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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] The True Cost of Cheap Food
  • Date: Fri, 05 Mar 2010 11:18:01 -0700


The True Cost of Cheap Food
The globalisation of the food market has made food cheap, but who is
benefiting?
http://www.resurgence.org/magazine/article3035-the-true-cost-of-cheap-food.html

Cheap food causes hunger.

On its face, the statement makes no sense. If food is cheaper it’s more
affordable and more people should be able to get an adequate diet. That is
true for people who buy food, such as those living in cities. But it is quite
obviously not true if you’re the one growing the food. You’re getting less
for your crops, less for your work, less for your family to live on. That is
as true for Vermont dairy farmers as it is for rice farmers in the
Philippines. Dairy farmers today are getting prices for their milk that are
well below their costs of production. They are putting less food on their own
tables. And they are going out of business at an alarming rate. When the
economic dust settles, this will leave us with fewer family farmers producing
the dairy products most of us depend on.

This is the central contradiction of cheap food. Low agricultural prices
cause hunger in the short term among farmers. And they cause food insecurity
in the long term because they reduce both the number of farmers and the money
they have to invest in producing more food.

An estimated 70% of the world’s poor live in rural areas and depend either
directly or indirectly on agriculture. Cheap food has made them hungry and
kept them in poverty. It has also starved the countryside in the developing
world of much-needed agricultural investment. Farmers have nothing to invest
if they are losing money on their crops.

The food crisis has indeed served as a wake-up call for governments and
international agencies responsible for such matters. Among those most shaken
from their policy slumber were officials at the World Bank, which cut the
share of its spending on agricultural development from 30% in 1980 to just 6%
in 2006. But, lo and behold, the World Bank’s World Development Report for
2008 carried the subtitle Agriculture for Development. It was the first time
in twenty-five years that the Bank had focused its signature publication on
agriculture. The renewed attention was welcome, as it included a call to
reinvest in smallholder agriculture, not just large-scale export crops.

The Bank, of course, studiously avoided taking any responsibility for having
promoted the very policies that caused agriculture to be neglected in the
first place: not only the cuts in aid and investment, but the structural
adjustment programmes, imposed as conditions on its loans, which gutted the
capacity of most governments to support domestic agriculture.

These same structural adjustment programmes were part of the campaign to get
governments out of the economy altogether. The argument was that the market
should be allowed to work its magic, to allocate resources more efficiently,
to set prices without government distortions. Trade policy needed to reduce
the government role as well, cutting protective tariffs and quotas and price
supports, following the theory of comparative advantage.

In agriculture, what that meant for developing countries was that if you
couldn’t produce basic grains as efficiently – read ‘cheaply’ – as they could
in the US, or Australia, or Brazil, you just shouldn’t produce basic grains.
It would be cheaper – “more efficient” – to buy them on the international
market. Instead, maybe you should produce, say, flowers for export, or winter
strawberries for the US market. But maybe you shouldn’t produce anything
because maybe your land is bad and you have no roads to get produce to a port
anyway. So maybe there’s nothing the market wants from you. And it doesn’t
need your home-grown grains any more because they are being imported.

That’s really how the theory works. The idea is that a country can import all
the food it needs, and it should do so if it can get that food more cheaply
from abroad than it could by having its own farmers grow it. One obvious
problem with this approach is that if farmers stop growing food, their
families don’t have anything to eat, and if they can’t get jobs, they have no
money to buy food.

Secondly, a country can end up in a situation of food dependency, which
becomes particularly problematic when prices spike and supplies get tight.
That is what we saw recently with what became known as the food crisis.
Countries like the Philippines couldn’t get the rice they needed. They had
stopped producing enough rice to protect themselves from such a market shock,
and they couldn’t get anyone to sell it to them because governments were
concerned about feeding their own people first.

This exposed the dangers of following policies that say you can get all the
cheap food you need out in the international market. A lot of countries have
taken note of that; the Philippines is now on a multi-year national campaign
to restore self-sufficiency in rice production.

One place where the government seems to have kept its ideological blinkers
firmly in place is Mexico. There, in the birthplace of corn, where the crop
was domesticated into one of the world’s most important food crops, there
were tortilla riots in the streets as people couldn’t afford this most basic
staple. In the fifteen years since the North American Free Trade Agreement
took effect, US corn has flooded Mexico at prices half what it cost to
produce in Mexico. Mexico now depends on imports from the US for more than a
third of its corn. Some two million hungry farmers have left agriculture
under the flood of cheap food.

The food crisis also illustrates what some have called the globalisation of
market failure. Globalisation involves opening markets and bringing things
that are produced in different parts of the world into direct competition.
The assumption – and the integrity of the economic theory hinges on such
assumptions – is that those markets work; that prices actually reflect the
real values of what’s being traded. In agriculture, the assumption is that
efficiency equals high yield, which means low price, which reflects the
actual value of what’s produced. When it doesn’t, economists call it a market
failure. Agriculture is rife with market failures. You can see it in the
Mexico-US trade in corn.

Environmental costs are one of the key areas where the market fails to
adequately value both costs and benefits. The US specialises in environmental
costs. Corn is one of the most polluting US crops of all. Excessive water and
chemical use, run-off of fertilisers into waterways, the dead zone at the
mouth of the Mississippi River in the Gulf of Mexico: all are examples of
high environmental costs from US corn production. Producers and traders pay
virtually none of the costs of those damages, and the price of corn when it
goes across the border into Mexico does not reflect these environmental costs.

What happens on the Mexican side? Well, the smaller producers are maintaining
great biodiversity – both wild and in corn varieties – with low-input
systems. These positive contributions go unrewarded by the market. Corn
biodiversity has virtually no value in the global marketplace, yet these corn
seeds are the building block for future varieties of corn: ones we will need
to withstand climate change, deal with pesticide resistance, and so on. The
price of Mexican corn does not reflect these contributions to the common good.

When you globalise trade, you also globalise market failure. You get
under-priced US corn coming into direct competition with under-valued Mexican
corn. Mexican corn loses that competition, but not because it’s less
‘efficient’. A Mexican farmer once said, “We’ve been producing corn in Mexico
for 8,000 years. If we don’t have a comparative advantage in corn, where do
we have a comparative advantage?” He’s right. The problem is that comparative
advantage as defined by the global marketplace doesn’t value the advantage
that Mexican corn offers. And in the deregulated marketplace, the only value
is how cheap something is.

The globalisation of market failure gives us a worsening environment,
increasing poverty among food producers, increasing food dependence, and
hunger. That is why one of the main culprits of the food crisis is our blind
pursuit of cheap food.

Globalisation cheapens everything. The problem is that some things just
shouldn’t be cheapened. The market is very good at establishing the value of
many things but it is not a good substitute for human values. Societies need
to determine their own human values, not let the market do it for them. There
are some essential things, such as our land and the life-sustaining foods it
can produce, that should not be cheapened.





  • [Livingontheland] The True Cost of Cheap Food, Tradingpost, 03/05/2010

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