It is reasonably clear that the world is in the grip of a prolonged and aggressive food crisis. Since 2005, there have already been food riots in more than 30 different countries. Paul Collier, a Professor of Economics at Oxford, claims that the price of food has jumped by 83% in that time – a price rise that the rich world has largely absorbed, but which has had horrific ramifications on the inhabitants of less developed nations.
While this is a severe problem, it is in fact less complex than many problems of similar scale; however, it is beset by misunderstanding. Effective solutions to world hunger exist, but they are impeded by a mixture of ignorance, romanticism, populism and cynicism. Tackling the issue requires a candid look at the effects of food prices, and an understanding of the mechanisms that can be used to control them.
Firstly, it is necessary to look beyond root causes. There is a general ignorance surrounding the question of how food prices have risen so high, so quickly, but the answer is actually relatively straightforward. This drive in food prices was caused by the rapid pace of economic develolment in Asia, which houses over half of the worlds population. Although still poor (the average resident of Asia devotes over half of their budget to food), this population is rapidly getting richer, and thus their demand for food is increasing. Not only that, but it is becoming more intensive; grain-based carbohydrate diets are being upgraded to protein-rich habits, and as it takes six kilograms of grain to produce one kilogram of beef, this is having a significant effect on demand. The solution to the problem of food prices can thus be effectively uncoupled from its cause; short of making Asia poor and malnutriated again, food prices cannot be controlled by reversing the stimulus that caused them to rise.
Secondly, we need to look at who actually suffers the most from high food prices. Causes such as Fair Trade and Red have become popular in the rich world over the last decade, mostly as a result of the famines that struck Africa in the later part of the twentieth century and thus off of the back of movements such as LiveAid. However, they operate on an underlying assumption that is broadly incorrect: the Africans in agrarian communities are the real losers of the world food lottery. Admittedly, African farmers tend to do rather less well out of high food prices than their Western counterparts, mostly because the markets that they serve are unresponsive to global food prices. However, farmers do have two rather large advantages when it comes to surviving food crises. Firstly, they are growing their own crops. Regardless of what happens to the food market, they can always ensure that they themselves have something to eat. And secondly, they have the World Food Program, a buyer of last resort in famine years who can prevent a failed crop from being a catastrophe. Now, the World Food Program is not a prefect institution. Its budget is set in dollars, not bushels, so it is less capable of responding when food prices are high (as they are now) – ironically making it much less effective during times of global food shortage. Farmers are still vulnerable to famine, drought, and crop failure. But they are still comparatively well off; provided that they manage to eke out a crop, the current food market actually works in their favour.
Comparatively well off, that is, to the urban poor, who are the real losers when it comes to high global food prices. In the cities of the developing world (typically ports), the slum-dwellers and underpriviliged must spend on food a proportion of their income five times greater than that of their wealthier neighbours. Because they have no recorse to their own subsistence farming, they are accutely vulnerable to price shocks. Ironically, it is these urban workers who have the greatest economic impact; keeping them fed will have a far greater impact on the relative wealth of nations than proping even agrarian sectors. This is the problem that I’ve always had with Fair Trade; it seems to me to be a vehicle for exporting western agrarian romanticism, when what the developing world needs is a more pragmatic look at what is required, and accordingly targetted stimulus to make the most difference.
Sadly, the victim’s victim in this case is the children, who are by far the most likely to go hungry. If a child remains malnourished for more than two years, the concequence is almost always stunted growth – an uncurable lifetime of physical and mental disability, and potentially a genetic factor for the next generation. The food market has been tight for three years already; a short-term solution is clearly needed.
Solutions are possible – no, it would be better to say that solutions are already potentially present. The world already produces more food than it requires. Supply needs to be boosted, as the population will keep growing, but the economic mechanisms that control the matching of supply and demand for food need to be reformed. The impediments are threefold: public romanticism, political populism and economic cynicism.
I’ve already touched on western agrarian romanticism, but to make my point more explicit here: the West needs to end its love affair with farmers, both its own and those in the third world. The “buy locally” movement in Europe and America is commendable, but Britain, America, France and countries like it all produce radically more food than it could ever consume, largely thanks to government subsidies and farmers union pressure on quotas, each of which have broad appeal amongst the population at large. This, however, is special treatment, and it is distortative. If these policies were being put in place for houses instead of grain, then the outcome would be ruinous. Subsidising grain is more acceptable than subsidising houses, for two reasons; firstly, because of the rural idyll; and secondly, because subsidised surplus grain can always be dumped – unsubsidised surplus grain, of course, would have to be sold, overseas if need be, thus easing the pressure on global prices. Farming in the west is not a competitive business; it is not exposed to normal market forces. It needs to be; small farmers are inefficient, while larger organisations, with better investment and more robust defenses against the vagiaries of the market, will help to lower prices at home and thus around the world. There will always be demand for local produce, free-range chickens and organic vegetables; and thus, there will almost certainly always be supply. However, small-scale farming in the rich world is an increasingly harmful anachronism.
Public fetishisation of farmers leads to political populism – always a baleful influence but especially malign in the farming sector. From corn subsidies for ethanol in the US to the Common Agricultural Policy in Europe, governments throughout the rich world are responsible for some deeply flawed policy-making in the name of fuelling agrarian romanticism. Worse than that is the pandering that is offered to those afraid of agricultural science. Some 300m acres of the world’s crop area, a full 10%, house genetically modified crops. There is still no evidence of any kind to suggest that it may have any negative effects at all, a decade after the science was globally introduced. But still, almost none of that land is in Europe or Africa. Needless to say, this has had a profound effect on supply, in the continent that would benefit from increased supply the most.
Economic cynicism is fuelled by those bodies that benefit the most from the status quo – governments that put export caps on domestic grain, for example, forcing crops to be dumped in order to keep international prices high, or lobbying groups that keep markets restricted and subsidies in place. It is this behaviour that has led to Brazilian sugar ethanol – far more efficient than corn ethanol and significantly cheaper, and greener, to produce – being restricted for import into the US. This, however, is not an area that is likely to change. Economic cynicism will always exist and is essentially uncombatable. It can, however, be worked around.
Paul Collier suggests three immediate policy changes that would reverse the trend in food prices quickly: expand large commercial farms, end the ban on GM crops and do away with US subsidies on ethanol. The end of ethanol subsidy would hopefully sharply reduce the rate at which crop prices rise, due to the influx of American corn that would be swiftly re-inserted into the global market. The expansion of farms and the wider imposition of GM crops would increase production over the course of the next decade to ensure that prices stay controllable. I would add three more: ending the CAP in Europe and liberalising trade agreements between Europe and Africa, allowing more food to come into Africa from outside but not so artificially priced that it destroys the local markets, and reforming the World Food Program, allowing it to buy and sell food with greater and more targetted efficiency.
Politically, all of these propositions are difficult, especially in these times of economic crisis; old industries, such as farming and manufacture, gain significant lustre when banks and house-prices start to take a tumble. However, the arguments for all of them are rational and sound, while the arguments against them tend to be emotional and easily countered. I await a politican with the principle to do the necessary – John McCain looked useful on ethanol subsidies, but I severely doubt that Barack Obama will step to the plate. If the mark of a good politician is the ability to guide citizens away from populism, then I hope that a good politican emerges soon, because there are a few romantic illusions that urgently need shattering.
