Thursday, October 14, 2010

Rich people are not starving – can markets help?

It is the World Hunger Day 16 October
Who is starving? It is perhaps quite obvious but is has to be said: Rich people don’t starve. Also, I believe most people have also understood that there is, globally, enough food in the world, it is just badly distributed, and also a lot of food is going to waste, in high-income countries mainly at the retail and consumption stages, in low income countries more often in the field and in immediate post harvesting. Many countries where people are hungry are also exporting food.

Far too often hunger and malnutrition are discussed as a problem to be solved by certain agricultural technologies, such as chemical fertilizers of GMOs. India is a poster child of the so called Green Revolution, a package of modern seeds, fertilizers and pesticides, which was introduced already 50 years ago. The Indian government is still subsidizing chemical fertilizers in the tune of US$ 20 billion annually. Nevertheless, India is the country in the world with most hungry people, 237 million people, that is almost as many hungry as in the whole of sub-Saharan Africa (239 million). In light of that, I can’t understand why some people are promoting more of the same recipe as a solution for the world’s hungry.

Despite a virtual population explosion, thanks to the impressive productivity gains by the world’s farmers food prices have decreased dramatically over the last sixty years. We are speaking about a fall in prices of about 60 percent for staple foods. But the number of hungry has been fairly constant. This shows two things. That increased total production of food is not a recipe for food security and that lower food prices is not the way out of hunger. Low food prices might be good for poor people in urban areas, and angry, hungry young men in cities are prone to rioting and uprising. But most of the hungry people are, perhaps paradoxically, in the country-side and many of them are small farmers.

For a Swede the idea that a farmer is starving may sound strange, but actually we don’t have to go more than 150 years back in our own history to find a similar situation. Small tenant farmers, torpare, were often not able to produce the food their, often large, families needed. In many cases, they (man and wife) had to work for a landlord or someone else to earn money for paying the rent of the farm, some clothes, tools etc. When they should have attended to their own crops at the peak of the year’s sowing and harvesting, that was also when their labor was in most demand. Their older children had to look for jobs instead of helping out on the farm. The farm itself was small and they lacked good tools to make their work more efficient. To pay what they owe they often had to sell of their meager crop at harvest when prices were low and buy in the lean period before next years crop. Because they lived in bad conditions they got more sick, but couldn’t afford proper medical care and in the end they couldn’t work so well.

This is a description of the situation of many of the poor today as well. In the very short term such household will benefit from lower food prices because they are net buyers. But this should not lead us into thinking that low food prices are good for them. By and large, low prices on agriculture products are bad news for agriculture. It means that farmers have to produce more to afford other necessities of life, pay their rent, their school fees, their medicines etc. And it is bad for the whole rural economy. Even for landless farm workers it is better that the farmers, their employers, make money than that they lose money. One can easily see in periods of high prices for a particular crop, e.g. coffee, how a whole area flourish.

But there are differences in effects. If the main money earner is a plantation kind of crop sold for export, wealth spreads less in rural areas. And even less if the main money earner is produced with the help of a lot of inputs that have to be bought from other areas, or other countries. That is one of many reasons for why proponents of sustainable agriculture are skeptical about increasing yields by the means of purchased inputs. Another reason is that it dramatically increases the risk of the farmer. If the crop fails, or if the world market price collapses the farmer sits with a hefty bill to be paid, but no income, which will throw him or her into absolute despair and poverty. The same increase of income gained by getting a higher price or by getting a good yield with use of local, free or low-cost inputs, is a lot safer and keeps money in rural economy. That is one of the reasons behind the promotion of organic agriculture for small-holders.

I had the pleasure to work with a Sida-financed project for organic farming in Uganda and Tanzania, the Export Promotion of Organic Products from Africa, EPOPA2, program. In the end of the project in 2008, it had 131,000 farms (corresponding to around 1 million people) engaged in 34 projects. The annual export sales value was around US$ 31 million, of which around half reached the farmers. We commissioned several studies that showed beyond doubt that the farm households in the project experienced improved food security. The main effect by which they improved their food security was by increased income. There are other schemes aiming at similar things, such as Rainforest Alliance, Fair Trade etc., but organic is without competition the most important scheme with a global market of around US$ 55 billion and constantly growing, even through the recession.

