The food crisis resolved: two paths

EDITORIAL: "The Doha dilemma: Does freer trade help poor people?" The Economist, 31 May 2008, p. 82.

CURRENTS: "Farming's Last Frontier: African Farmers, U.S. Companies Try to Recreate Another Breadbasket," by Roger Thurow, Wall Street Journal, 27 May 2008, p. A14.

Complex editorial basically says that "when countries cut their tariffs on farms goods, their consumers pay lower prices. In contrast, when farm subsidies are slashed, world food prices rise," so the net effect of totally free ag trade would be to raise global prices.

Good or bad?

One World Bank study (forthcoming) says that net food buyers tend to be richer than net food sellers, so the income transfer is good on a global scale. Yes, some countries will become poorer but more will become richer.

So the conclusion:

These subtleties suggest two conclusions. First, the bank, and others, should beware sweeping generalizations about the impact of food prices on the poor. Second, the nature of trade reform matters. Removing rich-country subsidies on staple goods, the focus of much debate in the Doha round, may be less useful in the fight against poverty than cutting tariffs would be. The food-price crisis has not hurt the case for freer farm trade. But it has shown how important it is to get it right.

The other big fix is suggested in the WSJ piece: give African farmers, the most disconnected from technology, the same access to hybrid seeds that unleashed the big boost in yields in America in the 1920s and 1930s.

Big U.S. ag companies have resisted trying to sell to the bottom of the pyramid farmers inside Gappish Africa for a long time, believing them too poor to afford the seeds, so in Ethiopia, for example, only ¼ of the farm land uses hybrids.

This dam needs to be broken. Keeping labor on the farm, where it's poorly employed, means we don't create consumers in Africa for our goods.

This ain't about charity. It's about who makes the most markets happen inside the Gap—our real competition with China.

Comments

[Bill Millan]

Creative CapitalismBy Greg Mankiw

A conversation, sparked by Bill Gates, with some big names contributing. http://creativecapitalismblog.com/

[EDIT: Reading the conversation between Gates and Buffet, it's interesting to see how they miss the point on serving the poor.]

[Andrew in Baghdad]

Tom,

Slashing the subsidies has other effects - right now the corn-ethanol subsidies do things like pollute the air (ethanol-gas mixes are more volatile than gas-only mixes), dramatically increase the costs of raising livestock and poultry, and force other grains prices higher because corn occupies more acreage. Not to mention the high-fructose-corn-syrup + Sugar lobby mafia that keeps third-world sugars (a huge cash crop) out of the US for no real gain to the US consumer.

I'm not sold on the concept that killing subsidies would raise world food prices, especially not if you look at the second and third order effects. Consumers everywhere will benefit and producers, especially those in third-world will as well. Isn't that the goal?

[Michael]

A possible 3rd path: I've read multiple articles recently (one of them linked on here) suggesting that the path of sustainable profit for many parts of the 3rd world lies in better LOW-tech organic methods.

Not incompatible with method 2: as farmers in different parts of the world cope with different problems, the solutions will likely be different as well.