Student Number: 1665086 1 PO984

University of Warwick
Department of Politics and International Studies
MA/Diploma

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Provide the following information

Core MA/Dip Programme MA International Relations

Student ID number: 1665086
Name and number of Module: Global Food System, PO984
Assignment: 1st Long Essay
Module Tutor: Dr Ben Richardson
Essay Title: Critically assess current World Bank
policy on food and agriculture.

Is the above title Pre-approved or Pre-approved

Negotiated?
Word count 4251
Student Number: 1665086 2 PO984

ABSTRACT

The paper critically assesses the current World Bank policy on food and agriculture. While

relying on the World Development Report, the articles highlights few of the main contributions

of the World Bank towards the development of the agricultural sector. Nonetheless, the

contention advanced in the essay is that the policies of the World Bank does not benefit the

poor, instead it is mainly aimed to enrich the rich. The first part of the essay advances criticisms

against the structural adjustment programs and neoliberal ideology which the World Bank

encourages. The second part of the essay highlights how the World Bank funds massive

displacement and human rights violations. Lastly, the plight of the smallholders is the issue of

concern in the third part of the essay.

Keywords: World Bank, Structural Adjustment Programs, Displacement, Smallholders.

Student Number: 1665086 3 PO984

INTRODUCTION

For the first time in 1982, agriculture came up on the agenda of the World Bank. However, due

to the neoliberal background underpinning the policies of the World Bank, agriculture was

assigned secondary status as a source of income, with industrial development dominating the

agenda. From staggering 32 per cent of lending from the World Bank in 1976-8, agriculture

received only 6.5 per cent during the period 2000-5.1 Instead of lending money towards

agriculture, the World Bank stressed on the use of resources provided by local governments

and called for global institutions to support the new agriculture for development agenda.

Recently, in 2008 the World Bank came out with a report which solely dealt with the issue of

agriculture. The main theme of this report was linking agriculture with development and

examining the ways in which agriculture could help reduce poverty and hunger. By

categorising states based on their reliance of agriculture, the World Bank distinguished between

three types of countries: agricultural countries were ones which accounted 32 per cent of its

GDP based on agriculture; industrial countries were those in which agriculture contributed 7

per cent in GDP; and urbanised countries were those where agriculture contributed to 5 per

cent of the GDP.2

The Bank works with various countries and international organisations to provide innovation,

infrastructure and resources so that the food and agriculture sector (a) is more productive and

resilient to climate change; (b) improves the lives and livelihoods of people by creating jobs;

(c) boost agribusiness by building inclusive and exclusive value chains; and (d) improve food

1
Jonathan Pincus, 'The Post-Washington Consensus And Lending Operations In Agriculture: New Rhetoric
And Old Operational Realities', Development Policy in the Twenty First Century: Beyond the Post-Washington
Consensus (1st edn, Routledge 2001). The World Bank data. Available at
http://siteresources.worldbank.org/INTANNREP2K5/Resources/D003-T001.xls
2
Derek Byerlee and Alain de Janvry, 'Agriculture for Development' (The World Bank 2017). p.10
Student Number: 1665086 4 PO984

security by helping produce enough safe and nutritious food for all the people all over the

world.3

The results of the strategies stated above are proudly boasted by the World Bank. For instance,

the Bank claims to have supported more than 1.6 million people in India by helping them

diversify crops, new technology, improved water management and enhanced market access to

smallholders. Similarly, in Egypt, the Bank has facilitated drainage improvements and

benefitted more than 600,000 families who live on 1,103,000 ‘feddan’ of irrigable soil. In terms

of developmental projects, the World Bank claims to have help construct 330 kilometres of

roads in rural areas of Philippines. Similarly, in Burundi, the Bank has helped more than

129,000 farmers to boost productivity and market access.4

However, this essay is not concerned with the accomplishments of the World Bank. On the

contrary, the main concern of this essay is to critically analyse the current World Bank policy

on food and agriculture. While highlighting the major criticisms associated with the World

Bank, the main contention of the essay is that the World Bank’s policy does not focus on

development of agriculture, rather it serves the interest of the western capitalists or

transnational corporations.

