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High prices not all bad
Many of the poorest countries are now suffering in part because the World Bank stopped helping them improve their agriculture techniques in recent decades to encourage their economies to diversify. This prompted many rural poor to abandon farming and move to the cities because they could not compete with cheap imported food, analysts say. Once in the cities, they became dependent on imported food and vulnerable to today’s rising prices.
The World Bank admitted this spring that investment in improved agriculture in the Third World would pay off royally in increased incomes and wealth and announced it will double its agricultural lending in sub-Saharan Africa over the next year, Mr. Butler noted.
“Agriculture has poverty-busting powers beyond straightforward revenue increases,” he said. “Agricultural growth spurs economic growth from the bottom up” because farmers who earn more spend it on services and goods in their communities.
High commodity prices are unquestionably benefiting farmers and the oil and mining sectors in the U.S., making them among the strongest spots in an otherwise weak economy. Booming farm output in particular has contributed to robust exports, as has strong demand for U.S. goods from the developing world, helping to keep the domestic economy afloat in the past year.
But overall, the U.S. is a consumer nation, and high prices have daunted the country’s 300 million consumers. Consumer confidence has fallen to the lowest levels in decades and seems to sink further with each daily increase in gas prices.
“Commodity prices have steadily increased over the past five years, and we believe that because of international demand, they could continue rising for another five,” said S&P;’s Mr. Wyss. “Dealing with that reality will remain a challenge for consumers and producers alike.”
About the Author
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