Food prices are finally coming down after a year of spikes and high volatility. But we must remain vigilant. Prices of certain foods remain very high, and millions of people around the world are still at risk of suffering from malnutrition and hunger.

Let’s get to the numbers first. According to the World Bank’s latestnbsp;Food Price Watch quarterly report released this week, global food prices declined 8 percent between September and December of 2011 due to increasing supplies and continuing uncertainty about the global economy. So in December 2011, the World Bank Food Price Index closed 7 percent below the December 2010 levels, and 14 percent lower than its February peak. Yet, the 2011 index average is 24 percent higher than the year before, and domestic prices of key staples remain dangerously high in many countries.

Take the case of maize. In Mexico, for instance, maize was up 106 percent from December 2010 to December 2011, making tortillas more expensive. The price of wheat in Belarus went up 88 percent, and sorghum increased 57 percent in Burkina Faso. No matter where you look, someone somewhere is paying more money to put food on the table, whether it is Mexican quesadillas or Burkinabe “to” (porridge).

It’s true that high food prices are not bad for everybody. While the poor in urban areas and rural net consumers of food are usually threatened the most, farm producers tend to benefit. Yet when there is so much price volatility--as we experienced last year--uncertainty very often gets in the way of reaping any gains.

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And yet, for many it would look like the food crisis and the economic woes -- both past and present -- are two different events with little in common. In fact, experts will explain to you that a weak economic recovery would be a good thing for people struggling to put food on the table because lower demand would push food prices down. That's true, but the food price crisis and the financial troubles are not two completely separate things. nbsp;The food-price crisis that began in 2008 and the financial crisis of that year were intimately connected. Therefore, financial reform must include derivatives and other financial instruments related to developing countries and their farming sectors.

As Vera Songwe shows in the Economic Premisenbsp;series note Food, Financial Crisis, and Complex Derivatives: A Tale of High Stakes Innovation and Diversification, "developing countries, particularly food-importing ones, were part of the early wave of the financial crisis via food price increases."nbsp;

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Last week, world leaders gathered in Cannes, France to discuss the future of the global economy. Key on the agenda were issues surrounding the European sovereign debt crisis, new capital requirements for banks, commodity and food price volatility, and climate change. Also addressed were the challenges facing the multilateral trading system, and specifically, the Doha Development Agenda.

Presently, the Doha Round of international trade negotiations is in a stalemate, with countries not being able to agree on a variety of measures. The source of the deadlock that has prevailed since 2008 is disagreement among a small number of large players on issues of market access—in particular, the extent of new liberalization commitments, especially for nonagricultural products. With negotiations proceeding for more than a decade, the Doha Round is currently the longest-running round ofnbsp; trade negotiations to date, and the prospects for concluding the talks in the near future are dim.

However, we should not focus solely on market access as a measure of Doha’s success—there are still many benefits that can stem from an otherwise gridlocked round of negotiations. As argued in thenbsp;last week'snbsp;Economic Premise, "The WTO and the Doha Round: Walking on Two Legs," there is much that the Doha Round, and the World Trade Organization (WTO) in particular, can do to improve trade conditions around the world.

According to Bernard Hoekman, director of the World Bank’s International Trade Department, the WTO is not just a marketplace in which countries exchange liberalization commitments.

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Trade, in fact, is a powerful engine for economic growth and opportunity. Over the past three decades, world trade grew twice as fast as global GDP. But even though many countries have benefited greatly from global integration, the gains have been distributed unequally, both between countries and within them. In order to improve the inclusiveness of trade, and to promote its impacts on reducing poverty and inequality, the World Bank Group (WBG) has prepared its first Trade Strategy to guide its work over the next decade. Endorsed this week by the Board of Executive Directors, following a six-month public consultation process last year, the Strategy focuses on four pillars:

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It’s no secret that current account imbalances exist around the world. In many cases, these imbalances may be benign and merely reflect market-driven differences in savings and investment or differences in stages of development. In other cases, persistent global imbalances may be unsustainable and may threaten growth in the long-run. Thus, it’s no surprise that addressing imbalances has been a key focus in recent G-20 discussions. Nor is it surprising that the World Bank and IMF are working with key partners such as the OECD, ILO, WTO, and UNCTAD to provide technical inputs to help coordinate economic policy among the G-20 members.

Despite a brief decline during the global financial crisis, current projections show that imbalances could widen again as the world economy recovers. In the most recent Economic Premise, the World Bank’s research series on good practices and key policy findings, author Zia Qureshi explores the relationship between global imbalances and growth. In his note, “Rebalancing, Growth, and Development in a Multipolar Economy,” Qureshi argues, “In a progressively multipolar world economy, the goals of global growth, rebalancing, and development are increasingly interlinked.” He continues, “Looking ahead, developing countries will likely continue to lead growth in the global economy.”

Indeed, the increasing role of developing countries in fueling global growth is precisely what Marcelo Giugale and I highlight in our recent book, The Day After Tomorrow: A Handbook on the Future of Economic Policy in the Developing World.