The contention in this essay is explained by three arguments. The first one is with respect to

the structural adjustment policies and neoliberal ideology which are encouraged by the World

Bank. The first section of the essay highlights how the adjustment policies endorsed by the

World Bank has led to market failure and benefitted western capitalism instead of benefitting

the developing countries. The second argument, covered in the succeeding section, will explain

how the projects funded by the World Bank has displaced millions of people, caused deaths

3
Understanding Poverty, The World Bank Group. Available at,
http://www.worldbank.org/en/topic/agriculture/overview#1
4
Understanding Poverty, The World Bank Group, Strategy. Available at
http://www.worldbank.org/en/topic/agriculture/overview#2
Student Number: 1665086 5 PO984

and rapes instead of saving lives and preserving livelihood. The instances in Kenya, Ethiopia

and India are highlighted to explain how the World Bank has caused grievances to the people

who it is supposed to help. Lastly, the essay explains how the World Bank serves the interests

of the transnational agribusinesses. Particularly, the focus in this part of the essay is concerning

the problems faced by smallholders in entering value chains.

STRUCTURAL ADJUSTMENT AND NEOLIBERALISM

Due to the global economic conditions prevailing in the 1960s and 1970s, developing countries

faced enormous level of external debts by the early 1980s. High rates of inflation, combined

with rising import bills and easy credits led many developing countries to borrow funds from

private banks which were based in the US.5 However, because of the changing economic

conditions and sharp increase in US interest rates, repayment of the loans suddenly became

extremely difficult for developing countries. Mexico was the first country to openly declare

that it could not repay the loan it owed to private banks.6 Consecutively, many other developing

countries faced a similar problem and this phenomenon came to be known as the developing

country debt crises.

In the backdrop of the developing country debt crises, the international community came

together to find a way to help the developing countries to repay the debts to avoid damage to

the global financial system. Particularly, the World Bank and the International Monetary Fund

(IMF) stepped in to provide loans to developing countries to help them repay the loans owed

to the private banks.

5
Jennifer Clapp, Food (1st edn, Polity 2016). p.59
6
Id at 60
Student Number: 1665086 6 PO984

By accepting the loans provided by the international financial institutes, poor countries gained

new loans and, additionally, had to meet certain criteria to obtain such loans.7 The additional

criteria were to structurally change the economic policy of developing countries in line with

the rich developed countries.8 Typically, these changes followed a neoliberal economic policy,

the primary purpose of which was to make profits and not development. This neoliberal

economic model came to be known as the Washington Consensus as it was endorsed by the

Bretton Woods Institute and the US government.9

The key reforms and adjustments included infusion of foreign exchange, increased agricultural

prices, trade liberalization, currency devaluation, improved marketing policy and privatisation

of market.10 Together, these policies were designed to improve export earnings and reduce the

spending of developing countries with a rationale to help the developing countries pay back

the money which it owed to World Bank.11

Following the Structural Adjustment Programs, many countries imposed protectionist barriers

to restrict imports of agricultural products that they themselves produced.12 A country which

produced rice would impose heavy tax on rice imports, while a country which produced cocoa

would impose tax on cocoa imports.13 Further, protectionist policy also operated in state-run

marketing boards for export crops to manage sales, supply and storage. Concomitantly, they

7
Simon Commander, 'Structural Adjustment Policies And Agricultural Growth In Africa' (1988) 23 Economic
and Political Weekly. p.103
8
Raj Patel, Stuffed and Starved: From Farm to Fork. The Hidden Battle for the World Food System (1st edn,
Melville House Pub 2014). p.187
9
Kjell J Havnevik and others, African Agriculture and The World Bank (1st edn, Nordic Africa Institute 2009).
p.15
10
Id at 16
11
William Easterly, 'What Did Structural Adjustment Adjust?' (2005) 76 Journal of Development
Economics.p.18
12
Peter B.R. Hazell and others, 'Impact of the Structural Adjustment Program on Agricultural Production and
Resource Use in Egypt' (International Food Policy Research Institute Environment and Production Technology
Division 2017). p.38
13
Jennifer Clapp, Hunger in The Balance: The New Politics of International Food Aid (1st edn, Cornell
University Press 2012). p.95
Student Number: 1665086 7 PO984

also set government controlled pricing policy and provided subsidies for agricultural inputs,

such as fertilizers, seeds and fuels.14

The impact of the structural adjustment programs was that it tipped the balance against the

developing countries.15 While the rationale behind devaluation of currency was to make exports

more competitive, the flipside was that imports became more and more expensive.

