven and still remains fragile, with ongoing adverse social consequences.   The crises have hampered progress towards attaining the MDGs.   • Global unemployment rose sharply from 178 million persons in 2007 to 205 million in 2009. The rapid rise in unemployment has triggered an increase in vulnerability, especially in developing countries without comprehensive social protection. Estimates suggest that between 47 million and 84 million more people fell into, or remained trapped in, extreme poverty because of the global crisis.   • The economic crisis exacerbated the effects of the food and fuel price hikes in 2007 and 2008. According to the FAO, the number of people living in hunger in the world peaked at over a billion in 2009, the highest on record. In the wake of the recession, food and fuel prices are again on the rise. These multiple crises have set back the progress many countries have made towards achieving the internationally agreed development goals, including the Millennium Development Goals.   • During times of financial and economic crisis, households often adopt coping strategies, such as making changes in household expenditure patterns; however, these can negatively influence education, health and nutrition, which may lead to lifelong deficits, especially for children, and thus perpetuate the intergenerational transmission of poverty.   • The impact on social progress in areas such as education and health will only become fully evident over time. Given the fragility of the economic recovery and the uneven progress in major economies, social conditions are only expected to recover slowly. The increased levels of poverty, hunger and unemployment will continue to affect billions of people for years to come.   • Meanwhile, austerity measures in response to high government debt in some advanced economies are also making the recovery more uncertain and fragile. Increased pressure for fiscal consolidation and new pressures in response to such debt have severely limited fiscal and policy space in developed economies, and many countries are also under pressure to cut public expenditure, undertake austerity measures, reduce the scope of government action and further liberalize labour markets.   What does this mean for policymakers?   • Countries need to be able to pursue countercyclical policies in a consistent manner. Such policy space should be enabled by changing the fundamental orientation and nature of policy prescriptions that international organizations impose on countries as conditions for assistance.   • It is essential that Governments take into account the likely social implications of their economic policies. It has been shown, time and again, that economic policies considered in isolation from their social consequences can have dire consequences for poverty, employment, nutrition, health and education, which, in turn, adversely affect long-term sustainable development.   • The relative success of some Asian and Latin American Governments in mitigating the economic and social impacts of the recent crisis strongly underscores the need for Governments to be consistently countercyclical and the wisdom of conserving fiscal resources during boom periods to support expansionary measures in times of need.   Universal social protection systems and active employment generation programmes should become permanent measures, not merely temporary components of national crisis response measures.   • Social investments should be accorded priority in recovery strategies and development policies. Increasing expenditures to expand social protection and improve access to education and health services will help ensure more inclusive development with stronger domestic demand and a more solid foundation for future growth.   As challenging as it may be, the crisis offers an opportunity for achieving social progress by making universal social protection a reality, revisiting the social impacts of globalization, and ensuring more inclusive and sustained growth. Visit the related web page
	High food prices do not mean a bigger supply by IRIN News South Africa   June 2011   Contrary to popular perception, the current high food prices will not see more money flowing into agriculture in the long term, warned a new forecast released ahead of a critical meeting of agriculture ministers in Paris on 22 and 23 June.   “Input costs, including that of fuel and fertilizer, have risen significantly - we anticipate global agriculture production to slow down in the next decade,” said Meritt Cluff, a senior economist at the UN Food and Agriculture Organization (FAO) and one of the authors of the Agricultural Outlook 2011-2020.   The Outlook - produced jointly by FAO and the Organization for Economic Cooperation and Development (OECD), which includes all the major developed countries - has forecast in its last three editions that food prices will remain high for the next few decades.   Global agricultural production is projected to grow at 1.7 percent annually until 2020, compared to 2.6 percent during the previous decade. Slower growth is expected for most crops, especially oilseeds and coarse grains, which face higher production costs and slowing productivity.   FAO estimates that to meet projected demand over the next 40 years, farmers in developing countries need to double production.   The cost of nitrogen fertilizers and other farm chemicals is closely related to the crude oil price, which has jumped from about US$35 per barrel in 2000 to hovering around $100 per barrel today.   