EDITOR'S NOTE: To solve the food crisis, effective policies which end the biases against big commercial farms and genetically modified crops are needed, argues Paul Collier, economics professor and director of Oxford University's Centre for the Study of African Economies. To read the full essay, please visit the Foreign Affairs magazine Web site. A few excerpts:
After many years of stability, world food prices have jumped 83 percent since 2005-prompting warnings of a food crisis throughout much of the world earlier this year. In the United States and Europe, the increase in food prices is already yesterday's news; consumers in the developed world now have more pressing concerns, such as the rising price of energy and the falling price of houses. But in the developing world, a food shock of this magnitude is a major political event. To the typical household in poor countries, food is the equivalent of energy in the United States, and people expect their government to do something when prices rise. And for some consumers in the world's poorest countries, the true anguish of high food prices is only just beginning. If global food prices remain high, the consequences will be grim both ethically and politically.
Politicians and policymakers do, in fact, have it in their power to bring food prices down. But so far, their responses have been less than encouraging: beggar-thy-neighbor restrictions, pressure for yet larger farm subsidies, and a retreat into romanticism.
The real challenge is not the technical difficulty of returning the world to cheap food but the political difficulty of confronting the lobbying interests and illusions on which current policies rest
Supply-side solutions
The root cause of high food prices is the spectacular economic growth of Asia. Asia accounts for half the world's population, and because its people are still poor, they devote much of their budgets to food. As Asian incomes rise, the world demand for food increases.
The two key parameters in shaping demand are income elasticity and price elasticity. The income elasticity of demand for food is generally around 0.5, meaning that if income rises by, say, 20 percent, the demand for food rises by 10 percent. Thus, if the supply of food were fixed, in order to choke off an increase in demand of 10 percent after a 20 percent rise in income, the price of food would need to double.
The unambiguous losers when it comes to high food prices are the urban poor. Being poor, they would inevitably be squeezed by an increase in prices, but by a cruel implication of the laws of necessity, poor people spend a far larger proportion of their budgets on food, typically around a half, in contrast to only around a tenth for high-income groups
At the end of the food chain comes the real crunch: among the urban poor, those most likely to go hungry are children. If young children remain malnourished for more than two years, the consequence is stunted growth-and stunted growth is not merely a physical condition.
In short, global food prices must be brought down, and they must be brought down fast, because their adverse consequences are so persistent. The question is how. There is nothing to be done about the root cause of the crisis-the increasing demand for food. The solution must come from dramatically increasing world food supply. That supply has been growing for decades, more than keeping up with population growth, but it now must be accelerated, with production increasing much more rapidly than it has in recent decades.
Fortunately, policymakers have the power to do all of this: by changing regulation, they can quickly generate an increase in supply; by encouraging organizational changes, they can raise the growth of production in the medium term; and by encouraging innovations in technology, they can sustain this higher growth indefinitely. But currently, each of these steps is blocked by a giant of romantic populism: all three must be confronted and slain.
The first giant of romantic populism
The first giant that must be slain is the middle- and upper-class love affair with peasant agriculture. Peasant life is prized as organic in both its literal and its metaphoric sense.
In its literal sense, organic agricultural production is now a premium product, a luxury brand. In its metaphoric sense, it represents the antithesis of the large, hierarchical, pressured organizations in which the middle classes now work.
Over time, African peasant agriculture has fallen further and further behind the advancing commercial productivity frontier, and based on present trends, the region's food imports are projected to double over the next quarter century. There are partial solutions to such problems through subsidies and credit schemes, but it should be noted that large-scale commercial agriculture simply does not face this particular problem: if output prices rise by more than input prices, production will be expanded.
There are many areas of the world that have good land that could be used far more productively if properly managed by large companies.
A further consequence of a lack of urban dynamism is that jobs are scarce, and so the prospect of mass landlessness evokes political fears: the poor are safer on the land, where they are less able to cause trouble.
Commercial agriculture is not perfect. Global agribusiness is probably overly concentrated, and a sudden switch to an unregulated land market would probably have ugly consequences. But allowing commercial organizations to replace peasant agriculture gradually would raise global food supply in the medium term.
The war on science
The second giant of romantic populism is the European fear of scientific agriculture. This has been manipulated by the agricultural lobby in Europe into yet another form of protectionism: the ban on GM crops.
The GM-crop ban has had three adverse effects. Most obviously, it has retarded productivity growth in European agriculture. GM-crop research takes a very long time to come to fruition, and its core benefit, the permanent reduction in food prices, cannot fully be captured through patents. Hence, there is a strong case for supplementing private research with public money. European governments should be funding this research, but instead research is entirely reliant on the private sector. And since private money for research depends on the prospect of sales, the European ban has also reduced private research.
