TABLE OF CONTENTS 1.0 1.1 1.1.1 1.1.2 1.1.3 1.1.4 2.0 2.1 2.2 3.0 Introduction........................................................................................................................... Definitions............................................................................................................................. Globalization..................................................................................................................

Food Crisis..................................................................................................................... Fuel Crisis...................................................................................................................... Financial Crisis.............................................................................................................. Impact of Food, Fuel, and Financial Crises on the ordinary person in Uganda.................... Food prices............................................................................................................................. Fluctuating energy and agricultural input prices................................................................... Responses to the Crises, an Urban Perspective.....................................................................

Conclusion.........................................................................................................................................

1.0

Introduction
The effects of the recent financial crisis are only beginning to be felt in many developing countries, but economic activity is declining rapidly with far reaching impacts. This crisis comes at a time when most countries are still struggling with the impacts of rising food and fuel prices. Though global food and fuel prices have softened somewhat in recent months from the highs earlier in 2008, there has been much volatility and they are anticipated to remain high over the medium term. It is estimated that the high food and fuel prices alone have increased the number of extremely poor in the world by at least 100 million ( World Bank, 2008)

While impacts of the crises affect both urban and rural populations, the Ordinary person have been hit hardest in this recent food and fuel crisis, and in previous financial crises, given their heavy reliance on the cash economy, no agricultural production to fall back on, and wage reductions and employment losses at urban based industries. This has resulted in social unrest in a number of cities earlier in 2008 all over the developing world.

The impacts on the ordinary people are felt through a number of channels. With regard to food prices, the high costs directly hit the household consumption budgets of the poor as they are almost all net consumers. Higher fuel prices result in higher production costs for a range of goods and services which use fuel such as manufactured goods, food, and transportation services though this impact is difficult to quantify. The high costs also directly hit the Ordinary person through the extra cost of purchasing fuel. This paper discusses the many ways in which globalization in terms of food, fuel and financial crises is affecting the ordinary person in my country.

1.1 1.1.1

Definitions Globalization Globalization has multiple definitions, according to Bayer Jennifer Marrie (2005, he looks at it as a process of global inter dependence; or as the interconnectedness of nations

According to professor Kajubi, he defines globalization as a process by which one of or few dominant states that is to say Britain, America, France among other) determine most affairs (Example political, social, economic among other) of small and medium member nation states like Uganda, Kenya, Tanzania Rwanda among others in the 3rd world countries of the international community. In summary, the concept globalization refers to any one of the following terms; Colonialism, empire building, regionalism, super power making, hegemony, internalization, selfishness, and conquest.

1.1.2

Food Crisis This refers to the decline in food production where people have little for saving that can culminate into starvation of the population.

1.1.3

Fuel Crisis This refers to the rise in fuel prices.

1.1.4

Financial Crisis This refers to the increase in inflation where the prices of goods rises in relation to the

fall in value of a currency and total Gross Domestic product. There is less money to spend on basic goods and services

2.0

Impact of Food, Fuel, and Financial Crises on the ordinary person in Uganda While the entire world has felt the tremendous effects of the recent financial crisis, the poorest and most vulnerable segments of society have been impacted the most.

2.1

Food prices Local reports of high food prices are consistent with global and national estimates of currently high food prices and food price inflation. Climate conditions and natural disasters were believed to have contributed to current food price inflation rates. The politicisation of food as well as fertilizer and fuel prices needs to be taken into account when interpreting reports of high food prices, although in the present context, food prices are globally at a historical high. Understandings of the causes of high food prices suggested scepticism about the smooth operation of food markets. In Uganda, people note that while food prices rose with rising fuel prices, when fuel prices came down, prices remained high. Some hold government responsible to at least some degree for taking action on high food prices. There, hoarding by traders and failures by the administration to regulate adequately were among those blamed for high local food prices. This scepticism implies demand for governments to intervene and to be seen to be intervening - to bring about the necessary adjustments; the need for a more direct hand in markets is articulated most clearly articulated in Uganda. Furthermore, an ongoing food price crisis and the lingering effects of record-high fuel prices have increased

