Where hunger ended, farmers owned land
Rising Food Prices -- What Should Be Done?
We trim, blend, and append this well-meaning Policy Brief from the International Food Policy Research Institute by Joachim von Braun, April of 2008, with comments from the Conde Nast magazine, Portfolio (CN also publishes The New Yorker), Apr 10, by Felix Salmon, who created the Economonitor blog for Roubini Global Economics.
by Joachim von BraunHungry people in Haiti and all over Africa are rioting. In 2007 the UNís food price index rose by nearly 40%; in the first months of 2008 prices again jumped drastically. Real prices are below their mid-1970s peak but have reached their highest point since then.
Nearly every agricultural commodity in the international market costs more. Since 2000 -- a year of low prices -- wheat has more than tripled, maize more than doubled; rice jumped to unprecedented levels in March. Dairy products, meat, poultry, palm oil, and cassava are up. When adjusted for the dollar's decline, food price increases are not as huge but still dramatic.
With the US subsidizing farmers to grow crops for energy, American farmers have shifted to biofuel feedstocks, especially maize, often at the expense of cultivating soybeans and wheat. About 30% of US maize production will go into ethanol in 2008 rather than into world food and feed markets. Oil has also raised the cost of mechanical cultivation, inputs like fertilizers and pesticides, and transportation of inputs and outputs.
At the same time, the growing world population growing richer is demanding more and different kinds of food. The Chinese and others have strengthened their purchasing power and shifted their demand from traditional staples and toward higher-value foods like meat and milk. This dietary shift is leading to increased demand for grains used to feed livestock.
Meanwhile, severe drought in Australia, one of the world's largest wheat producers, has cut into global wheat production.
In response, Morocco cut tariffs on wheat imports from 130% to 2.5%; Nigeria cut its rice import tax from 100% to just 2.7%. But what is a country with hungry people doing taxing food in the first place? your editor wonders.
Other policies are likely to backfire:
* Price controls reduce the price that farmers receive for their agricultural products and thus reduce farmers' incentives to produce more food.
* Export restrictions and import subsidies have harmful effects on trading partners dependent on imports and also give incorrect incentives to farmers by reducing their potential market size.
These national agricultural trade policies undermine the benefits of global integration.
There are effective actions to take:
First, poor countries should expand income transfers and nutrition programs focused on early childhood. Donors should expand child nutrition programs and food aid, too.
Second, developed countries should eliminate domestic biofuel subsidies and open their markets to biofuel exporters like Brazil.
Third, developed countries should eliminate other agricultural trade barriers. A level playing field for developing-country farmers will make it more profitable for them to ramp up production in response to higher prices.
Salmon: If you want proof that the free-market intelligentsia really doesn't get what it wants, all you need to do is look at agricultural subsidies. The right hates them because, well, they're subsidies, and the left hates them because the beneficiaries are big agricultural companies while the losers are taxpayers and third-world farmers. The way I see it, abolition of US and EU agricultural subsidies makes sense as a matter of fiscal policy first and foremost -- the impact on government budgets can be quite large. And over the long term, making the changes will help eradicate market inefficiencies, such as rent-seeking behavior in the agricultural industry.
Fourth, to develop, countries need to invest in roads, electricity, and communications, and crop storage and processing capacity.
JJS: Yet such investment in the past merely made land more valuable, more worth fighting over, and the winning landowners richer, the losing country folk poorer and hungrier.
Fifth, I say and most basic, let farmers own land. To spur absentee owners of huge tracts to sell off their excess at prices poor farmers can afford, tax land at its annual rental value. Having to pay the overhead, big owners no longer find it worth their while to be a middleman. This tax broke up huge estates in Denmark, California, Australia, New Zealand, and Taiwan. Afterwards, working their own land, farmers produced much more food, wiping out hunger in the case of Taiwan.
Jeffery J. Smith runs the Forum on Geonomics.
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