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Collier on the Food Crisis
Paul Collier's The Bottom Billion was my pick for best economics book last year (not written by a dear friend), it was smart, hard-hitting and unconventional. Collier hasn't lost his touch as a great comment, more like an op-ed, on the food crisis over at Martin Wolf's Economic Forum illustrates.
The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market.... 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...
Unfortunately, large-scale commercial agriculture is unromantic. We laud the production style of the peasant: environmentally sustainable and human in scale. In respect of manufacturing and services we grew out of this fantasy years ago, but in agriculture it continues to contaminate our policies. In Europe and Japan huge public resources have been devoted to propping up small farms. The best that can be said for these policies is that we can afford them. In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. 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 productivity frontier of the globalized commercial model.
Read the whole thing. Many more oxen are gored.
Posted by Alex Tabarrok on May 3, 2008 at 07:05 AM in Economics | Permalink
Comments
OpEd I would say: it bears a remarkable similarity to the piece he wrote for the Time (London version) on April 15th.
http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article3746593.ece
He's consitent, that's for sure....
Posted by: Tim Worstall at May 3, 2008 8:37:53 AM
Keeping the farmers of small American farmers going and that land out of the hands of large agro-corporations through subsidies is definitely worth more than the lives of the world's poor.
Posted by: Ken at May 3, 2008 10:55:22 AM
As a counter point you might want to look at http://www.grain.org/articles/?id=39
It cites some interesting facts and reaches some different conclusions such as:
...Hedge funds and other sources of hot money are pouring billions of dollars into commodities to escape sliding stock markets and the credit crunch, putting food stocks further out of poor people’s reach.[8] According to some estimates, investment funds now control 50–60% of the wheat traded on the world’s biggest commodity markets.[9] One firm calculates that the amount of speculative money in commodities futures – markets where investors do not buy or sell a physical commodity, like rice or wheat, but merely bet on price movements – has ballooned from US$5 billion in 2000 to US$175 billion to 2007
...In Asia, the World Bank constantly assured the Philippines, even as recently as last year, that self-sufficiency in rice was unnecessary and that the world market would take care of its needs.[12] Now the government is in a desperate plight: its domestic supply of subsidised rice is nearly exhausted and it cannot import all it needs because traders’ asking prices are too high.
...The truth about who profits and who loses from our global food system has never been more obvious.
...the small clique of corporations that control the world’s fertiliser market can charge what they want – and that’s exactly what they are doing. Profits at Cargill’s Mosaic Corporation, which controls much of the world’s potash and phosphate supply, more than doubled last year.[13] The world’s largest potash producer, Canada’s Potash Corp, made more than US$1 billion in profit, up more than 70% from 2006.
...On 14 April 2008, Cargill announced that its profits from commodity trading for the first quarter of 2008 were 86% higher than the same period in 2007.
...Bunge, another big food trader, saw its profits of the last fiscal quarter of 2007 increase by US$245 million, or 77%, compared with the same period of the previous year. The 2007 profits registered by ADM, the second largest grain trader in the world, rose by 65% to a record US$2.2 billion. Thailand’s Charoen Pokphand Foods, a major player in Asia, is forecasting revenue growth of 237% this year.
...an ideologically driven elite has forced countries to wrench open markets and let the free market run, so that a few megacorporations, investors and speculators can take huge payoffs. Many countries have lost that most basic power: the ability to feed themselves.
But what do they know anyway.
Posted by: lxm at May 3, 2008 10:56:43 AM
Bah! So what if the Europeans and Americans want to starve themselves so they run their cars on ethanol? The primary problem is how to get African farmers super-productive. As the article pointed out Africa has heaps of farmable land so there's no real reason why Africans should need to import food. As long as Africa relies on outside aid then of course it's going to feel the worst of shocks that happen in the providing nations. It's akin to me being a beggar and getting the excess food from a farming individual grows but would otherwise waste it. If one day this farmer decides he's going to experiment with the excess food and see if he can turn it into car fuel why should he be obligated not to experiment and instead give me the fuel? Or if I find one day that someone else is hungry and willing to pay him a good price for his excess food how is he obligated not to sell the food and instead give it to me? It seems as though Libertarians are shoving Liberals off the 'we care about the poor' soapbox utilitarian argument here.
Posted by: Gil at May 3, 2008 11:16:12 AM
Well at least Mr. Collier admits (although indirectly) that large-scale commercial agriculture, relying on "increased fertilizer inputs" among other things, is not sustainable...
