In the summer of 2008, food prices, which had been rising steeply over the last year, reached historic highs. The prices of wheat and rice doubled; corn prices more than tripled. The rapid rise in food prices in 2007-8 led to social unrest and/or civil conflict in over 40 countries. Meanwhile, during 2008-9, the number of hungry people increased globally, from around 896 million to over 1.023 billion; in 2010, it dropped to 925 million (FAO and WFP 2009). 1 As a result of these developments, attainment of the Millennium Development Goals (MDGs), especially MDG1, to halve poverty by 2015, which was in sight for a number of low-income countries (LICs) in Africa in early 2007, has been severely compromised (World Bank 2010). According to the recent World Bank Food Price Watch (October 2011), global food prices remain high and volatile three years after the food price crisis. The persistent fragility of the global economy requires more vigilance on this front, and also a better understanding of the links between the food and financial crisis. A large body of literature exists on the causes and impacts of the 2008 food crisis (von Braun 2008; World Bank 2008a; Timmer 2009; FAO and WFP 2009; Prakash 2011). However, it is rarely acknowledged that in 2007, "No Street" 2-even before "Main Street"-was already feeling the pain of the impending financial crisis: the food crisis was foreshadowing the financial crisis. For nearly a decade, the developing countries had benefited from favorable monetary and regulatory policies in the West. In 2008, developing countries shared the downside risk of these policies, and therefore should be part of the discussion on resolving the problem. The 2008 food price crisis was an integral part of the financial crisis. In fact, the food price crisis was the second crisis in a chain of events that began in 2007 with the mortgage crisis, and culminated in the worst financial crisis since the Great Depression. Contrary to what was generally believed in 2008, developing countries, particularly food-importing countries, were part of the early wave of the financial crisis via food price increases, and later suffered another wave via the real sector. The events leading up to the food crisis were global and complex in nature. As a result, as the G-20 discusses solutions to the financial crisis, any new framework must include developing countries, especially low-income countries. In addition, developing countries, especially in Africa, must pay close attention to the work of the Financial Stability Board (FSB) and its recommendations on financial market reform, and over-the-counter (OTC) derivatives in particular, because these reforms will have important consequences for their housing, food, fuel, financial markets, and ultimately their growth and poverty reduction objectives.