Besides the cost of agricultural inputs, pressure on resources such as water and land, and the higher risk of adverse weather are also contributing to the slow-down in food production.   “We need greater political will to make substantial investments into improving production of food grains to meet the rising demands in the future,” said Cluff.   An increase in the supply of major food grains such as wheat and rice could help bring food prices down somewhat. “We are not into a crisis of the proportions we faced in 2007/08 yet. Yes, food prices are high, but the global supply of wheat and rice - the two major food grains - is not critical at the moment,” Cluff noted.   There is some concern over maize crops in US, which have been affected by floods. The US Department of Agriculture is expected to release final figures later in June. All food grain prices are now above those of 2010.   2010 ended with food prices at their highest since 2008, when the world was in the grip of a crisis sparked by very expensive staple grains. Cereal prices, especially of wheat, started climbing in the second half of 2010 as severe drought and fires slashed crop sizes in Russia and Ukraine, two of the world"s largest producers. The price of wheat shot up by more than 70 percent. Economists said speculation and national policy responses were partly to blame for the for the price hikes.   Countries that do not produce enough to satisfy national demand and are net consumers have been hit not only by high food prices but by price volatility or fluctuations, said a new inter-agency report to the G20, Price Volatility in Food and Agriculture Markets: Policy Responses, coordinated by FAO and OECD on behalf of 10 international organizations.   The report proposes a list of policy responses to bring down food prices and tackle price shocks. It calls for the reduction or elimination of trade-distorting policies and the establishment of a new mechanism to improve information and transparency in agricultural production, consumption, stocks and trade.   Basic commodities like grains, sugar and oil experienced boom times between 2002 and 2008, attracting growing numbers of financial investors to the commodities futures exchange, a move dubbed the "financialization of commodity markets" by the UN Conference on Trade and Development (UNCTAD), an intergovernmental body dealing with trade, investment and development issues.   The Intergovernmental Groups on Grain and Rice at FAO list the impact of financialization on the futures markets - along with poor market transparency, insufficient information about investors, unexpected changes triggered by national food security situations, panic buying and hoarding - among the root causes of harmful, rapid food price hikes. Russia announced a ban on exports in 2010, which also helped push up prices, economists said.   The absence of accurate reliable public information on food stocks, and the entry of unscrupulous commodities speculators have been cited among the major reasons for price swings. The US has already put in motion plans to curb speculation and “Other countries are also following suit,” said Cluff.   Price levels and volatility   Christopher Barrett, a food security expert who teaches development economics at Cornell University, New York, said there was a need to distinguish between high food prices and price volatility, because the way the food-price problem is cast affects policy response.   “Policies aimed at curbing food price volatility, such as export bans, price controls and price stabilization schemes, not only have a poor track record, they are misguided if policy-makers’ goal is to increase the welfare of the poor,” he claims.   “Instead, policy-makers should consider policies that prevent sharp increases in food prices, such as removing barriers to international agricultural trade, and increased investment in scientific research on crop productivity improvement, on soil and water conservation, on reducing post-harvest losses that run to nearly 50 percent in many low-income countries, and on renewable energy sources that do not compete with food for land and harvests.’”   “While it is clear that food price levels are at historic highs, food price variability, although high these past few years, is not out of line with historical experience and is generally lower than in the 1970s. Although it is clear that the world faces historic food price highs, it is unclear that there is a similarly unprecedented food price volatility problem,” Barrett said.   “Second, the effects on the well-being of the poor of price levels, and of price volatility, differ. Rising food price levels hurt food consumers by reducing their purchasing power while benefiting food producers by increasing farm profits,” he pointed out.   “By contrast, food price volatility hurts food producers, who make irreversible investments in crop inputs at the start of the growing season, and routinely reduce such investments as food price risk increases” Barrett explained.   “Throughout the world, but especially in low-income countries, the poor are overwhelmingly net food buyers, so poverty increases as food price levels rise - but losses due to food price volatility fall mainly on relatively better-off large farmers, Barrett said.   “Perhaps not coincidentally, these same large farmers enjoy tremendous taxpayer-funded support programmes from G20 governments presently expressing concern about food price volatility.” Visit the related web page
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