However, the worst consequence of the European GM-crop ban is that it has terrified African governments into themselves banning GM crops, the only exception being South Africa. They fear that if they chose to grow GM crops, they would be permanently shut out of European markets.
Africa cannot afford this self-denial; it needs all the help it can possibly get from genetic modification
It has become commonplace to say that Africa needs a green revolution. Unfortunately, the reality is that the green revolution in the twentieth century was based on chemical fertilizers, and even when fertilizer was cheap, Africa did not adopt it
It is important to recognize that genetic modification, like commercialization, is not a magic fix for African agriculture: there is no such fix. But without it, the task of keeping Africa's food production abreast of its population growth looks daunting.
The final giant of romantic populism is the American fantasy that the United States can escape dependence on Arab oil by growing its own fuel-making ethanol or other biofuels, largely from corn.
The killer evidence of political capture is the response of the U.S. government to this potential lifeline: it has actually restricted imports of Brazilian ethanol to protect American production. The sane goal of reducing dependence on Arab oil has been sacrificed to the self-serving goal of pumping yet more tax dollars into American agriculture.
Striking a deal
The three policies-expanding large commercial farms, ending the GM-crop ban, and doing away with the U.S. subsidies on ethanol-fit together both economically and politically. Lifting the ethanol subsidies would probably puncture the present ballooning of prices.
The expansion of commercial farms could, over the next decade, raise world output by a further few percentage points. Both measures would buy the time needed for GM crops to deliver on their potential (the time between starting research and the mass application of its results is around 15 years).
One such message concerns the scope for international reciprocity. Although Americans are attracted to homegrown fuel, they are infuriated by the European ban on GM crops. They see the ban for what it is: a standard piece of anti-American protectionism. Europeans, for their part, cling to the illusory comfort of the ban on high-tech crops, but they are infuriated by the American subsidies on ethanol.
The General Agreement on Tariffs and Trade was fundamentally a deal between the United States and Europe that virtually eliminated tariffs on manufactured goods. NATO is a partnership in security. The Organization for Economic Cooperation and Development is a partnership in economic governance.
How might the romantic hostility toward commercial and scientific agriculture be countered politically? The answer is to educate the vast community of concern for the poorest countries on the bitter realities of the food crisis.
The mark of a good politician is the ability to guide citizens away from populism. Unless countered, populism will block the policies needed to address the food crisis. For the citizens of the United States and Europe, the continuation of high food prices will be an inconvenience, but not sufficiently so to slay the three giants on which the current strain of romantic populism rests.
After many years of stability, world food prices have jumped 83 percent since 2005-prompting warnings of a food crisis throughout much of the world earlier this year. In the United States and Europe, the increase in food prices is already yesterday's news; consumers in the developed world now have more pressing concerns, such as the rising price of energy and the falling price of houses. But in the developing world, a food shock of this magnitude is a major political event. To the typical household in poor countries, food is the equivalent of energy in the United States, and people expect their government to do something when prices rise. And for some consumers in the world's poorest countries, the true anguish of high food prices is only just beginning. If global food prices remain high, the consequences will be grim both ethically and politically.
Politicians and policymakers do, in fact, have it in their power to bring food prices down. But so far, their responses have been less than encouraging: beggar-thy-neighbor restrictions, pressure for yet larger farm subsidies, and a retreat into romanticism.
The real challenge is not the technical difficulty of returning the world to cheap food but the political difficulty of confronting the lobbying interests and illusions on which current policies rest
Supply-side solutions
The root cause of high food prices is the spectacular economic growth of Asia. Asia accounts for half the world's population, and because its people are still poor, they devote much of their budgets to food. As Asian incomes rise, the world demand for food increases.
The two key parameters in shaping demand are income elasticity and price elasticity. The income elasticity of demand for food is generally around 0.5, meaning that if income rises by, say, 20 percent, the demand for food rises by 10 percent. Thus, if the supply of food were fixed, in order to choke off an increase in demand of 10 percent after a 20 percent rise in income, the price of food would need to double.
The unambiguous losers when it comes to high food prices are the urban poor. Being poor, they would inevitably be squeezed by an increase in prices, but by a cruel implication of the laws of necessity, poor people spend a far larger proportion of their budgets on food, typically around a half, in contrast to only around a tenth for high-income groups
At the end of the food chain comes the real crunch: among the urban poor, those most likely to go hungry are children. If young children remain malnourished for more than two years, the consequence is stunted growth-and stunted growth is not merely a physical condition.
In short, global food prices must be brought down, and they must be brought down fast, because their adverse consequences are so persistent. The question is how. There is nothing to be done about the root cause of the crisis-the increasing demand for food. The solution must come from dramatically increasing world food supply. That supply has been growing for decades, more than keeping up with population growth, but it now must be accelerated, with production increasing much more rapidly than it has in recent decades.