There are some complications with large scale international trade in food. One is that there is a large scale movement of nutrients from the exporting country to the importing country. Soils are mined and depleted in exporting countries and importing countries get an excess of nutrients, causing environmental problem. This is not sustainable. Another troubling aspect of free international trade is the extreme tilted competition. Farmers in developing countries are supposed to compete with farmers in high income countries which are heavily subsidized, in the range of US$ 250 billion annually (OECD PSE rate). And even worse, the productivity per worker in OECD countries is in the range of US$ 25,000 dollars, while in low income countries it is just a few hundred dollars. Or expressed in other terms: a farmer in low income countries produce less than a ton of grain from one year of toil while a farmer or farm worker in OECD countries produce 500 up to 2000 tons. Is it really realistic for them to compete in a free global market? In my view trade from low income, tropical countries, shall focus on crops with high-energy, low-nutrient content, such as sugar, cotton and oil or crops, in this way what is exported is basically carbon, packaged solar energy, of which the tropics is abundant. The other option is high-value per kg crops such as spices, coffee and cocoa. Many of these crops are not easily produced in high income countries, which is the reason for why poor countries are still competitive. The day the GMO engineers of agri-business has made a coffee tasting corn that can be grown in the plains of the US, Ukraine or Argentina, millions of small holders in Ethiopia or Rwanda will be in for a very, very bad time.

That the confidence in the global market is rather weak was shown in a dramatic way during the last food price hike where countries introduced export bans and even more interestingly some net food importing countries, such as South Korea, Libya and Saudi-Arabia made bilateral agreements with food producing countries to safeguard food supply. With that in mind I think we need to be a bit cautious about promoting global food markets as a solution to problems of poverty and food security. Sweden has a very strong free trade tradition and it is popular here to blame all problems on trade restrictions and to believe that most problems can be solved by trade liberalization. Food is not just another commodity to be shipped and the relationship between humans, the food they eat and their local ecosystems needs to be strong to nurture a sustainable stewardship of the planet, locally and globally. So while it is clear that international markets represent a great opportunity for many, I believe they should not be oversold as a panacea.

I don’t have the Answer, and perhaps there is no such simple answer. Markets certainly can help, but they will not solve some underlying disparities. Hunger is mainly about poverty, and poverty is largely about power, it is power that has determined who has and who has not. To give poor people access to resources; land, capital and water in particular; and political influence are most important. Direct cash contributions to vulnerable households are probably an interesting solution, which also will stimulate local food production and local food markets.


  1. Thanks for the great article, it partially addresses a few questions that I have been trying to find answer to, specifically:

    - Don't agricultural subsidies from rich countries help developing countries that import the artificially low priced food products by providing them with low cost food? For a poor country, isn't this a good thing? I understand that it does not help farmers from those countries, but I would think that providing consumers with access to low cost food would be more important.

    - And if this is not true, then why are higher food prices resulting from the increased use of biofuels a problem? Would this not be good for farmers in developing countries?

    Any additional thoughts?

  2. Good points. The issues are very complex and it is hard to cover all of it in one single posting. We need to ask ourselves WHY have many of the poorest countries gone from being food exporters to food importers in the last fifty years. In a few countries this might have to do with actual limitations on possibilities to produce food (lack of land, water etc.), but in most of them I am convinced that it has to do with bad politics, both by the countries themselves and by the rich countries in the world. To dump subsidized food is one of the best ways to destroy the local food production. It will help urban poor, because they can by cheaper food. It clearly helps the local elite as they first get their own food cheaper and secondly the masses in the cities are placated by cheap food. But most of the food insecure lives on the country side and less money in the food sector certainly means less income for the rural areas and ultimately food insecurity.
    I don't think higher food prices is a bad thing, I think it is good for the farmers in general and ultimately good also for rural poor people. In the short term, however, it can create problems for say landless rural poor or other net food buyers. The rapid swings in food prices are by themselves a problem.