Posted by: A Tykhyy at May 3, 2008 11:28:29 AM
Anybody read Michael Pollan's "The Omnivore's DIlemma?" Small organic farms have been repeatedly shown to be more efficient than factory farms. Also, Monsanto's PR notwithstanding, resistance to pesticides and herbicides is growing. Ah! Someone is sure to say, "But RoundUp Ready seeds will help!" Alas, crops based on this yield less then organic counterparts, and pests are developing resistance to RoundUp as well.
The only problem with organic is organization. When Chipotle wants to cut a deal for a million chicken breasts a day, they don't want to deal with 100,000 farms providing ten chickens a day. I don't know how to solve this, but it seems a much more tractable problem than thinking we're going to succeed in the long run with giant monoculture farms.
Posted by: Doug Blair at May 3, 2008 11:30:09 AM
One can already see what is going to happen, and we are seemingly helpless to stop it.
Governments the world over will attempt to cap prices- and the crisis will worsen.
Posted by: Yancey Ward at May 3, 2008 11:58:10 AM
Doug: yeah, the internet solves such organization problems somehow, I'm sure there's a reasonably efficient way to go about this as well. Witness Estonians cleaning up 8000 tons of rubbish all over the country in a day.
Posted by: A Tykhyy at May 3, 2008 12:17:14 PM
Doug, by which measures are organic farms more efficient? Not in output per acre. And while it may be true in a few cases that organic farming produces higher crop output, it's not universal.
Plus you are discounting the scientific advances of factory farms. It was the big boys who created the knowledge base for current organic farming. Just because you're organic doesn't mean you mimic the technology of the '20s.
The Omnivore's Dilemma is a great book. But the topic at hand is feeding the world. The real problem is that while we can debate the merits of small-scale farming here in the U.S., large agrobusiness is the only real hope for Africans. This isn't about convincing a national chain to source chicken breasts from 1,000 small farms. It's not about "guilt-free" meals. It's about providing the raw quantities of food needed for Africa to survive.
Posted by: Odin's Beard at May 3, 2008 12:25:32 PM
the small clique of corporations that control the world’s fertiliser market can charge what they want – and that’s exactly what they are doing. Profits at Cargill’s Mosaic Corporation, which controls much of the world’s potash and phosphate supply, more than doubled last year.[13] The world’s largest potash producer, Canada’s Potash Corp, made more than US$1 billion in profit, up more than 70% from 2006.
Well it would be surprising if profits didn't rise in a boom year, no? High food prices mean farmers want to buy more fertiliser, so they pay more. Next year you take the profit and invest it in more fertiliser factories. This isn't evidence of a conspiracy.
Posted by: improbable at May 3, 2008 1:02:14 PM
An irony I haven't seen commented on is that farm subsidies in rich countries used to be blamed for artificially lowering world food prices, making it impossible for poor countries to compete. Shouldn't those who held this view be happy to see high prices?
Posted by: improbable at May 3, 2008 1:08:55 PM
I am sorry I dont understand economics to same extent most people who write/comment on this blog. I wanted an opinion whether co-operative system can be used in Africa to increase production. I am not sure if any present large African organization can do large scale farming and there is high amount of mistrust for Western MNCs and to some extent rightly so. But if a co-operative organization is formed by all the farmers of a region and share of each farmer can depend on the extent of his land. Can this help?
As for organic farming, I am not sure whether it can be implemented on large scale right now.
If possible pls do provide some kind perspective on co-operative organization.
Posted by: buriedatsea at May 3, 2008 1:32:00 PM
"Small organic farms have been repeatedly shown to be more efficient than factory farms."
So, is it your opinion that market forces will lead to smaller organic farms, in place of the large corporate farms that have previously been favored?
Posted by: kebko at May 3, 2008 4:06:56 PM
re: small farms -- they are more efficient WHEN you consider that they are sustainable, i.e., they do not mine the environment for water, oil, fertilizer. Read more
re: Africa -- they suffer from bad government more than technology problems, e.g., Zimbabwe now.
re: co-ops -- they can certainly help in terms of aggregating capital and market power.
re: cliques of corporations -- they ARE having a material impact on prices, but mostly they are capturing more rents than farmers, etc. Read more
re: hedge funds -- they seem to be having an impact by squeezing inventories down into the volatile range. Read more
Posted by: David Zetland at May 3, 2008 6:24:58 PM
small farms -- they are more efficient WHEN you consider that they are sustainable, i.e., they do not mine the environment for water, oil, fertilizer.
David, by analogy, autarkies are the most efficient economy. After all, only an autarky is entirely self-reliant.
I think I'll still define efficiency as output/input as opposed to the implied output / (external input).