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Istanbul is now at the center of the development action. In this splendorous city—where West and East converge—leaders from all over the globe have gotten together this week to assess the development results and challenges of the world’s poorest countries.

One of the goals of the 4th United Nations Conference on Least Developed Countries is to reduce the number of these nations from the current 48 to 24 over the next decade. And one of the things we can do to ensure this isnbsp;to increase trade, and South-South trade in particular.

Some skeptics point out that the overdependence of low income countries on commodities and natural resources has limited their economic prospects. Or that it was precisely through trade and financial integration that the 2008 financial crisis was transmitted to many emerging markets, while poorer and less integrated economies remained isolated from the worst impact of the crisis. But the reality is that in the recovery from the crisis, trade is becoming a powerful engine for economic opportunity. And not in the traditional way. South-South trade is becoming increasingly important.

World Bank data shows that while demand in developed countries remains stagnant, trade among developing nations is growing. Between 1996 and 2006, South-South trade tripled—nearly half of imports to low- and middle-income countries now come from other countries like them. China is leading much of the recovery. While the OECD, a group of the wealthy nations, still accounts for most imports, its share has dropped from 69 percent to 59 percent in only 8 years.

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In the aftermath of the global economic crisis, financial market regulators have proposed a myriad of reforms to better govern the banking sector and to enhance its resilience to future shocks. In fact, in September 2010, a number of measures were agreed upon by the Basel Committee on Banking Supervision, an international forum designed to foster cooperation and develop standards on banking supervisory matters. The cornerstone of these reforms—collectively known as “Basel III”—is a commitment tonbsp;stronger capital and liquidity requirements, which will ensure that banks are better able to absorb losses in the future. Other significant measures include reforms to improve supervision, risk management, governance, transparency, and disclosure in the financial sector.

As I argued in a recent article, “Reviving a Policy Marriage,” such a harmonization of financial supervision and macroeconomic management can be the key to happy cyclical endings in the long-term. However, concerns have been raised that the costs of moving to higher capital ratios may lead banks to raise their interest rates and reduce lending in the short-term, which can pose financing problems for emerging markets that are dependent on global banking flows.

In the most recent edition of the World Bank’s Economic Premise series, authors Swati Ghosh, Naotaka Sugawara, and Juan Zalduendo examine the short-term impacts of the regulatory changes proposed under Basel III on emerging markets.

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In the aftermath of the global economic crisis, financial market regulators have proposed a myriad of reforms to better govern the banking sector and to enhance its resilience to future shocks. In fact, in September 2010, a number of measures were agreed upon by the Basel Committee on Banking Supervision, an international forum designed to foster cooperation and develop standards on banking supervisory matters. The cornerstone of these reforms—collectively known as “Basel III”—is a commitment tonbsp;stronger capital and liquidity requirements, which will ensure that banks are better able to absorb losses in the future. Other significant measures include reforms to improve supervision, risk management, governance, transparency, and disclosure in the financial sector.

As I argued in a recent article, “Reviving a Policy Marriage,” such a harmonization of financial supervision and macroeconomic management can be the key to happy cyclical endings in the long-term. However, concerns have been raised that the costs of moving to higher capital ratios may lead banks to raise their interest rates and reduce lending in the short-term, which can pose financing problems for emerging markets that are dependent on global banking flows.

In the most recent edition of the World Bank’s Economic Premise series, authors Swati Ghosh, Naotaka Sugawara, and Juan Zalduendo examine the short-term impacts of the regulatory changes proposed under Basel III on emerging markets.

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So how do we account for this apparent paradox? Conventional wisdom suggests that growth is sufficient for poverty reduction and social progress, but is this the case in South Asia? Perhaps not, says Ejaz Ghani, Economic Advisor in the World Bankrsquo;s South Asian region and author of ldquo;The South Asian Development Paradox: Can Social Outcomes Keep Pace With Growth?rdquo; the most recent in the Economic Premise research series.

ldquo;The paradox of South Asia is that growth has been instrumental in reducing poverty rates, but poverty rates have not fallen enough to reduce the total number of poor people,rdquo; explains Ghani. And as the total number of poor people expands, he is quick to warn, ldquo;Human development, particularly education and health, has not kept pace with income growth. And growth has not been gender inclusive.rdquo;

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As emphasized by Wolfgang Fengler and Homi Kharas, authors of Delivering Aid Differentlymdash;Lessons from the Field, the recent transformations in the foreign aid environment are threefold. First, strong growth in the developing world has changed the face of aid recipients. Where developing countries were once collectively grouped as the ldquo;Third World,rdquo; previously poor countries and regions are transcending the need for aidmdash;and some are becoming donors themselves. Second, a new troupe of actors is stepping onto the donor stage. In addition to the aid provided by traditional donors, a vast array of international non-governmental organizations, philanthropic foundations, multinational corporations, and faith communities are assuming a larger role than ever. Third, innovation, information, and technology are changing the delivery of aid. In terms of building local capacity to take on todayrsquo;s development challenges, the transfer of knowledge is now becoming as important as financial aid itself.