Concomitantly, countries were also forced to remove tax on agricultural exports and scrap the

benefits which were meant for the agricultural sector.16 In addition, the borrowers under these

programmes were required to remove barriers to food imports from other countries and adopt

policies which facilitated investment in agriculture.17

This led to surges in food imports in the developing countries because imported food was much

cheaper than locally produced food. As a result of these changes, the investment into

agricultural sector fell dramatically, production stagnated and food imports came in flooding

in from abroad, while the debts owed by the developing countries continued to rise.18

The main criticism against structural adjustment programs is that while it was designed to

liberalise markets and overcome market failure, it has only partly succeeded and created new

market failures because of the unrealistic assumptions concerning benefits of liberalisation. 19

Also, policy reforms were not promoted by sufficient incentives, which led to the local

politicians fearing that they would lose a source of personal enrichment.20The consequence of

14
Id at 106
15
Jennifer Clapp, Food (1st edn, Polity 2016). p.165
16
Bert Meertens, 'Agricultural Performance In Tanzania Under Structural Adjustment Programs: Is It Really So
Positive?' (2000) 17 Agriculture and Human Values. p.342
17
Peter B.R. Hazell and others, 'Impact of the Structural Adjustment Program on Agricultural Production and
Resource Use in Egypt' (International Food Policy Research Institute Environment and Production Technology
Division 2017). p.43
18
Marc J Cohen and Jennifer Clapp, The Global Food Crisis (1st edn, Wilfrid Laurier University Press 2009).
p.51
19
Heike Hoeffler, The Political Economy of Agricultural Policies in Africa: History, Analytical Concepts and
Implication for Development Cooperation, Quarterly Journal of International Agriculture Vol 50, issue 1 (2011).
p.38-40
20
Id 39
Student Number: 1665086 8 PO984

which was that many programs were not carried out at all, implemented half-heartedly or never

completed.21 The SAPs also encouraged abandoning of the agricultural marketing boards and

programs which existed during the 1980s, which created another problem. There were literally

no organisations which would market goods and services on behalf of the smallholders. This

in turn forced the smallholders to join the agro-value chain which was heavily dominated by

transnational corporations.

Further, the improvement and development of new infrastructure and institutions went at a

slower pace and public goods were not provided as expected. Additionally, where the SAPs

were implemented, there was shift from governmental control over market to complete

withdrawal of state from agricultural market. This free market mechanism led to market failure

due to the absence of an institutional framework which was meant to regulate the market to

prevent failure.

Mkandawire and Soludo have countered the SAPs in their work by arguing for the necessity

for developing countries to compete in the global economy, not only on the basis on

comparative advantage but also through modified import substitution policies.22 Further

criticism is raised towards the political implications of the reforms and the risks that were posed

to the stability of the country.23 In particular, the instance of Honduras is important to explain

how the World Bank sponsors coup d’etat. After the coup of former President of Honduras,

Manuel Zelaya, many members of the Organisation of American States were reluctant to

recognise the new government as a legitimate one. However, in opposition to the viewpoint of

the Organisation of American States, the World Bank supported the new leader who was

21
Id 38
22
Thandika Mkandawire and Charles C Soludo, Our Continent, Our Future (1st edn, International Development
Research Centre 1999). p.84
23
Id at 84
Student Number: 1665086 9 PO984

responsible for the coup and large scale human rights violations in Honduras.24 Thus, the

Washington Consensus is seen as apolitical, overly economic approach which is characterised

by excessive conditions as well as the absence of genuine ownership by the countries.25

Although the structural adjustment programs were eventually withdrawn in 2002, the World

Bank has adopted renewed methods to influence policy in the developing countries to adopt

neoliberal agendas.26 The ability of the Bank to influence countries comes from its economic

power. The World Bank has spent more than a $100bn by granting loans, funding construction

projects and development in the global South.27

Additionally, the World Bank also publishes an annual report titled Doing Business Report, in

which a country by country economic ranking is published on denote where business can be

done easily.28 Since the Bank sets the standards for judging countries, it pressurises developing

countries to adopt neoliberal policies in exchange for a good ranking in the Doing Business

Report. 29

In summation, the structural adjustment programs initiated under the aegis of the World Bank

gradually failed due to the problems it has created in the agricultural market. Although the

structural adjustment schemes have been abandoned since 2002, the Bank still imposes its

neoliberal ideology by other means.

