Tuesday, April 7, 2009

Can we manage this crisis differently? Bailing out the poor, not just the banks

Author : Minouche Shafik
Date : January 26th, 2009
In every economic crisis, it is the poor that suffer the most. Whether it is individuals or countries, they are the most vulnerable and lack the savings and the institutions to support them during difficult times. In past crises, we have focused too late on adverse effects on poor people. Can we do it differently this time?
The current economic downturn, unlike the East Asia crisis, started in the richest countries and has now affected the major emerging markets. The effects on low income countries are being felt, not mainly through financial markets, but through the volatility of commodity prices, the decline in export volumes and remittances. Reporting from DFID’s offices (Ethiopia, Bangladesh, India, Pakistan) indicate that in some cases poor households are taking children out of school to save money, and families, especially women and girls, are eating less or lower quality food, leading to concerns about malnutrition. Estimates are that the economic crisis has already put 100 million people back into poverty.
It is interesting to recall the lessons from previous shocks. During the recession of the 1980s, many developing countries embarked on structural adjustment programmes. While the economic reforms were often necessary, the awareness of the negative effects quickly became apparent and caused political problems in many countries and for the international financial institutions. The appeals for “adjustment with a human face” ensued and instruments such as Social Funds were established in many countries to cushion the effects through community development, skills training, and microfinance. While these Social Funds were often quite effective, they often took too long to establish and failed to play a truly countercyclical role in helping the poorest cope with economic adjustment.
For developing countries, this crisis started with the spike in food prices in early 2008. Interestingly, there was once again an appeal to create new institutions. The international response focused on a set of short term measures (food aid, social protection, input subsidies, etc.) and longer term measures (investment in research, infrastructure). But within months of agreement on this, food prices had started to fall and energy prices skyrocketed. Once again, there was a search for ways to alleviate the adverse effects. And once momentum on an international response coalesced, oil prices fell by two-thirds.
What lessons can we draw from these experiences? First, it is the nature of globalisation that there will be shocks. Those shocks may be food or fuel prices or credit squeezes or flights to quality, but they will come. Second, attempts to orchestrate a tailored response to protect the most vulnerable will almost always lag behind the need. This is inevitable given the long lead times required when new institutions are desired. Third, the best mechanisms are those that provide protection from any shock and use existing institutions and programmes to keep the most vulnerable above a minimum threshold.
Some countries have formal systems of social protection which can vary from reasonably good (Brazil, Ghana, India, Bangladesh, Indonesia, Vietnam), to limited (Uganda, Zambia, Ethiopia, Pakistan, Central Asia, Caribbean, Iraq) to still under preparation (Kenya, Sierra Leone, Cambodia). But in many countries there is no formal system and poor households rely on informal mechanisms such as remittances (Pakistan, China) or digging into modest savings (China), borrowing from moneylenders (Bangladesh), or drawing down on assets such as livestock (Tanzania) in order to cope. A good example of a well designed social protection scheme is Ethiopia’s Productive Safety Net Programme, which provides cash and food transfers for over 7 million people. £13 ($18) per month pays for cash transfers to support an entire family. The overwhelming majority (84%) of households spend some or all of this cash on buying staple food, ensuring improved health and nutrition outcomes and protecting families from having to sell productive assets to pay for food. Over a quarter of recipients (28%) also use some of the funds to keep children in school. Cash is also used to settle health bills and to facilitate asset accumulation by many families, especially livestock purchases. The programme proved its value last year, protecting many families from high food prices and drought and enabling the government and donors to use the existing programme to extend the duration of assistance.
DFID does not see the money we have committed to social protection as a welfare programme, although clearly for some households it will provide this function. The real pay off from social protection is in protecting other investments we are making in development (Ravallion, 2008). There is strong evidence that economic shocks in poor countries cause rising infant mortality, falling school enrollment, and falls in nutrition levels (Ferreira and Schady, 2008). Severe malnutrition in early childhood often leads to stunted physical development and deficits in cognitive development - all of which reduce life chances and result in significant losses in life-time earnings (Alderman et al, 2006; Behrman et al, 2004). The costs of preventing such malnutrition can be very low because of recent technological advances - as noted in Josette Sheeran’s January 8 contribution to Ideas4development.
In the months ahead, more poor countries need to be instituting social protection schemes to ensure that this economic crisis does not cause persistent poverty across generations and undermine recent progress, especially on education. When the Tequila crisis hit Mexico in 1994, it triggered the design of the famous PROGRESA programme which resulted in the establishment for the first time of an effective safety net for the country’s poor. More countries should do the same and more donors should be allocating funding to social protection. Robert Zoellick has called on the US to pledge 0.7 per cent of its stimulus package to a vulnerability fund for developing countries, who cannot afford a fiscal stimulus, to help them manage the consequences of the crisis (”A Stimulus Package for the World”, New York Times, 22 January 2009). Ideally we would create a shared funding mechanism that would send a strong signal that, alongside international policy coordination to protect the world’s financial systems, we will work together to protect the poorest from the inevitable shocks that globalisation brings. Without that, we risk losing the international consensus around globalisation and the value of past and future investments in development.