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How can this change? How can migrant programs increase access to labor markets by the poor and, therefore, have a larger impact on poverty reduction? This is precisely the question that World Bank Senior Economist Manjula Luthria explores in

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There is no evidence that the 2008-09 crisis changed citizensrsquo; trust in the state, in either direction. Well before the crisis, that trust was already in long-term decline among advanced countries, and was stuck at a very low level among developing ones. And, while markets may have lost their shine, governments did not pick up the credit.

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The United Nations Development Programme (UNDP) andnbsp;Stichting Nederlandse Vrijwilligersnbsp;(SNV Netherlands) redefine the concept through this creative new video. Enjoy!

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Please visit the Power of How to learn more on this capacity development initiative.

The World Bank also estimates that 64 million more people globally may be living in extreme poverty by the end of 2010 as an aftermath of the crisis. Although GDP growth is improving globally, it will be a long road to full recovery as developing countries need to anticipate scarcer and more expensive capital.

The World Bank feature story on Crisis, Finance and Growth on the new 2010 edition of Global Economic Prospects (GEP 2010 - released January 21) provides more insight and shows that, while the worst is over, the global economy may indeed be fragile for years to come.

This World Bank feature story about the newly released Global Economic Prospects 2010 publication provides many insights and shows that, while the worst is over, the global situation will be fragile for years to come.

As my World Bank colleague Milan Brahmbhatt and I observed in a recent note, primary commodity exports remain crucial for most developing countries. When one takes a simple average across developing countries (i.e. attributing each country an equal weight) for 2003-07, commodities still show up as accounting for over 60 percent of merchandise exports, with half of the group featuring a commodity export dependence of over 70 percent. Chart 1 shows different degrees of primary commodity dependence across regions.

Source: Brahmbhatt amp; Canuto (2010)

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Social development and progress continue to stay strong in Brazil:

• Brazil tops global ranking in fight against hunger: In a recent report published by anti-poverty NGO ActionAid, Brazil ranks first among developing countries for its progress in the fight against hunger.
  
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• Brazilrsquo;s ldquo;Bolsa Familiardquo; income transfer program raises literacy rates: Newly released data reveals that half a million beneficiaries of Brazilrsquo;s cash transfer program became literate in 2006 and 2007, and the number of people registered for public literacy programs increased by 12 percent.

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With one of the worldrsquo;s largest populations, Brazilrsquo;s government has invested heavily in programs to eliminate poverty and hunger and improve access to services and opportunities in low-income communities. These efforts and their success to date earned Brazilrsquo;s President Lula UNESCOrsquo;s prestigious Feacute;lix Houphoueuml;t-Boigny Peace Prize in July, and Brazilrsquo;s Minister of Social Development the World Future Councilrsquo;s Future Policy Award just a few weeks ago.

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Detailed information can be found below.

Once upon a (not long ago) time, there was a widely established set of blueprints for regimes of monetary and exchange rate policies expected to fit a full range of economies, and to serve as a guide for international monetary cooperation. That world is gone with the global economic crisis. As I explain in my new policy note, The Arrival of Asset Prices in Monetary Policy, a reshuffling of views on monetary and exchange rate policies will probably accompany new financial regulation.

Here are some of the issues I discuss in my notendash;and hope to discuss with you too:

This version is not final andnbsp;may benbsp;subject to further changes. The final WDR 2010 will be out in October.

The financial and economic crises of 2008 had gender-specific impacts and placed a disproportionate burden on women, in particular poor, migrant and minority women. Even though both women and men are affected by job losses, women are often laid off first, as men are traditionally considered to be the main ldquo;breadwinnersrdquo;. Some of the implications of the global financial and economic crisis on women are:

The literature on corruption is large and growing. In this and upcoming Fridays Academy commentsnbsp;we willnbsp;attempt to capture the essence of the arguments and provide some empirical evidence on the impact of corruption on growth and poverty reduction. Corruption, which includes bribery, rent-seeking, extortion, embezzlement, is perceived as a major problem facing many countries.nbsp; Corruption has therefore been variously defined to mean lsquo;the misuse of public office for private gain.rsquo;nbsp;nbsp; This does not mean that there is no corruption in the private sector because this is quite common in (private) financial firms.nbsp; But, corruption is more severe in the public sector than in the private sector.nbsp; One of the first known articles on corruption and its punishment is in Kautilyarsquo;s Arthasastra (dating back to 14 BC).nbsp; Corruption is found to be closely inter-related with a countryrsquo;s social norms, formal and informal rules and culture as well as legal environment in a country.nbsp; No matter what, corruption connotes illegal or improper (moral) behavior and is treated as a lsquo;socially and culturally deviant behavior.rsquo;nbsp; From political science point of view, high level of corruption coincides with political instability and tends to reduce citizenrsquo;s trust and faith in institutions.

Measurement of Corruption

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WDI online database available for subscribers. Selected indicators can also be accessed for free with thenbsp;quick query.