By the way, your link is quite dissapointing as it doesn't even buttress your claim that organic yields higher a output / (external input) ratio. If you want to make a counterintuitive claim, and you want to be taken seriously, then when you put in a link to support your claim, link to a study, a paper, something that actually makes an empirical argument. Not to a summary of four snippets of rants about the evils of capitalism. Seriously, that could have been a Rick Roll and it would've been equally as supportive of your argument.
Posted by: Jody at May 3, 2008 6:51:34 PM
A lot of the development literature has taken a different turn lately. Rather than mandating land-redistribution as a means for alleviating poverty, wealth is becoming increasingly delinked with land in the eyes of many NGO. The consequence is, of course, agricultural intensification and livelihood diversification. Things are changing.
Posted by: Uku at May 3, 2008 6:53:50 PM
Between Martin Wolf's article and Paul Collier's response, there is a lot to chew on (so to speak).
First off, to those who think there is speculative hoarding by hedge funds or other bogeymen, I strongly suggest checking out the graphs in Martin Wolf's article. Stored food supplies are falling, not rising like one would expect pretty much by definition if hoarding was going on. (I am too lazy to log out of FT to find out if you need to be registered with FT to read the article or not, but registration is free, albeit mildly time consuming per the norm in such situations).
Second, decreased poverty (anyone's definition of poverty) in China and elsewhere is enabling (and producing, not necessarily the same thing) poor people to eat improved diets. People who used to eat one meal a day can now eat two. Those who used to eat two meals a day can and do eat three per day. Those who used to eat more or less strictly vegetarian diets for money reasons can now afford to eat meat, and more and more often. This is definitely a good development for those with the improved diets.
Also, increasingly in the "rich" countries the "poor" (hardly poor by the definitions of truly poor countries) members of society are increasingly fat due to food being nominally cheap either via wages or handouts of one sort or another. Middle class citizens are also increasing their caloric intake to levels beyond what is healthy for them (i.e. they too are getting fat).
Since more and more countries are finally adopting freer markets and becoming richer (or less poor, depending on framing), these increased caloric intakes will continue for decades, maybe even generations, depending on how fast poorer countries develop economically.
As a result the demand side part of the equation is simply going to grow and grow and grow for a lot longer than many people seem to realize. This means that food supply simply has to increase or some disturbing results will ensue. Perhaps there will be mass starvation in some countries that remain poor. Perhaps governmental or freelance agents will engender some form of genocide as a local "solution".
To put it simply, any policy that stands in the way of long term productivity increases is simply obscenely immoral and ought to be spotlighted as such and those arguing for such policies need to be taught how they are wrong, and if they persist in their ways they ought to be shamed and shunned at the very least.
Posted by: happyjuggler0 at May 3, 2008 7:56:23 PM
Regarding "organic" food (a redundancy if I ever heard one), Norman Borlaug (of Nobel peace prize winning, father of the Green Revolution, feeder of billions "fame" [he is sadly unkown by most]) says that we can feed only about 4 billion people using "organic" methods, and then only at the cost of massively destroying forest land.
The world has about 6.5 billion people on it. Which 2.5 billion (and counting) will have to be murdered so that Whole Foods customers can feel superior?
Sooner or later "organic" food will properly come to be seen as an immoral indulgence.
Posted by: happyjuggler0 at May 3, 2008 8:17:36 PM
Odin, organic farming, according to at least one study, yields three times the food on a per acre basis: http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=1091304
And, given peak oil (and, by extension, peak natural gas) and the declining availability of potassium and phosphorus from mines, we're going to be farming organic eventually, anyway. I know that economists tend to wave these issues away -- the almighty market will provide -- but I'm not sure the pricing signals will leave enough time for any sort of alternatives to be developed without all of us suffering from significant pain.
http://www.noble.org/Ag/Soils/NitrogenPrices/Index.htm
http://www.energybulletin.net/6994.html
http://en.wikipedia.org/wiki/Fertilizer#Health_and_sustainability_issues
Posted by: Doug Blair at May 3, 2008 9:09:29 PM
"David, by analogy, autarkies are the most efficient economy. After all, only an autarky is entirely self-reliant."
False. Do you know the definition of efficiency? The most basic definition and intuitive definition of efficiency is increasing output with the same or less input. By definition autarkies can never be more efficient than economies that open themselves up to trade, taking advantage of comparative advantage, which all by itself makes an economy more efficient.
By your definition of efficiency, the most efficient economy would be an individual living an isolated life somewhere. The division of labor exists because it's more efficient.
Posted by: Ken at May 3, 2008 10:16:22 PM
Doug: if that is true, then why is organic food much more expensive than the regular stuff. Are all organic farmers evil gougers, or are these studies missing something?
