RAY SUAREZ: Ahead of an annual meeting of G-8 countries next week, World Bank head Robert Zoellick is calling on world leaders to do more to address the global rise in commodity prices.
The combination of record oil prices and high and rising food prices is causing hunger and malnutrition in over 40 countries. Zoellick calls the situation a “manmade catastrophe that must be fixed by people.” He joins us now to tell us more.
And, Ambassador Zoellick, why manmade catastrophe? Was this somebody’s intention?
ROBERT ZOELLICK, President, World Bank: Well, my point is some have talked about this as a silent tsunami or a perfect storm. And what I’m trying to emphasize is that the causes of this are ones that are basically created by people, and so we have to focus on agenda to fix them.
Now, the causes are in part because of extra demand for food and fuel around the world, but there’s also some mistaken policies, such as restrictions on export that make it hard for even the World Food Programme to buy humanitarian supplies. Some of the biofuels policies I think will need to be adjusted.
So what we’re trying to focus on going into the G-8 is some of the short-term measures to try to provide the safety net support for the most vulnerable in need, also some of the short-term supplies for seed and fertilizers to help with a production response in developing countries, and to try to get at this terrible problem of the export bans or restrictions, at least for the humanitarian supplies.
RAY SUAREZ: There’s been a very steep spike, as you noted in your report, in both oil and food prices around the world. But what are the effects that you would see in towns and villages among the poorest people in the world? What impact is the crisis having there?
ROBERT ZOELLICK: Well, at the biggest level, you’re right, we’re really in a danger zone because of the combination of the food and fuel. And so we estimate that, for some 40 or 50 countries, you could have a decline of 3 percent to 10 percent in their GDP, that you could have 100 million people pushed into poverty.
But the most practical way to look at this is a country like Liberia, where President Johnson-Sirleaf has tried after two decades of horror to get that country on the right track, but food prices in January rose some 25 percent; that pushed another 200,000 people into poverty; and that means 70 percent of that country is below the poverty line.
How can you re-establish a democracy and rebuild a country under those conditions? These are the types of situations that leaders that are trying to move forward with reforms, trying to build a growth agenda are facing.
And that’s why we need both the developed countries and some of the major oil producers to help them get through this patch. And then the possibility that is optimistic is, is that, if we also increase production and productivity in developing countries in agriculture, they can take advantage of these higher prices.
World aid helps fund food programs
RAY SUAREZ: Your letters went to such men as the prime minister of Britain, the president of France, the president of the United States, of course. What can they do right away in the near term that would help ease the suffering of the people you've been talking about?
ROBERT ZOELLICK: Well, a number of the countries you mentioned have made contributions.
But the first that we've tried to stress is that the World Food Programme is the first line of humanitarian defense. They normally have to raise over $3 billion a year. This year, they'll probably have to raise about $6 billion a year.
In addition, one of the things I called for is they need to start to look at the possibility of a partial U.N. assessment, because that money for the World Food Programme has to be raised fresh each year. The U.N. does an assessment for peacekeeping after the trouble has been created. It strikes me we ought to at least look at the possibility of creating some baseline of support to prevent the social outbreaks.
And then, at the World Bank, we created a $1.2 billion rapid financing facility. We seeded it with some $200 million of grant money, but the needs are so great that we have a special trust fund that I spoke to the Russians a couple weeks ago. It looks like they'll contribute. This could be another source of contribution.
What I wrote in the letter was that we analyzed on the ground, through some 50 countries, the needs for either the safety net program, such as the school feeding programs, the food-for-work programs, the maternal health and mother-to-child feeding programs, that, plus creating seed and fertilizer to help with the short-term production response, in total will amount to about $3.5 billion that we need, whether through the programs we have or others.
If you add in the World Food Programme's amounts and the others from the IMF, probably about $10 billion of short-term money. Now, some of that is on its way, but we want to focus on the G-8 meeting to make sure people realize this is a double jeopardy with these food and fuel prices. And if we're unable to deal with the most vulnerable, I'm afraid we're going to see ramifications at the social and political level in countries.
Food, fuel shortages a new reality
RAY SUAREZ: Well, you've just laid out several possibilities for things that can be done in the near term, but what if this very high spike in both food and fuel prices is just leading us to a new plateau, that this is the new reality and food and fuel are just going to be very expensive for years to come? Is there a different response to what's no longer an emergency, but the new reality?
ROBERT ZOELLICK: Well, I think we are facing a new reality for a lot of reasons, some of which are in the paper, some of which we touched on. Of course, there will be some supply response in the food area, I hope in the energy area, an improved energy efficiency.
But, particularly, I think for the -- if we can get through this emergency situation, for the medium and longer term, we do want to expand the production and productivity, particularly in the developing world, so they can gain from agricultural production.
And that involves looking across the whole value chain, whether it be property rights, the seeds, the fertilizers, the irrigation system, creating the markets, trying to reduce some of the barriers in Europe and in the United States and other countries to their agricultural production.
So that's how we can turn what is today's problem into an opportunity. But, frankly, there's a lot of talk sometimes about what to do over two or three years. And what I'm trying to signal is, from the on-the-ground analysis we have, we have a danger zone today, and we need to try to address it, and this G-8 meeting, I think, is a good opportunity to focus on some of these short-term steps.
Developing nations should trade
RAY SUAREZ: Did the advice that some of these poorer countries got from the developed world not serve them well in the end, when they were told to rely on world markets for basic foodstuffs, and perhaps not emphasize local production and domestic production as much?
ROBERT ZOELLICK: Well, I think one of the challenges is right now, as you start to see this breakdown in the international agriculture system, people unwilling to export goods, that puts all this at risk.
I mean, you're seeing some of the world commodity markets now break off their futures markets. They're starting to break contracts. People are putting in price controls. So that's the system that's at risk.
But, ultimately, I don't think it will be healthy for people to try to grow all their own food. What we need to try to do is have a system where the market works and developing countries have a fair chance to profit and grow with these needs.
And so, in the case of Africa, for example, I do think one also needs to look at some of the possibilities for local crop production, whether it be cassava or some other varieties. We need some research, in terms of seeds that, for example, can deal under different climactic conditions with the challenges of climate change or whether it's flood conditions or drought conditions.
So I think that one of the challenges for all the developing world, but particularly for Africa is, how do you take advantage of some of these changes of globalization while you make sure that you protect the most vulnerable?
RAY SUAREZ: Ambassador Robert Zoellick of the World Bank, thanks for joining us.
ROBERT ZOELLICK: Pleasure.