Thursday, January 27, 2011

Robert Zoellick on the World's Challenges

Published by Newsweek on Sunday, January 23, 2011
By R. M. Schneiderman

In the lead-up to the World Economic Forum in Davos, NEWSWEEK's R. M. Schneiderman interviewed World Bank president Robert B. Zoellick about the future of the global economy.

What is the biggest challenge facing the developing world in 2011?

The biggest challenge facing most developing countries is the risk of a big boost in food prices. Food accounts for a large and increasingly volatile share of family budgets for poor and urban families. When prices of staple foods soar, poor countries and poor people bear the brunt. France's President Sarkozy, Chair of the G-8 and G-20 this year, has rightly identified this issue as a priority.

How can the globe assure food security in the face of rising prices?

There are two interrelated challenges. First, we need to increase food productivity and production in developing countries, especially in sub-Saharan Africa and with small-holder farmers. To do so, we need to fix problems all along the "value chain": property rights; R&D for seeds and inputs; irrigation; fertilizer; agricultural extension; credit; rural infrastructure; storage; and connection to markets. The World Bank Group manages a Global Agriculture and Food Security Program, with contributions from six countries as of now and the Bill & Melinda Gates Foundation, to help promote investments in small-holder farmers. In 2011, I hope we can get more contributions. Separately, the World Bank Group is boosting investment in agriculture to about $6-8 billion a year through our lending and investment projects.

The second problem is the volatility of food prices, often because of events outside poor countries' control. An interconnected combination of steps could help ensure that the most vulnerable countries and people get the nutrition they need. For example, we can increase public information on the quality and quantity of grain stocks to reassure markets and calm panic-induced price spikes. We can improve long-range weather forecasting and monitoring, especially in Africa, to better prepare for dangers. Export bans exacerbate panic pricing, so we need a code of conduct that at least exempts humanitarian purchases from bans.

We can help small-holder farmers become a bigger part of the solution for food security through tenders from humanitarian purchasers such as the World Food Program. We need financial and other tools to help farmers and their governments manage risk, whether of rainfall, prices of inputs such as energy, or others. We may need small, regional humanitarian food reserves, too, in disaster-prone, infrastructure-poor areas. We should also ensure effective, targeted social safety nets so that we protect the most vulnerable populations, such as pregnant and lactating women and children under two. The bottom line: The G-20 should agree to "Put Food First."

What about the world economy?

For the world economy as a whole, the macro challenge is managing and enhancing a modest multispeed recovery that must steer clear of various shoals: for major emerging markets, avoiding overheating or bubbles in certain sectors; for the EU, navigating through sovereign debt icebergs that could puncture big holes in the financial sector; for the US, creating jobs today while breaking the wave of structural spending and debt increases; for all, setting course to make structural reforms suited to each economy to boost growth and a rebalanced international economy.