In any event making natural gas is merely a problem of having enough energy. I find it hard to believe that will be a problem for more than a few decades.
Posted by: James K at May 3, 2008 11:55:50 PM
James K: I can think of a couple answers to this. First, organic isn't always more expensive. Second, organic is sometimes a better product; the producers maintain standards higher than their non-organic competition. Third, at the moment, supply is outstripping demand. Fourth, the processing of organic foods may often be done on a smaller scale (cereals, for example), which could result in higher costs.
",,,merely a problem of having enough energy." Well, sure, and death is merely a problem of ceasing living! There are no alternatives waiting in the wings with either the quantity or flexibility of fossil fuels. I believe that the impacts of peak oil will be rather serious; perhaps not Kunstlerian, but bad.
http://en.wikipedia.org/wiki/Peak_oil
http://jameshowardkunstler.typepad.com/
Posted by: Doug Blair at May 4, 2008 1:02:35 AM
Collier singlehandedly recycles every unsubstantiated talking point of the USDA-Agribusiness Complex.
If there's a problem with people "romanticizing" things, it's with Chandlerian/Galbraithian technocrats who romanticize large-scale production (especially in agriculture).
Large-scale agribusiness is indeed more efficient in terms of output per man-hour; but small-scale, intensive production is actually MORE efficient in terms of output per acre. Those presently unemployed in the Third World, sitting in shanty towns or begging in the gutters, would be better off back on the land they were evicted from by quasi-feudal landed oligarchs in collusion with cash-crop agribusiness interests.
Most of the problem of starvation results, not from underproduction, but from maldistribution of purchasing power. That's because land formerly used to support the rightful owners, who were living and working on it, is now used instead by the landed oligarchs and agribusiness interests to raise cash crops for the export market. And those formerly living on it, who were able to support themselves, now have no source of purchasing power to buy it.
To repeat, it's not a problem of underproduction, any more than was the Irish potato famine (which occurred at a time when English landlords were exporting wheat from Ireland). Most Third World starvation results from the reenactment of the Enclosures on a global scale.
It's also asinine to romanticize Green Revolution techniques, when for the most part they are only viable in the presence of massively subsidized irrigation and other inputs, and are useful only for the privileged classes engaged in large-scale, subsidized production on stolen land. For the vast majority of ordinary producers, traditional drought- and pest-resistant varieties are far more productive for farming that actually internalizes its own costs instead of operating on the taxpayer tit.
Posted by: Kevin Carson at May 4, 2008 3:14:26 AM
happyjuggler:
What Doug said.
Has Borlaug even heard of John Jeavons or biointensive farming? or is he just talking out of his ass whereof he knows nothing, based on his own institutional background?
I once talked to an agribusiness professor who regurgitate the whole "the world would starve without chemical fertilizers" party line. And when I confronted him with the productivity per acre of intensive, raised-bed techniques that returned all organic material to the soil through composting, guess what his reaction was: "Oh, well, if people made that intensive use of the land, it could probably be done."
James K.:
Doug's third answer is probably the most imporant one. Current high organic prices are mostly scarcity rents.
In addition, we have a distribution system geared to large-scale agricultural production and large supermarkets. When a single supermarket can absorb an entire truckload of organic produce from a nearby farm, instead of the load being distributed among a number of stores all over a county, the distribution cost will fall.
Posted by: Kevin Carson at May 4, 2008 3:28:25 AM
KC, you have overstated your case in two areas. They wouldn't matter for your conclusions, only some people are bound to stop reading as soon as they spot an error.
A lot of the people who would be better off as peasant-proprietors were not "rightful owners", sometimes because they always were tenants and sometimes because they had a different cultural connection with land, one not recognised by modern systems (which is why they had no standing as claimants when it was first appropriated in our sense of the term). There's a complete spectrum all the way from legal machinery not counting them, all the way to people who never had a claim (why should ex-slaves end up better off than crowded out natives in British Guiana?). Injustice was done, just not always that particular injustice.
Ireland did have a food shortage during the potato famine; the fact that exports continued doesn't disprove it, it only shows that things were even worse than nature hitting a distorted economy had made them. Your description does apply in most poor areas today, but since it doesn't account for your example after all, some people will assume that the main reason for that suffering applies to this suffering after all.
You might want to look at "Sanity", by G.K.Chesterton, which I just found linked from Distributism. It goes into these areas, and also fills in the gaps Belloc left in "The Servile State" about the role of big business structures.
Posted by: P.M.Lawrence at May 4, 2008 5:07:28 AM