24
John Schertow, 'Stop World Bank Funding Of 'Death Squads' In Honduras' (Intercontinental Cry, 2017)
<https://intercontinentalcry.org/stop-world-bank-funding-of-death-squads-in-honduras/> accessed 13 April
2017.
25
Franz Heidhues and Gideon Obare, Lessons from Structural Adjustment Programmes and their Effects in
Africa, Quarterly Journal of International Agriculture Vol 50, issue 1 (2011) 57-60
26
Alice Martin-Prevel, 'Unfolding Truth Dismantling the World Bank’s Myths on Agriculture and
Development' (Oakland Institute 2014). p.5
27
Projects and Operations, The World Bank, Available at
http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,menuPK:64383817~pagePK:64387457~piPK:
64387543~theSitePK:40941,00.html
28
Alice Martin-Prevel, 'Unfolding Truth Dismantling the World Bank’s Myths on Agriculture and
Development' (Oakland Institute 2014). p.1
29
Id at 1
Student Number: 1665086 10 PO984

FUNDING MASS DISPLACEMENT AND HUMAN RIGHTS VIOLATIONS

The World Bank’s support for large scale industrial agribusiness has tremendously expanded

in recent years.30 Despite its own findings stating that large scale investments have negative

outcomes, the Bank suggests that a “win-win” situation is possible as long as investors respect

certain standards.31 The standards include respect for local rights, consultation and

transparency with stakeholders, support for livelihoods, environmental sustainability among

other criteria.32 However, evidence shows that these standards have been ignored and a number

of projects supported by the Bank have resulted in land grabs.

The investigation conducted by the International Consortium of Investigative Journalists (ICIJ)

and other organisations indicate that the World Bank has regularly failed to enforce its rules,

with devastating consequences for the poorest and vulnerable people on the planet.33 The

investigations reveal that the dams, power plants and other projects which are funded by the

World Bank has displaced 3.4 million people.34 Which led the Bank’s President Jim Yong Kim

to say “we took a hard look at ourselves on resettlement and what we found caused me deep

concern.”35

From 2009 to 2013, the World Bank Group lenders have pumped in $50bn into projects which

present the highest risk for irreversible or unprecedented social or economic impacts. 36 The

30 Alice Martin-Prevel, 'Unfolding Truth Dismantling the World Bank’s Myths on Agriculture and
Development' (Oakland Institute 2014).
31
Derek Byerlee and Alain de Janvry, 'Agriculture for Development' (The World Bank 2017). p.168
32 Grahame Dixie, 'Land And Agribusiness: Ground Testing Principles With Communities' (2017)
<http://blogs.worldbank.org/voices/land-and-agribusiness-ground-testing-principles-communities> accessed 4
May 2017.
33
Jacob Kushner, 'World Bank Projects Leave Trail Of Misery Around Globe' (The Huffington Post, 2017)
<http://projects.huffingtonpost.com/projects/worldbank-evicted-abandoned/worldbank-projects-leave-trail-
misery-around-globe-kenya> accessed 5 April 2017.
34 Sasha Chavkin, 'How The World Bank Broke Its Promise To Protect The Poor' (The Huffington Post, 2017)
<http://projects.huffingtonpost.com/projects/worldbank-evicted-abandoned> accessed 5 April 2017.
35 The World Bank, 'World Bank Acknowledges Shortcomings In Resettlement Projects, Announces Action
Plan To Fix Problems' (2017) <http://www.worldbank.org/en/news/press-release/2015/03/04/world-bank-
shortcomings-resettlement-projects-plan-fix-problems> accessed 7 April 2017.
36
Sasha Chavkin, 'How The World Bank Broke Its Promise To Protect The Poor' (The Huffington Post, 2017)
<http://projects.huffingtonpost.com/projects/worldbank-evicted-abandoned> accessed 5 April 2017.
Student Number: 1665086 11 PO984

problem is not the funding of these projects, but that the World Bank neglects to properly

review projects ahead of time to ensure communities are protected. Further, the Bank has no

idea what happens to the people who are displaced from their home.37 In addition, the Bank

has continued to do business with governments and organisations which are accused of massive

human rights violations, particularly rape, murder and torture. 38

In 2012, President Kim announced an action plan by calling for greater independence for the

banks’ safeguards watchdogs and a 15% funding boosts for safeguarding enforcement.

