the food crisis explained

The Financial Times features some of the best economists and political scientists in the world, and recently, it's been the universally-celebrated Paul Collier talking sense in their Economists' forum. One of my first posts lauded Collier's terrific analysis of global poverty and general strife in his book, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It." (Link to Amazon).

Collier is back once again to explain the why there is a food crisis, what stands in the way of an adequate food supply, and what should be done about it. (Hat tip: Alex T at MR)


First, Collier explains the why:

"Why have food prices rocketed? Paradoxically, this squeeze on the poorest has come about as a result of the success of globalization in reducing world poverty. As China develops, helped by its massive exports to our markets, millions of Chinese households have started to eat better. Better means not just more food but more meat, the new luxury. But to produce a kilo of meat takes six kilos of grain. Livestock reared for meat to be consumed in Asia are now eating the grain that would previously have been eaten by the African poor."

Next up, a realistic solution:

"The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market."

But, of course, there is a catch:

"Unfortunately, large-scale commercial agriculture is unromantic ... We laud the production style of the peasant: environmentally sustainable and human in scale."

Collier notes that we grew out of this perception of manufacturing (who dreams of owning a small manufacturing "ranch"?), and have enjoyed the manufacturing wealth since.

Yet this romanticism has taken root in agricultural development:

"In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing productivity frontier of the globalized commercial model."

In case you thought it couldn't get worse, Africa is the victim of more than one breed of romanticism:

"Our longstanding agricultural romanticism has been compounded by our new-found environmental romanticism. In the United States fears of climate change have been manipulated by shrewd interests to produce grotesquely inefficient subsidies for bio-fuel. Around a third of American grain production has rapidly been diverted into energy production."

Collier also reserves some blame for the European Commission, which has its own bio-fuels policy, albeit less "effective" and thereby less damaging. More damning is the EU's ban on the "production and import of genetically modified crops has obviously retarded productivity growth in European agriculture: again, the best that can be said of it is that we are rich enough to afford such folly. But Europe is a major agricultural producer, so the cumulative consequence of this reduction in the growth of productivity has most surely rebounded onto world food markets. Further, and most cruelly, as an unintended side-effect the ban has terrified African governments into themselves banning genetic modification in case by growing modified crops they would permanently be shut out of selling to European markets."

But wait, there is one more nail in the coffin for food supply. Export-restrictions in grain-exporting countries, a product of "the internal tussles between the interests of poor consumers and poor producers, the interests of consumers have prevailed. Governments in grain-exporting countries have swung prices in favour of their consumers and against their farmers by banning exports."

The effect is that grain-exporting countries have lower prices, but less grain is produced than would otherwise be produced, reducing the overall food supply, and greatly raising the prices for grain-importing countries.

What's the main takeaway?

"Unfortunately, trade in agriculture has been the main economic activity to have resisted being subject to global rules. We need stronger and fairer globalization, not less of it."

I like this piece for a few reasons -- it's comprehensive, it's straightforward -- but I especially take note of Collier's condemnation of romanticism. It's similar to what I've been trying to get at in the "moralizing" series of posts, and it demonstrates the shallowness of thinking on the left as well as the right. I'm reading Jane Jacobs' "Death and Life of Great American Cities" right now, and she strikes me a similar thinker, one who is able to see the err of well-intentioned, but entirely unintellectual pursuits.