THE VINE APRIL 18, 2008
By now, everyone can tick off the main reasons why global food prices have lurched upward in recent months: Oil's getting costly; people in China and India are eating more meat; rich countries are going on an ill-conceived biofuels binge; harvests have been poor... But now here's a more contentious theory: In the Guardian, Ray Patel of UC Berkeley argues that two decades of trade liberalization have crippled the ability of poorer countries to adapt to what would normally be harmless fluctuations:
Practically, [trade liberalization] meant the removal of developing countries' ability to stockpile grain (food mountains interfere with the market), to create tariff barriers (ditto), and to support farmers (they ought to be able to compete on their own). ...
Without agricultural support policies, though, there's no buffer between the price shocks and the bellies of the poorest people on earth. No option to support sustainable smaller-scale farmers, because they've been driven off their land by cheap EU and US imports. No option to dip into grain reserves because they've been sold off to service debt. No way of increasing the income of the poorest, because social programmes have been cut to the bone.
The reason that today's price increases hurt the poor so much is that all protection from price shocks has been flayed away, by organisations such as the International Monetary Fund, the World Trade Organisation and the World Bank.
Even the World Bank's own Independent Evaluation Group admits that (PDF) the bank has been doing a poor job in agriculture. Part of the bank's vision was to clear away the government agricultural clutter so that the private sector could come in to make agriculture efficient. But, as the Independent Evaluation Group delicately puts it, "in most reforming countries, the private sector did not step in to fill the vacuum when the public sector withdrew." After the liberalisation of agriculture, the invisible hand was nowhere to be seen.
Is this a fair assessment? Too crude? Just right? That last paragraph brings to mind a Times piece Celia Dugger reported last year, about how the World Bank and assorted Western aid donors had forced Malawi to dismantle its fledgling program to subsidize fertilizer for poor farmers—on the grounds that the subsidies made it impossible for a "free" agricultural market to develop. Well, Malawi complied, two years of disastrous shortages ensued, and the government finally told the donors to shove off and reinstated the fertilizer program. Two bumper crops later, the EU decided that maybe the subsidies weren't so horrid after all.
Anyway, I'm still sticking with the biofuels boondoggle and the world's ever-growing addiction to oil as the primary culprits here, but Patel's point about how decades worth of trade policies have exacerbated these pressures is, I think, a good one.