However, the drawback is that the World Bank is not ready to admit the fact that the Bank

shares blame for violent and wrongful evictions carried out by the State.39 The case of Kenya

is important in this regard.

In Kenya, the World Bank’s in-house Inspection Panel found the bank violated its policies by

failing to do enough to protect an indigenous minority group in Kenya’s western forests called

Sengwer. Although the Panel did not highlight the World Bank’s shortcomings, it did recognise

that the Bank could have prevented the evictions of Sengwer in Kenya.40

The World Bank started financing Kenya’s Forest Service Natural Resources Management

Project in 2007 by promising to cover $68.5 million of the project’s $78 million budget with a

rationale to improve the livelihood of communities.41 However, reports of the ICIJ and the

Huffington Post reveal that the bank’s funding of the conservation has put the Sengwer people

in danger because the Management Project redrew the Cherangani Hills’ protected Forest

37
Id
38
Id
39
Jacob Kushner, 'World Bank Projects Leave Trail Of Misery Around Globe' (The Huffington Post, 2017)
<http://projects.huffingtonpost.com/projects/worldbank-evicted-abandoned/worldbank-projects-leave-trail-
misery-around-globe-kenya> accessed 5 April 2017.
40
The World Bank, 'Investigation Report' (World Bank 2014). Available at
http://ewebapps.worldbank.org/apps/ip/PanelCases/84%20-%20Investigation%20Report%20(English).pdf
41
Jacob Kushner, 'World Bank Projects Leave Trail Of Misery Around Globe' (The Huffington Post, 2017)
<http://projects.huffingtonpost.com/projects/worldbank-evicted-abandoned/worldbank-projects-leave-trail-
misery-around-globe-kenya> accessed 5 April 2017.
Student Number: 1665086 12 PO984

Reserve in a way that included thousands of them inside the reserve’s boundaries, which gave

the Kenyan officials a pretext for evicting people who were living with the reserve’s

boundaries.42

Further, the ICIJ report also found that the cash which was mean to serve the purpose of

development was used to provide equipment to Kenyan Forest service, which included new

vehicles, guns and boots.43 Under the pretext that the Sengwer people have illegally occupied

public lands, the Kenyan government has torched and burned more than thousand Sengwer

homes ever since the World Bank has started funding the project.44 In addition, several people

have also been jailed for farming with permit and trespassing into the property of the

government.

However, in the spring of 2011, the World Bank urged Kenya’s finance ministry to end the

evictions until the bank could help the government work out a plan for addressing the

Sengwer’s concerns. According to bank officials, Kenyan authorities agreed to stop the

evictions until they found new land where the Sengwer could relocate.

Similarly, in In Ethiopia, the Bank’s inspection panel found that the bank had violated its own

rules by failing to acknowledge the operation link between health and education on one side

and mass reallocation on the other side. In addition, a report by Human Rights Watch and

ICIJ’s interviews indicate that in 2011 the soldiers who were carrying out the evictions were a

part of beatings, rapes and torture.45 The instance of Odoge Otiri and Aduma Omot is important

to gain a picture of the adverse impact the World Bank causes by funding large scale

development projects.

42
Id
43
Id
44
Id
45
Human Rights Watch, '“Waiting Here for Death" Displacement And “Villagization” In Ethiopia’s Gambella
Region' (Human Rights Watch 2017). p.22
Student Number: 1665086 13 PO984

Otiri, a 22-year-old student in Ethiopia was attacked and beaten by Ethiopian soldiers till he

almost died. Concomitantly, his wife Omot was taken to the soldiers’ camp and was raped for

two days. The reason behind such ill treatment was that Otiri opposed the ‘villagization’

project, a massive social engineering project initiated by the Ethiopian government which

sought to move more than 2 million people to build sites selected by the government.46

The investigation by the ICIJ revealed that the funding for the evictions were channelled

through the money lent by the World Bank for the development of health and education in

Ethiopia.47 Government officials have admitted that over $10million from the World Bank’s

health and education initiative has been redirected by the Ethiopia government for financing

mass relocation through the villagization program.48

Another instance in India reveals how members of a historically oppressed Muslim community

have been suffering due to the policies of the developmental project funded by the World Bank.

The International Finance Corporation, World Bank’s private lending arm, loaned TATA

Power $450 million to help build an ultra mega coal-fired power plant in Gujarat.49 The

problem caused by this plant is that heated water ejecting out of coal fuelled power plant has

depleted fish and lobster stocks which were once available in abundance.50 The Tragadi Bandar

bears the cost of the depleted fish and lobster stocks.

