The Unnatural Coupling: Food and Global Finance

The dramatic rise and fall of world food prices in 2007-8 was largely a result of speculative activity in global commodity markets, enabled by financial deregulation measures in the United States and elsewhere. Despite the recent fall in agricultural prices in world trade, the food crisis has been exacerbated in many developing countries where food prices remain high and even continue to increase. The financial crisis also directly operates to increase food insecurity by imposing constraints on fiscal policies and food imports in balance-of-payments constrained developing countries, causing exchange rate devaluation through capital flight and adversely affecting employment, thereby reducing the ability of vulnerable groups to purchase food.