Staving off food riots means governments must end their love of peasant agriculture, accept GM and stop growing bio-fuels.
The sharp increase in the world price of staple foods is already yesterday’s news. Consumers in the rich world have more pressing concerns such as falling house prices and the rising cost of energy. But for consumers in the poorest countries, especially in Africa, the true anguish of high food prices is only just beginning. By no means are all poor people adversely affected. The many Africans who are farmers are largely self-sufficient: rural food markets are not well-integrated into global markets and where they are, farmers may gain.
The unambiguous losers are the urban population: the price of food in the third world’s coastal cities is set on global markets. Often crowded in slums, these people cannot grow their food: they have no choice but to buy it. Even among the urban dwellers many can afford to pay. The people who will be worst affected are the urban poor. Not only have they little money, but about half of their budget is spent on food, in contrast to only about a tenth for high-income groups. Hungry slum dwellers are unlikely to accept their fate quietly, and so the food crisis has the potential for an ugly populist politics.
Food riots have already inflicted political casualties: for example, the fragile reform efforts in Haiti have been derailed. But we have still not arrived at the end of the food chain: we now come to the crunch. Among the urban poor the ones most likely to go short of food are children. If young children remain malnourished for more than two years the consequence is stunting. We now know that stunting is not merely a physical condition: stunted people are not just shorter than they would have been, but their mental potential is irreversibly impaired. And so, although high food prices are yesterday’s news, if they remain high for the next few years their consequences are tomorrow’s nightmare: and tomorrow will last a lifetime.
Global food prices must be brought down fast, and the only remedy is to increase food supply. Fortunately, our own policy makers have the power to bring food prices down. The question is whether they have the courage: to bring down food prices three giants of popular romanticism must be confronted and slain.
Banishing romanticism
The first giant is the love affair with peasant agriculture. The Brazilian model of large, technologically sophisticated agro-companies has demonstrated how food can be mass-produced. To give one remarkable example, the time between harvesting one crop and planting the next, in effect the downtime for land, has been reduced to an astounding 30 minutes. The gains from scale have become more pronounced over time as marketing channels have become more sophisticated and demanding, and as technology has advanced.
Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing commercial productivity frontier. Indeed, during the present phase of high prices, the Food and Agriculture Organisation is worried that African peasants are likely to reduce their production because they cannot finance the increased cost of fertiliser inputs.
While there are partial solutions through subsidies and credit schemes, large-scale commercial agriculture simply does not face the problem: if output prices rise by more than input prices, production will be expanded. Sometimes the Brazilian model can be combined with out-cropping, in which small farmers supply a central business with precisely specified qualities to schedule, but often it is better for the entire labour force to be wage employees. Currently, far too many ordinary people are thrust into the role of small entrepreneurs due to lack of jobs. In all societies where people have the choice, most prefer wage employment. There are still many areas of the world that have good land which could be used far more productively if it was properly managed by large companies.
Yet over the past 40 years both the aid agencies and African governments have preferred to preserve peasant society in aspic. Africa has even less large-scale commercial agriculture than it had 50 years ago. The rural young have voted with their feet and walked to the urban slums, where they will now go hungry.
The second giant is the European fear of scientific agriculture. It has been manipulated by the agricultural lobby into yet another form of protectionism: the ban on genetically modified (GM) crops.
The ban has had three adverse effects. Most obviously it has retarded productivity growth in European agriculture: prior to 1996, when the ban was introduced, grain yields tracked those in the US, whereas since they have fallen behind by about 1% to 2% per year. So, European grain production could be increased by about 15% should the ban be lifted. More subtly, because Europe is out of the market for GM technology, the pace of research has slowed: there is no public money provided and private money for research obviously depends on the prospect of sales.
Disaster for Africa
The worst consequence of the GM ban is that it has terrified African governments into themselves banning GM; the only exception being South Africa. They fear that by growing GM crops they would permanently be shut out of selling to European markets. Africa cannot afford this self-denial, it needs all the help it can possibly get from GM. Not only is it currently being hit by rising food prices, it is facing climatic deterioration in the context of a rapidly growing population. With Africa closed to GM there is no incentive for research on the crops that are of key importance to the region, such as cassava and yams, or on cutting storage losses through fungal resistance.
Even when fertiliser was cheap Africa missed the chemical-based Green Revolution (the post-1945 development of high-yielding varieties of crops). With the rise in fertiliser costs due to high energy prices, an African green revolution will need to be biological: that is what GM offers.
The third giant is the US fantasy that it can grow its own fuel and so escape dependence on Arab oil. There is a case for growing fuel, but not for growing it in the US: Brazilian sugar cane is a far more efficient source of energy than US grain. This has not stopped the US agricultural lobby from gauging out grotesquely inefficient subsidies: about a third of US grain has rapidly been diverted into energy. This switch demonstrates both the superb responsiveness of the market to price signals, and the shameful power of subsidy-hunting lobby groups.
Unsurprisingly, this huge loss of food has had a large impact on world grain prices: a recent World Bank study finds that it accounts for most of the problem.
Preserving the peasant way of life, keeping out ‘Frankenfoods’, and home-grown energy, are each classic populist programmes: they sound nice but they do harm. Politicians have a duty to save societies from such errors. The task is not so difficult. Those people most attracted to the romanticisms of keeping commerce and science out of agriculture are precisely the group most concerned to fight global poverty.
Cruel truths
Such people simply need to be confronted with the cruel moral dilemma that their romanticism is an obstacle to their goal. Those people most attracted to energy self-sufficiency through agriculture are potentially the constituency that can save the US from its ruinous energy policies. The cruel truth is that the US indeed needs to reduce its dependence upon imported oil, but that growing bio-fuel is not the answer.
American bio-fuel uses almost as much energy as it produces: it is a scam not a solution, and it is impeding discussion of genuine solutions.
If food prices are not brought down fast, slum children will go hungry and their entire lives will be impaired. The painful task of deconstructing our romantic illusions cannot be avoided.
PAUL COLLIER AUTHOR OF ‘THE BOTTOM BILLION’.