Tragadi Bandar is a makeshift fishing community which is situated at the borders of TATA

Mundra Ultra Mega Power Project in the Western part of Gujarat, India.51 The makeshift

46
Sasha Chavkin, 'New Evidence Ties World Bank To Human Rights Abuses In Ethiopia' (The Huffington Post,
2017) <http://projects.huffingtonpost.com/projects/worldbank-evicted-abandoned/new-evidence-ties-
worldbank-to-human-rights-abuses-ethiopia> accessed 27 March 2017.
47
Id
48
Id
49
Barry Yeoman, 'The World Bank Group's Uncounted' (The Huffington Post, 2017)
<http://projects.huffingtonpost.com/projects/worldbank-evicted-abandoned/india-uncounted> accessed 5 May
2017.
50
Id
51
Id
Student Number: 1665086 14 PO984

community is separated from the power plant by a man-made channel that releases heated

wastewater from the 4,150-megawatt operation. The water discharged by the Tata plant has

driven fishes away from the intertidal zone, where the Waghers used to set up nets and harvest

the fish at low tide.52 Hence, the funding of the World Bank to TATA Power to set up the so

called ultra mega power plant has come to destroy the livelihood of several people who like in

Tragadi Bandar.

In summation, this section highlights the drawbacks of the massive investments made by the

World Bank for the purposes of development. From the reports of the ICIJ and the Huffington

Post this section shows how the World Bank also funds governments which commit massive

human rights violations against its citizens for the sake of development.

SMALLHOLDER FARMING AND AGRIBUSINESS

Twenty-five years after its first report on agriculture, the World Bank declared in 2008 that it

is time to place agriculture afresh at the centre of the development agenda. 53 The Agriculture

for Development Report replaces smallholder knowledge with corporate inputs to channel food

through ‘value chains’ to markets comprised of those with purchasing power. The effective

instruments include increasing assets of poor households, so that smallholders are more

productive and expand rural nonfarm economy.54 The goal of the Bank is to link extensive

value chains between consumers and producers and include many entrepreneurial smallholders

supported by their organisations.55 Simply put, the new development agenda is to promote

agribusiness, aided by the state.56

52
Id
53 Derek Byerlee and Alain de Janvry, 'Agriculture for Development' (The World Bank 2017). p.1
54
Id at 8
55 Id; See also, Philip McMicheal, 'Banking on Agriculture: A Review of the World Development Report 2008'
(2009) 9 Journal of Agrarian Change, p 241
56
Carlos Oya, 'Introduction To A Symposium On The World Development Report 2008: Agriculture For
Development?' (2009) 9 Journal of Agrarian Change.
Student Number: 1665086 15 PO984

However, by pushing for expansion of contract farming to generate a productivity revolution,

the policy of the Bank is benefitting corporations rather than farmers because it ignores three

crucial factors: (A) Agribusiness is dominated by corporations and supermarkets; (B)

Corporations impose harsh restrictions on farmers for quality product; (C) Corporations only

share risks, but keep profits.

Agribusiness is dominated by Corporations and Supermarkets

While recognising the importance of supermarkets to alleviate poverty, the World Bank depicts

supermarkets and corporations as small chains arising in regional economies.57 However, the

domination of corporations and supermarkets started in 1980s after the structural adjustment

programs liberalised the agricultural markets, enabling corporations and supermarkets to

participate in the food value chain.58 As a result, only a few number of companies which has

the funds and capacity to compete with the biggest players were allowed to stay.

While thirty years ago, there were thousands of seed companies, now only ten companies

control more than two-thirds of sales of proprietary seeds; while dozens of pesticide companies

existed, the number has decreased to ten companies controlling 90 per cent of shares

worldwide.59 Further, from almost a thousand companies dominating the biotechnology

companies, the number has come down to only ten companies.60 As per the Cap Gemini Ernst

