Providing international leadership to alleviate global hunger requires our Government to have strong policies in two separate areas:
Responding to short-term food emergencies, such as the international food price spike we saw in 2008, which temporarily put up to 100 million more people at risk.
Attacking the persistent poverty that keeps more than 850 million people hungry even when international food prices are low.
In the first of these areas, the United States Government has done a good job, at least a B+. But in the second area the U.S. has done a poor job over the past 25 years, something close to an F. In 2009 America has a chance to correct this second failing grade by directing more development assistance support to help small farmers in Sub-Saharan Africa and South Asia. Until the productivity of these small farmers goes up, poverty and hunger will not go down.
Market exchange rates can move around a lot, particularly but not only around currency crises. For this reason, they can properly be averaged over several years for international comparisons. However, the Chinese yuan has been fixed at roughly 8.3/dollar since 1994. In my view it is modestly undervalued, as evidenced by the steady growth of China's foreign exchange reserves, the result of central bank market intervention to keep the yuan from appreciating. China has also had a significant trade surplus in recent years. However, it still maintains controls on outflows of domestic capital. And it is about the enter the WTO, following which under the access agreements China must reduce its import barriers much more than its trading partners do. Many Chinese are fearful of withering foreign competition. If these fears prove to be valid and widespread, the yuan might have to depreciate over the next five years, although my guess is the required depreciation will be modest, e.g. 10-15 percent. Moreover, WTO membership may result in more inbound foreign investment, thus mitigating the required depreciation or even eliminating it altogether. The bottom line is this: the market exchange rate provides a much better basis for converting Chinese GDP into dollars than does some artificially constructed ppp rate. Following the pattern of Japan and Korea, the real exchange rate of the rmb might appreciate over time, as China develops, but that process will occur at a modest rate, over decades.