Skip to Content.
Sympa Menu

livingontheland - [Livingontheland] The end of cheap food

livingontheland@lists.ibiblio.org

Subject: Healthy soil and sustainable growing

List archive

Chronological Thread  
  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] The end of cheap food
  • Date: Wed, 12 Mar 2008 10:47:20 -0600

The end of cheap food

>From The Economist print edition
Rising food prices are a threat to many; they also present the world with an
enormous opportunity
http://www.economist.com/opinion/displaystory.cfm?story_id=10252015
Dec 6th 2007

FOR as long as most people can remember, food has been getting cheaper and
farming has been in decline. In 1974-2005 food prices on world markets fell
by three-quarters in real terms. Food today is so cheap that the West is
battling gluttony even as it scrapes piles of half-eaten leftovers into the
bin.

That is why this year's price rise has been so extraordinary. Since the
spring, wheat prices have doubled and almost every crop under the sun—maize,
milk, oilseeds, you name it—is at or near a peak in nominal terms. The
Economist's food-price index is higher today than at any time since it was
created in 1845 (see chart). Even in real terms, prices have jumped by 75%
since 2005. No doubt farmers will meet higher prices with investment and more
production, but dearer food is likely to persist for years (see article).
That is because “agflation” is underpinned by long-running changes in diet
that accompany the growing wealth of emerging economies—the Chinese consumer
who ate 20kg (44lb) of meat in 1985 will scoff over 50kg of the stuff this
year. That in turn pushes up demand for grain: it takes 8kg of grain to
produce one of beef.

But the rise in prices is also the self-inflicted result of America's
reckless ethanol subsidies. This year biofuels will take a third of America's
(record) maize harvest. That affects food markets directly: fill up an SUV's
fuel tank with ethanol and you have used enough maize to feed a person for a
year. And it affects them indirectly, as farmers switch to maize from other
crops. The 30m tonnes of extra maize going to ethanol this year amounts to
half the fall in the world's overall grain stocks.

Dearer food has the capacity to do enormous good and enormous harm. It will
hurt urban consumers, especially in poor countries, by increasing the price
of what is already the most expensive item in their household budgets. It
will benefit farmers and agricultural communities by increasing the rewards
of their labour; in many poor rural places it will boost the most important
source of jobs and economic growth.

Although the cost of food is determined by fundamental patterns of demand and
supply, the balance between good and ill also depends in part on governments.
If politicians do nothing, or the wrong things, the world faces more misery,
especially among the urban poor. If they get policy right, they can help
increase the wealth of the poorest nations, aid the rural poor, rescue
farming from subsidies and neglect—and minimise the harm to the slum-dwellers
and landless labourers. So far, the auguries look gloomy.
In the trough

That, at least, is the lesson of half a century of food policy. Whatever the
supposed threat—the lack of food security, rural poverty, environmental
stewardship—the world seems to have only one solution: government
intervention. Most of the subsidies and trade barriers have come at a huge
cost. The trillions of dollars spent supporting farmers in rich countries
have led to higher taxes, worse food, intensively farmed monocultures,
overproduction and world prices that wreck the lives of poor farmers in the
emerging markets. And for what? Despite the help, plenty of Western farmers
have been beset by poverty. Increasing productivity means you need fewer
farmers, which steadily drives the least efficient off the land. Even a vast
subsidy cannot reverse that.

With agflation, policy has reached a new level of self-parody. Take America's
supposedly verdant ethanol subsidies. It is not just that they are supporting
a relatively dirty version of ethanol (far better to import Brazil's
sugar-based liquor); they are also offsetting older grain subsidies that
lowered prices by encouraging overproduction. Intervention multiplies like
lies. Now countries such as Russia and Venezuela have imposed price
controls—an aid to consumers—to offset America's aid to ethanol producers.
Meanwhile, high grain prices are persuading people to clear forests to plant
more maize.

Dearer food is a chance to break this dizzying cycle. Higher market prices
make it possible to reduce subsidies without hurting incomes. A farm bill is
now going through America's Congress. The European Union has promised a
root-and-branch review (not yet reform) of its farm-support scheme. The
reforms of the past few decades have, in fact, grappled with the rich world's
farm programmes—but only timidly. Now comes the chance for politicians to
show that they are serious when they say they want to put agriculture right.

Cutting rich-world subsidies and trade barriers would help taxpayers; it
could revive the stalled Doha round of world trade talks, boosting the world
economy; and, most important, it would directly help many of the world's
poor. In terms of economic policy, it is hard to think of a greater good.
Where government help is really needed

Three-quarters of the world's poor live in rural areas. The depressed world
prices created by farm policies over the past few decades have had a
devastating effect. There has been a long-term fall in investment in farming
and the things that sustain it, such as irrigation. The share of public
spending going to agriculture in developing countries has fallen by half
since 1980. Poor countries that used to export food now import it.

Reducing subsidies in the West would help reverse this. The World Bank
reckons that if you free up agricultural trade, the prices of things poor
countries specialise in (like cotton) would rise and developing countries
would capture the gains by increasing exports. And because farming accounts
for two-thirds of jobs in the poorest countries, it is the most important
contributor to the early stages of economic growth. According to the World
Bank, the really poor get three times as much extra income from an increase
in farm productivity as from the same gain in industry or services. In the
long term, thriving farms and open markets provide a secure food supply.

However, there is an obvious catch—and one that justifies government help.
High prices have a mixed impact on poverty: they hurt anyone who loses more
from dear food than he gains from a higher income. And that means over a
billion urban consumers (and some landless labourers), many of whom are
politically influential in poor countries. Given the speed of this year's
food-price rises, governments in emerging markets have no alternative but to
try to soften the blow.

Where they can, these governments should subsidise the incomes of the poor,
rather than food itself, because that minimises price distortions. Where food
subsidies are unavoidable, they should be temporary and targeted on the poor.
So far, most government interventions in the poor world have failed these
tests: politicians who seem to think cheap food part of the natural order of
things have slapped on price controls and export restraints, which hurt
farmers and will almost certainly fail.

Over the past few years, a sense has grown that the rich are hogging the
world's wealth. In poor countries, widening income inequality takes the form
of a gap between city and country: incomes have been rising faster for urban
dwellers than for rural ones. If handled properly, dearer food is a
once-in-a-generation chance to narrow income disparities and to wean rich
farmers from subsidies and help poor ones. The ultimate reward, though, is
not merely theirs: it is to make the world richer and fairer.





Archive powered by MHonArc 2.6.24.

Top of Page