The nutrition challenge and what I saw in India

Author : Josette Sheeran
The global financial crisis and the high cost of food mean different things in different places. In those parts of the world where hunger is on the march, their impact can be measured in empty stomachs and blighted lives. That is why, during my recent visit to India, I traveled to a remote district called Chhatarpur in the central state of Madhya Pradesh (MP). I went there because I wanted to see for myself the plight of people in India’s hunger heartland. I particularly wanted to listen to the experiences of the local women. As always in such situations, the women are the ones in the front line of the war against hunger.
So serious is the food-security situation in MP that, when inserted into the country table of the Global Hunger Index, the state falls between Ethiopia and Chad which are among the 10 poorest-performing countries in the world. One third of the children under five in MP suffer from wasting (too thin for their height) and 60 per cent are underweight (too thin for their age), according to India’s most recent National Family Health Survey.
Chhatarpur, in the north of the state, is one of a number of MP districts in the grip of malnutrition. “Severely insecure” is how it is described in the forthcoming Report of Food Security in Rural India, a joint initiative of the World Food Programme and the MS Swaminathan Foundation. Climate change would appear to be contributing to the problem. Persistent drought during the past five years has led to crop failures and cattle losses, driving many farmers into severe debt. A woman called Krishna told me her husband is jobless, their land barren. They have four small children whom they are struggling to feed. So bad is the situation, they have even been thinking of selling off their land to raise badly-needed cash.
This year, as last year, children died from hunger-related diseases in Chhatarpur. Women whom I met told me of the crushing difficulties they face every day in feeding their children. At a Nutrition Rehabilitation Centre where severely malnourished children are nursed back to health, I learnt first-hand about the ravages of hunger. Some of the women had not just one but several malnourished children to care for. The mothers were so busy with looking after their large families and performing endless household chores that, even when they did have enough food, they often did not have the time to prepare it properly and feed it to their babies.
The point about malnutrition, though, is that it is not like cancer. It does not need some new scientific discovery for us to tackle it. We already have the tools to eradicate hunger and history will judge us if we do not use them.
India is home to more than 230 million undernourished people - the highest number of any one country in the world. But it is also at the forefront of the race to produce innovative nutrition technology. WFP’s India operation is currently developing a “smart” nutritional intervention for children of 6-24 months - exactly the age group of children at the Rehabilitation Centre in Chhatarpur.
This new ready-to-use food is made from ingredients such as chickpeas and dry skimmed milk powder with a range of added micronutrients. There is huge scope for this type of nutritional supplement in India which has the highest prevalence of underweight children in the world, higher even that sub-Saharan Africa. This latest addition to our hunger toolbox can be used not just for rehabilitating malnourished children but for preventing them becoming malnourished in the first place.
This product can be made locally and at relatively low cost - a daily ration costs just five rupees (10 cents). Being oil-based, it does not require water for its preparation, giving it a longer shelf life and making it particularly suitable for use in places with poor sanitation. Nor does it require cooking which makes it ideal for distribution in disaster zones - which is why we deployed it as part of our relief package after the recent cyclone in Myanmar.
It has already excited significant interest in the region and beyond. Afghanistan, Nepal and Bangladesh have all expressed interest in making this product part of their national food programmes. When I produced a sachet at the African Union Summit in Ethiopia not long ago, Prime Minister Meles Zenawi said he wanted to start producing locally it in his own country.
I really feel we are embarking on a new age of tackling malnutrition. For the first time, we have a range of products which can deliver the kind of nutritious ‘punch’ that is needed to hit hunger where it matters.
Another initiative that WFP has pioneered in India has been rice fortification. This has huge potential and could be particularly useful in countries like India which has the largest population suffering from vitamin and mineral deficiencies in the world.
Just one kernel of this fortified rice, added to 99 regular rice kernels, gives an undernourished child or an adult all those micronutrients they so desperately need.
Working in partnership with a Dutch company and the authorities in Orissa, WFP is starting on a pilot project to fortify 10,000 metric tones of rice in the eastern Indian state. This will be distributed over a two-year period through the Indian government’s mother-and-child feeding programme, reaching up to a quarter of a million beneficiaries. The idea is that what happens in Orissa will serve as a model for the Indian government to extend rice fortification to other parts of the country.
Micronutrient powder is another intervention we’ve been working on in India. Sprinkled on cooked food, this tasteless powder delivers meals that contain the daily recommended intake of essential vitamins and minerals. Again, this innovative idea has applications for use way beyond India and the South Asia region.
We’re looking at nothing short of a nutritional revolution here, a change in the way we target specific needs and specific communities. Another issue we have been exploring in India is how to improve the nutritional status of people with HIV and AIDS. Working closely with India’s National AIDS Control Organisation, WFP has devised a special fortified food supplement called ‘NutriPlus’, made from wheat and full-fat soya. Pilot projects in Orissa and in the southern Indian state of Tamil Nadu are now leading the way in the nutritional care of this particular sector of society in India.
Such new products and initiatives come at a crucial moment. In this time of financial crisis and high food prices, people make cut-backs where they can. What goes first is the nutritional content of a family’s diet. My experiences in Chhatarpur and elsewhere in the world have shown me that, when push comes to shove, vulnerable people either cut down on the number of meals they eat or reduce the servings of food. This is particularly hard on children and babies who need that nutrition and those minerals to grow up into healthy, fully-functioning adults.
If we can target the most vulnerable - particularly young children - with tailored nutritional interventions during the crucial early months of their lives, then we will have gone a long way towards winning our battle against malnutrition.