2.2

Fluctuating energy and agricultural input prices Fuel, energy, transport and agricultural input prices had fluctuated more than food prices. drops in fuel prices in a number of countries may explain why people were less likely to
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prioritise fuel prices as problems than food prices (which remain more uniformly high) Prices for fuel, energy, transport and agricultural inputs are more directly shaped by government policies in a number of countries, as public subsidies were variously cut or increased, in some contexts for political reasons. Dropping fuel prices do not necessarily mean transport becomes become more affordable: Poverty In Uganda the impacts on poverty from the food and fuel crises have been significant. The rise in food prices have impacted on the dietary rations for the ordinary person. The impact on the Ordinary person is particularly acute, increasing the incidence of urban poverty by more than 1.5 percentage points. Many more people are already poor are falling even more deeply into poverty. The analysis indicates that a increase in food prices results in a 5.8% average increase in the poverty rate, using the US$2.50 per day poverty line (which is arguably more appropriate in Uganda). Employment and occupational change The global financial crisis has already hit Indonesia, where job losses are being felt in the export sector. In Uganda, the crisis is not discernibly leading to fewer jobs yet, but new jobs are reported to be on cheaper production lines, in low-quality factories. Other formal sector jobs were also being cut, while people in the informal sector and the self-employed reported a range of impacts. Some wages have risen, but in no case enough to compensate for commodity price rises. Women and young people are diversifying into new activities, often at a considerable cost to their time and status, or at some risk.

Vulnerable Groups Those who are already poor who fall into extreme poverty are particularly vulnerable given that they have no reserves to fall back on if faced with further resource deprivation.

Among this group, children are at highest risk of suffering irreversible damage to their health and education due to malnutrition, and dropping out of school to look for work. Within households, there is gender disparity as, mothers forgo meals and in many countries boys get preference over girls. A final vulnerable group in some countries is the elderly, particularly those living alone, as the financial crisis could jeopardize the security provided by their pensions and they may not have a safety net to fall back on. Job Losses and Reductions in Wages With the financial crisis, growth slowing and exports from developing to developed countries are reported to be declining. This results in a reduction in wages and employment, particularly in urban areas, some pushing into poverty. In places such as Uganda, many of the workers already fall below the poverty line, job losses or reductions in wages could result in higher levels of extreme poverty. The increasing fuel prices pose a danger of joblessness resulting from the financial crisis as a result in more spending on fuel culminating in less for food and saving. When there is a financial crisis, the demand for foreign goods which have helped the local people earn from their sales decreases and causes some closure and job losses in cities.

Remittances and Migration Remittances are a major source of income for many countries and play an important role in poverty reduction. For example in Uganda remittances reduce poverty incidence by four percentage points on average, and five percentage points in urban areas. This means that with a financial crisis there is less for remittance putting the ordinary person in a position where they can not receive money from their people who remit this money Social Impacts Urban areas tend to be more prone to stark inequalities and problems of crime and violence. The high food and fuel prices have resulted in widespread reports of social

unrest in towns as portrayed by the media in Uganda. Reports of riots, property destruction and even death have prompted a range of Government responses. Total household consumption that the poor spend on fuel is approximately 10% overall, and tends to be higher in urban areas. Higher prices may also cause households to move down the ladder of fuels which can have negative consequences such as indoor air pollution with increased use of biomass, and deforestation through collection of food (e.g. in peri-urban areas). The financial crisis affects the Ordinary person through direct effects from a worsening economy and job losses in cities, as well indirect effects from reduced remittances, and the potential for reduced aid from donors. Countries will also face lower commodity prices, and may face a reduction in private investment flows, making weak economies even less able to cope with internal vulnerabilities and development needs such as infrastructure investments. Uganda like other developing countries economies have been hard hit because it among those countries with large current account deficits, and for those that showed signs of overheating and unsustainable rapid credit growth prior to the intensification of the financial crisis. Many experts also emphasize that the volatility and unpredictability of prices make decisions on investments and necessary adjustments difficult. Food prices have been pushed up by a combination of rising fuel costs, bio-fuel production, and unfavorable weather conditions, with trade restrictions adding to the problem. The steady increase in the price of oil in recent years has had a staggering effect on food prices, both in terms of transportation costs and diversion of food crops toward bio-fuel production. High fuel costs add to rising farming costs and falling food supplies. The price of inputs for food production, such as fuel and fertilizers, impacts and undermines the profitability