& Young report on State of the Art in Food, future global food manufacturing will be

dominated by 25 brand manufacturing companies.61

57
Derek Byerlee and Alain de Janvry, 'Agriculture for Development' (The World Bank 2017). p.126
58
Hannah Bargawi, 'Agribusiness For Development’: Who Really Gains?' (2009) 36 Development Viewpoint.
p.1
59
Minerva Cabungcal-Cabiles, Ma. Estrella Penunia and Marciano Virola, Jr., 'Critical Issues On The Growing
Market Power Of Transnational Agribusinesses' (Asian Farmers' Association for Sustainable Rural
Development 2009). p. 3
60
GRAIN, 'Food Sovereignty For Sale: Supermarkets Are Undermining People's Control Over Food And
Farming In Asia' (GRAIN 2014) <https://www.grain.org/article/entries/5010-food-sovereignty-for-sale-
supermarkets-are-undermining-people-s-control-over-food-and-farming-in-asia> accessed 9 April 2017.
61
Jan-Willem Greivink, Lia Josten and Conny Valk, 'The Changing Face Of The Worldwide Food Industry'
(Cap Gemini, Ernst & Young 2007). p. 25
Student Number: 1665086 16 PO984

Agribusinesses have come to have market power because of vertical and horizontal integration.

While vertical integration is where a single company controls the production and marketing, a

horizontal integration would be when a company and its sister company obtain a bigger market

share in the production process.62 Because of the vertical and horizontal integration companies

can not only control the prices of commodities, but also control the quality of the products

which would enter the market.63 Further, the volume of goods and prices of inputs and raw

materials are also determined by the transnational agribusiness companies.

Harsh Conditions

In contrast with manufacturers of food, large retailers avoid direct involvement in production

of materials and only specialise in marketing and organising supply chains.64 The oligopolistic

nature of the corporations is illustrated by its reliance on product differentiation, advertising

and information technology to battle for consumers and raise the entry barrier to production by

the scale of their marketing.65 While production is outsourced, the companies only concentrate

on branding, packaging, design and marketing functions.

Due to the health and safety concerns which arise from use of pesticides, BSE and GMOs,

international food retailers have developed stringent rules and regulations to ensure that

farmers are producing as efficiently as possible while complying with the standards set by the

retailers.66 Agribusiness governance, as the framework is referred to, is regarded as very

important to retailers because it helps build brand confidence, goodwill, confidence and loyalty

62
Minerva Cabungcal-Cabiles, Ma. Estrella Penunia and Marciano Virola, Jr., 'Critical Issues On The Growing
Market Power Of Transnational Agribusinesses' (Asian Farmers' Association for Sustainable Rural
Development 2009). p. 3
63
Id
64
GRAIN, 'Food Sovereignty For Sale: Supermarkets Are Undermining People's Control Over Food And
Farming In Asia' (GRAIN 2014) <https://www.grain.org/article/entries/5010-food-sovereignty-for-sale-
supermarkets-are-undermining-people-s-control-over-food-and-farming-in-asia> accessed 9 April 2017.
65
John Wilkinson, 'The Globalization Of Agribusiness And Developing World Food Systems' (2009) 61
Monthly Review. p.42
66
Kojo Sebastian Amanor, 'Global Food Chains, African Smallholders And World Bank Governance' (2009) 9
Journal of Agrarian Change. p.258
Student Number: 1665086 17 PO984

among customers. Quality control is carried out by food monitoring teams which inspect the

goods of the suppliers throughout the world without prior notice. Which means that the

products which fail to meet the standards which are set are automatically rejected by the quality

control team.67

Additionally, supermarkets are also engaging in practices such as forcing farmers to absorb the

costs of promotions which is supposed to be borne by them.68 For instance, in cases where the

supermarkets advertise a ‘buy one get one’ offer to consumer, instead of bearing the cost of the

free product, the supermarkets impose cost on smallholders. Further, supermarkets also force

smallholders to absorb costs of special packaging, bar code changes, advertising. In addition,

the smallholders are also forced to purchase goods and services from a particular company

which has a tie up with the supermarket.69 Supermarkets are also accused of ordering surplus

goods for a predetermined price which is then sold at a higher rate. The Cap Gemini report

indicates that three-quarters of food retailers resort to such practices, which is also referred to

as blackmailing.70

Sharing risks or profits?

The domination of value chains by supermarkets and corporations also enables them to retain

a large share of profit while passing on the risks to the smallholders. This is because while

liberalisation of agricultural market opens up the market to competitors, it results in low

producer margins and high risk to producers and exporters.

