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Paul Collier - The World Food Crisis, Mark II

Paul Collier - 12th January 2011

The FAO index of world food prices has now surpassed the peak reached in 2008. Then a price spike was punctured by the global economic crisis; this time there will be no such demand reduction. The consequences of a prolonged period of high food prices are alarming. Africa is a substantial net importer of food and many third world cities are largely fed from imports. Food already accounts for around half of the budget of poor families in these cities. High prices equilibrate food markets primarily by squeezing out demand, and these are the people whose demand will be squeezed: they simply cannot protect themselves against a substantial rise in prices. As they go hungry, the adults will turn to political protest, and, if prices remain high for more than two years, their infants will suffer stunting. Stunting is not just a physical condition: it also impairs mental development, and is irreversible.
To date, the policy responses to the new food crisis have been as dysfunctional as they were in 2008. Food exporting countries ban exports: not only does this immediately intensify shortages; it discourages their farmers from investing in the necessary increase of output. Rich food importing countries grab land in an attempt to pre-empt production before it can reach the world market. Such blatant neo-colonialism is surely a recipe for future political tensions.

The causes of the food crisis provide little guidance to its solution. On the demand side, the emerging market economies are prospering, and so their citizens are eating more. On the supply side, increasing climatic volatility periodically hits one or other of the big producing countries: in 2008 it was Australia, now it is Russia. Fortunately, there is plenty of scope for increased supply, and Europe can make an important contribution.

The productivity of peasant agriculture, especially in Africa, has lagged far behind international standards. Farmers and pastoralists are occupying vast tracts of land that could produce much more if better managed. It has long been evident that scale economies are important for the ancillary aspects of agriculture: the logistics of getting crops to market, the finance of inputs, and the technology for innovation all favour size. But recent agricultural research finds that, contrary to the misleading indicator of yield per hectare, there are also scale economies in agricultural production – total factor productivity per hectare increases with farm size. So, larger farms are desirable, either through consolidation among family farms, with the more efficient taking over the land of their neighbours, or, on the least populated land, through full-blown commercial farming. Yet to date, the priorities for rural development promoted by the international development agencies have been hostile to scale. European NGOs and governments have been highly influential in setting these priorities.

While the supply shocks generated by climate volatility might appear to imply that mitigating climate change should be a priority, the effects on climate for the next half-century are already determined by past carbon emissions. Hence, the pertinent climate-related response to the emerging food crisis is to accelerate adaptation. Within African agriculture the most obvious adaptation is to accelerate the pace of innovation in crop varieties. The technology of genetic modification has the potential to be significantly helpful, and it is highly unfortunate that, following Europe’s lead, most African governments have banned it. Europe’s ban was emotional rather than scientific: it is time to recognize that our indulgence in romanticism is liable to contribute to the stunting of poor children. Those uncomfortable with dependence upon American companies should be advocating the application of European public money into GMO research, with discoveries released as public information.

Europe is not alone in dysfunctional romanticism. America has established extravagant subsidies that divert grain from food to bio-fuels. The ostensible rationale has been to reduce dependence upon imported oil, yet the strategy is a sham based and an expensive illusion. It is a sham because America has imposed import restrictions on bio-fuel produced much more efficiently in Brazil: the real motivation is agricultural protectionism. It is an illusion because, even were the entire American grain harvest diverted to fuel, it would contribute less than a tenth of America’s profligate energy consumption. Dependence on oil imports would be far more dramatically addressed were America to rein in its per capita energy consumption to European levels.

Yet the above agenda – commercialization, genetic modification, and withdrawal of the bio-fuels subsidy – faces an insuperable obstacle. The people who are going to suffer most from prolonged high prices of food are not priorities for the people who set these policies.

This article originally appeared in Social Europe Journal.