of many smallholders. This has implications on any attempt to jumpstart production by increasing fertilizer use. In addition to its effect on fertilizer prices, rising oil prices have at least two other significant indirect effects on poor households. Although the share of modern fuels in household budgets is a great deal lower than that of food, households consume fuel indirectly in other goods they use. In Uganda, indirect consumption can be much larger than direct consumption for the rural poor, who consume little commercial energy. Moreover, higher prices may cause households to move down the ladder of fuels, especially from other sources to biomass, with harmful consequences: women and children collecting fuel for longer hours, the risks of increased indoor air pollution, and risks of deforestation in densely populated rural areas. The imposing magnitude of these crises has made it imperative to begin looking at innovative solutions to these recurring crises. It is also crucial to use the current situation as an opportunity to collect data, disseminate information, and facilitate increased participation of poor women and men in securing food, participating in profitable markets, and introducing new crops and techniques for the creation of alternate fuels. To date, policy responses at the national and international levels have not been adequately gender sensitive, despite research that increasingly points to the gender differentials of their impacts. Efforts to help poor women and men during these crises and to prepare them for future crises must include the following: High food prices lead to distress sales of assets by household members, which will aggravate chronic poverty. In the short run, households smooth their consumption by increasing their labor supply and drawing down their savings. However, when families have to disinvest in their livelihoodseating their seed grain, selling their animalsthey will be challenged to rebuild their earning capacities, increasing the risk of chronic poverty. With inadequate credit markets and high interest rates from both formal and informal sources, the chances of quick recovery are limited and the chances of falling into indebtedness and poverty are high. A number of studies highlight that womens or

female-headed households assets are often more vulnerable to distress sales than those of men.

As the global financial crisis begins to strike developing countries, the evidence in this report is that the food and fuel crises are by no means over. Compound, complex crises are interacting with each other, making it difficult to disentangle their impacts on peoples lives.

While local accounts of how the crises are being experienced cannot tell us all we need to know, they offer vital insights into how the food, fuel and financial crises are unfolding in poor developing countries. The situation is different everywhere, but everywhere there are signs of strain. Many people are trying hard to adapt. And there is support from within communities, as well as some valued government and faith-based support. But many report not being able to make ends meet: managing food, health and educational needs has been a struggle, and not only for the very poorest. For some, particularly children, the impacts may be permanent: children who drop out of school to earn or because their parents cannot afford fees, books, or breakfast, are unlikely to re-enrol once food prices decline. And the ties that bind communities together also show signs of unravelling: people get together to save or celebrate less than they used to, and while there remains plenty of neighbourly support, some believe this is declining. In all five countries, people believe crime rates have risen. In the worst-hit communities, there are reports that children and the elderly are being abandoned by people no longer able to cope. The situation is serious, but much can be done to help people protect against the worst of the crises. Some government programmes are working well, but many cover too few people with too little support to make a difference. Others are not reaching the poorest. And much assistance including from religious institutions and NGOs is unpredictable or even declining, at this time of acute insecurity and hardship. The accounts of crisis given here highlight processes that affect current wellbeing, but

which may also have enduring consequences beyond the period of the present crisis. People have been cutting back on the quality and quantities of food, struggling to pay education and health costs, borrowing and selling assets. In addition, this study flags a number of new issues that merit more sustained attention for policy, including reported rises in: the abandonment of children and the elderly; micro-credit default; crime, particularly criminalisation of youth; and risky sexual behaviour.

Global and national data support the local view that prices have not dropped enough, nor have they dropped everywhere. What has been happening in global food markets has been compounded and complicated in some countries by national political crises and uncertain transitions. Although climate change was not a focus of the study, adverse climate conditions, including long-term drought, regular floods and cyclones, emerged as a significant factor shaping these communities vulnerability to crisis and their capacities to respond (see picture below). Global and national crises are complicated by the more localised and regular crises of ill-health and death, asset loss as well as the everyday struggle of the poor to get by and get ahead. In-depth analyses of the root causes of these crises, including the extent to which gender inequality prevents adequate responses to the crises. Rural infrastructure to connect small farmers to markets; such ventures should be planned, designed, and implemented using participatory and inclusive approaches. Cost-benefit analyses and understanding of trade-offs (e.g., food quality versus quantity; biofuels versus food crops); and these analyses should be disaggregated by gender and income class. 3.0 Responses to the Crises, an Urban Perspective
The approach to the crises adopted by the World Bank has been to substantially increase financial support for developing countries that will protect the poorest and most

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vulnerable from harm, support countries facing big budget short-falls, and help sustain long-term investments upon which recovery and long-term development can be built. These include productive investments in infrastructure, health and education, and in social safety nets for the most vulnerable. Many countries have responded to high food and fuel prices through tax reductions to offset higher prices and increased spending on subsidies and income support. These programs, however, are regressive, expensive, and very difficult to remove once in place.