67
Id at 254
68
Id at 260
69
GRAIN, 'Food Sovereignty For Sale: Supermarkets Are Undermining People's Control Over Food And
Farming In Asia' (GRAIN 2014) <https://www.grain.org/article/entries/5010-food-sovereignty-for-sale-
supermarkets-are-undermining-people-s-control-over-food-and-farming-in-asia> accessed 9 April 2017.
70
Id
Student Number: 1665086 18 PO984

The work of Daviron and Ponte is apt to explain how the liberalisation of coffee has resulted

in a crisis of production.71 Daviron and Ponte point out that in major consumer countries coffee

trading is booming with development of new coffee chains and speciality coffees. 72 The

success of coffee is because of a creation of a brand value, which is not concerned with the

material conditions of coffee production but with lifestyle imaging and fashion trends. 73

While there is much concern with respect to promoting coffee as a cultured and sustainable

product, the conditions under which coffee is produced are hostile to the producers as it

undermines their ability to gain a sustainable livelihood.74 Additionally, the deregulation and

collapse of the previous coffee agreements has undermined the stability of production and

increased the bargaining power of the retailers and their ability to make profits through

manipulation of the market.75 Hence, due to the power asymmetries in cost and risk-sharing,

profits tend to be concentrated within a few oligopolistically organised companies at the

trading, processing and retail end of the value chain, instead of being shared equitably with

producers in developing countries.76

The increase in profits of major companies during the world food crises underscores the above

point that transnational agribusinesses have profited enormously at the expense of

smallholders. As McMicheal writes:

In 2007, Cargill’s profits rose 36 per cent, ADM’s 67 per cent and Bunge’s 49 per cent,
while in the first quarter of 2008 Cargill’s net earnings rose 86 per cent, ADM’s gross
profit rose 55 per cent, and Bunge’s gross profit rose 189 per cent …. Seed and
agrochemical corporations reported unusual profits for 2007: Monsanto (44 per cent),

71
Jan-Willem Greivink, Lia Josten and Conny Valk, 'The Changing Face Of The Worldwide Food Industry'
(Cap Gemini, Ernst & Young 2007). p. 34
72
Daviron Benoit and Stefano Ponte, Coffee Paradox: Global Markets, Commodity Trade & The Elusive
Promise Of Development (1st edn, Zed Books 2005). p.138
73
Id 67
74
Kojo Sebastian Amanor, 'Global Food Chains, African Smallholders And World Bank Governance' (2009) 9
Journal of Agrarian Change. p.258
75
Philip McMicheal, 'Banking on Agriculture: A Review of the World Development Report 2008' (2009) 9
Journal of Agrarian Change, p 235
76
Kojo Sebastian Amanor, 'Global Food Chains, African Smallholders And World Bank Governance' (2009) 9
Journal of Agrarian Change. p.255
Student Number: 1665086 19 PO984

DuPont (19 per cent) and Syngenta (28 per cent); and the Asian giant Charoen
Pokphand Foods (Thailand) forecast revenue growth of 273 per cent for 2008.77
In summation, the contention advanced in this section is that powerful transnational companies

dominate the agro-value chain, which enables them to pose harsh conditions on the small

holders. Additionally, the transnational companies are also at the liberty to exploit the

smallholders by maximising profits for themselves while the smallholders take credit for all

the risks associated with production.

77
Philip McMicheal, 'Banking on Agriculture: A Review of the World Development Report 2008' (2009) 9
Journal of Agrarian Change, p 241
Student Number: 1665086 20 PO984

CONCLUSION

While the World Bank is an international financial institute which is meant to help the

developing and underdeveloped countries to move up the ladder, the policies of the World

Bank do not indicate its willingness to help the needy. Instead, as highlighted throughout the

essay, the policies of the World Bank are focused to enrich the rich countries and

transnational corporations.

In the first part of the essay, the main highlight was the structural adjustment programs and

the problems associated with it. Particularly, the essay highlights how the neoliberal agenda

of the World Bank is focused mainly to enrich the rich countries.

The second part of the essay shows how the World Bank is funding massive displacement

projects and abuse of human rights in various countries. While drawing the importance of

land, this section highlighted problems faced in three countries. Kenya, Ethiopia and India.

The final contention of the essay was that the World Bank’s ignorance of the problems faced

by the smallholders. Particularly, focus is drawn to how the smallholders while meeting

stringent standards have to share the risks associated with the production and supply of

goods, while the transnational companies largely reaped the profits.

Student Number: 1665086 21 PO984

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