Fortunately, policymakers have the power to do all of this: by changing regulation, they can quickly generate an increase in supply; by encouraging organizational changes, they can raise the growth of production in the medium term; and by encouraging innovations in technology, they can sustain this higher growth indefinitely. But currently, each of these steps is blocked by a giant of romantic populism: all three must be confronted and slain.
The first giant of romantic populism
The first giant that must be slain is the middle- and upper-class love affair with peasant agriculture. Peasant life is prized as organic in both its literal and its metaphoric sense.
In its literal sense, organic agricultural production is now a premium product, a luxury brand. In its metaphoric sense, it represents the antithesis of the large, hierarchical, pressured organizations in which the middle classes now work.
Over time, African peasant agriculture has fallen further and further behind the advancing commercial productivity frontier, and based on present trends, the region's food imports are projected to double over the next quarter century. There are partial solutions to such problems through subsidies and credit schemes, but it should be noted that large-scale commercial agriculture simply does not face this particular problem: if output prices rise by more than input prices, production will be expanded.
There are many areas of the world that have good land that could be used far more productively if properly managed by large companies.
A further consequence of a lack of urban dynamism is that jobs are scarce, and so the prospect of mass landlessness evokes political fears: the poor are safer on the land, where they are less able to cause trouble.
Commercial agriculture is not perfect. Global agribusiness is probably overly concentrated, and a sudden switch to an unregulated land market would probably have ugly consequences. But allowing commercial organizations to replace peasant agriculture gradually would raise global food supply in the medium term.
The war on science
The second giant of romantic populism is the European fear of scientific agriculture. This has been manipulated by the agricultural lobby in Europe into yet another form of protectionism: the ban on GM crops.
The GM-crop ban has had three adverse effects. Most obviously, it has retarded productivity growth in European agriculture. GM-crop research takes a very long time to come to fruition, and its core benefit, the permanent reduction in food prices, cannot fully be captured through patents. Hence, there is a strong case for supplementing private research with public money. European governments should be funding this research, but instead research is entirely reliant on the private sector. And since private money for research depends on the prospect of sales, the European ban has also reduced private research.
However, the worst consequence of the European GM-crop ban is that it has terrified African governments into themselves banning GM crops, the only exception being South Africa. They fear that if they chose to grow GM crops, they would be permanently shut out of European markets.
Africa cannot afford this self-denial; it needs all the help it can possibly get from genetic modification
It has become commonplace to say that Africa needs a green revolution. Unfortunately, the reality is that the green revolution in the twentieth century was based on chemical fertilizers, and even when fertilizer was cheap, Africa did not adopt it
It is important to recognize that genetic modification, like commercialization, is not a magic fix for African agriculture: there is no such fix. But without it, the task of keeping Africa's food production abreast of its population growth looks daunting.
The final giant of romantic populism is the American fantasy that the United States can escape dependence on Arab oil by growing its own fuel-making ethanol or other biofuels, largely from corn.
The killer evidence of political capture is the response of the U.S. government to this potential lifeline: it has actually restricted imports of Brazilian ethanol to protect American production. The sane goal of reducing dependence on Arab oil has been sacrificed to the self-serving goal of pumping yet more tax dollars into American agriculture.
Striking a deal
The three policies-expanding large commercial farms, ending the GM-crop ban, and doing away with the U.S. subsidies on ethanol-fit together both economically and politically. Lifting the ethanol subsidies would probably puncture the present ballooning of prices.
The expansion of commercial farms could, over the next decade, raise world output by a further few percentage points. Both measures would buy the time needed for GM crops to deliver on their potential (the time between starting research and the mass application of its results is around 15 years).
One such message concerns the scope for international reciprocity. Although Americans are attracted to homegrown fuel, they are infuriated by the European ban on GM crops. They see the ban for what it is: a standard piece of anti-American protectionism. Europeans, for their part, cling to the illusory comfort of the ban on high-tech crops, but they are infuriated by the American subsidies on ethanol.
The General Agreement on Tariffs and Trade was fundamentally a deal between the United States and Europe that virtually eliminated tariffs on manufactured goods. NATO is a partnership in security. The Organization for Economic Cooperation and Development is a partnership in economic governance.
How might the romantic hostility toward commercial and scientific agriculture be countered politically? The answer is to educate the vast community of concern for the poorest countries on the bitter realities of the food crisis.
The mark of a good politician is the ability to guide citizens away from populism. Unless countered, populism will block the policies needed to address the food crisis. For the citizens of the United States and Europe, the continuation of high food prices will be an inconvenience, but not sufficiently so to slay the three giants on which the current strain of romantic populism rests.
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