Principles for designing policies and programs for addressing shocks do not differ for the rural and ordinary person. Public investment in infrastructure has shown to have long term economic benefits and generates employment. Investments in health and education build human capital, and will mitigate the potential long term negative consequences of malnutrition and school drop out. Well-designed, targeted safety nets can cushion the impacts on the poor, enable households to maintain a basic standard of living, and curtail social unrest. Finally, there is much evidence that urban agriculture can also help to mitigate the impacts of crises through the production of additional income and food for households. Implementing such strategies in urban areas will require a concerted effort and good collaboration between national and local Governments. Maintaining Investments in Cities Cities rely on infrastructure for economic growth and poverty reduction, and on a welltrained, healthy workforce. Within this context, targeting investments for the poor during times of crisis, and using labor intensive approaches as is done in workfare programs can help to mitigate impacts in the short run as well as reduce risks in the future. Programs such as slum upgrading which invest in providing water and sanitation, electricity and roads to the Ordinary person, and investments in basic education, health and nutrition in low income urban areas, have long term benefits for the poor.

Social Safety Nets for the Ordinary person The type of safety nets available in urban areas varies substantially from country to country and even city to city, with some operated through national level programs, and

others operated more locally. While it is difficult to quantify whether there is an urban or rural bias in these programs, in many places the proportion of poor is often higher in rural areas and thus programs are oriented accordingly. It can also be difficult to reach the Ordinary person as they often live in informal settlements and tend to be more transient than rural populations. Among the more popular safety net programs are Conditional Cash Transfers (CCTs), workfare programs, fee waivers, and targeted cash or in-kind transfer schemes (e.g. food distribution, food stamps, or vouchers) all of which could be scaled up in urban areas during times of crisis.It is naturally easier to scale up an existing safety net program than to design a new one, but some countries have been able to use a crisis as an opportunity to eliminate ineffective programs and replace them with better designed programs.

Conditional cash transfers are particular relevant in times of financial crisis when poor families may deem it necessary to withdraw children from school to seek employment. By providing some incentive to keep children in school and provide a transfer to households, there is substantial evidence that the CCT approach results in short term as well as long term benefits from the additional schooling and health care. CCT program design in urban areas must face challenges different from rural areas in targeting due to more heterogeneous neighborhoods, informality of jobs and housing, and feasibility of using banks for transfers. Scaling up Urban Agriculture Urban Agriculture can be a very important source of additional income and food for households. It can reduce consumption of more expensive imported food products, reduce transport costs, provide products that are highly perishable, generate income and employment, and have important impacts on environmental sustainability. It is estimated that some 15% of the worlds food is produced in urban areas and this could be scaled up even further, with huge potential benefits for the poor. Household responses

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Food consumption

The impact of the food crisis has been felt most directly in terms of household food consumption; this was also the issue on which people in all communities spoke at greatest length and with greatest concern. Looked at across all ten communities in the five countries, the hierarchy of impacts from least to most severe was as follows: Spending a larger share of income on food; this typically meant cutting down on other expenses, such as transport, communications, clothes, social activity. In Jakarta, people reported that they now only use prepaid mobile phone credit to send SMS or text messages in order to cut expenditure.

Conclusion The local people are particularly vulnerable in times of crisis due to their heavy reliance on the cash economy, job losses and wage reductions in urban based industries, and no agricultural production to fall back on. Prioritizing investments in cities can help to mitigate impacts in the short run and reduce risks in the future. Well targeted safety nets, workfare programs, and urban agriculture can play an important role in cushioning the impacts for the local people during difficult times.

References World Bank, 2008, Global Financial Crisis and Implications for Developing Countries, G-20 Finance Ministers Meeting. Simler, K., 2008, Assessing the poverty and distributional impacts of higher fuel prices, draft, mimeo. World Bank, 2008, Global Financial Crisis: Responding Today, Securing Tomorrow, Background Paper for the G-20 Finance Ministers Meeting. Dessus, S., Herrera, S. and R. de Hoyos, The Impact of Food Inflation on Urban Poverty and Its Monetary Cost: Some Back-of-the-Envelope Calculations, forthcoming, Ag. Ec.The micro data are part of the Global Income Distribution Dynamics (GIDD) model. The welfare indicator is expressed in 2005 PPP dollars for consistency with the US$1.25 and $2.5 dollars per day poverty lines developed by Ravallion and Chen (2008). World Bank, Rising Food and Fuel Prices: Addressing the Risks to Future Generations October, 2008, Human Development Network, Poverty Reduction and Economic Management Network.

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