Paul Collier’s prescription
November 26, 2008, 12:48 pm
Filed under: Farming

Dawn, Brazil

While traveling last week I finally got round to reading Paul Collier‘s “Politics of Hunger” article in Foreign Affairs, and I recommend it. It lays out the basic driver of high food prices — fast income growth in Asia and an income elasticity for food of about 0.5, so that a 20% increase in earnings leads to a 10% increase in demand for food. But as he says, in a simple, logical way, “There need be no logical connection between the cause of a problem and appropriate or even just feasible solutions to it.” His solutions are

three politically challenging steps. First, contrary to the romantics, the world needs more commercial agriculture, not less. The Brazilian model of high-productivity large farms could readily be extended to areas where land is underused. Second, and again contrary to the romantics, the world needs more science: the European ban and the consequential African ban on genetically modified (GM) crops are slowing the pace of agricultural productivity growth in the face of accelerating growth in demand. Ending such restrictions could be part of a deal, a mutual de-escalation of folly, that would achieve the third step: in return for Europe’s lifting its self-damaging ban on GM products, the United States should lift its self-damaging subsidies supporting domestic biofuel.

He makes some other points, too: avoid export restrictions and don’t let the French use the crisis as a way of boosting the Common Agricultural Policy. But his three key points are the article’s theme, and they resolve into a short term, medium term and long term strategy. In the short term, the US ethanol subsidies can be rescinded, in principle, purely through legislation. To begin with, as he points out (and as others have too) they are indefensible in terms of their stated aim:

If the United States wants to run off of agrofuel instead of oil, then Brazilian sugar cane is the answer; it is a far more efficient source of energy than American grain. The killer evidence of political capture is the response of the U.S. government to this potential lifeline: it has actually restricted imports of Brazilian ethanol to protect American production. The sane goal of reducing dependence on Arab oil has been sacrificed to the self-serving goal of pumping yet more tax dollars into American agriculture.

Getting rid of the subsidy, Collier argues, would immediately lower food prices through two routes; it would reduce an artificially maintained competing demand, ad it would reduce the basis for price speculation. For the medium term, he puts his faith in policies that expand large scale commercial farming, in part because it is in a position to respond to increased prices by spending on the inputs needed for increased production, but also because he believes it is better placed to be innovative.

Innovation, especially, is hard to generate through peasant farming. Innovators create benefits for the local economy, and to the extent that these benefits are not fully captured by the innovators, innovation will be too slow. Large organizations can internalize the effects that in peasant agriculture are localized externalities — that is, benefits of actions that are not reflected in costs or profits — and so not adequately taken into account in decision-making. In the European agricultural revolution, innovations occurred on small farms as well as large, and today many peasant farmers, especially those who are better off and better educated, are keen to innovate. But agricultural innovation is highly sensitive to local conditions, especially in Africa, where the soils are complex and variable

A model of successful commercial agriculture is, indeed, staring the world in the face. In Brazil, large, technologically sophisticated agricultural companies have demonstrated how successfully food can be mass-produced. To give one remarkable example, the time between harvesting one crop and planting the next — the downtime for land — has been reduced to an astounding 30 minutes. Some have criticized the Brazilian model for displacing peoples and destroying rain forest, which has indeed happened in places where commercialism has gone unregulated. But in much of the poor world, the land is not primal forest; it is just badly farmed. Another benefit of the Brazilian model is that it can bring innovation to small farmers as well. In the “out-growing,” or “contract farming,” model, small farmers supply a central business. Depending on the details of crop production, sometimes this can be more efficient than wage employment.

His long term play is GM, over a 15-year plus timescale.

The GM-crop ban has had three adverse effects. Most obviously, it has retarded productivity growth in European agriculture. Prior to 1996, grain yields in Europe tracked those in the United States. Since 1996, they have fallen behind by 1-2 percent a year. European grain production could be increased by around 15 percent were the ban lifted. Europe is a major cereal producer, so this is a large loss. More subtly, because Europe is out of the market for GM-crop technology, the pace of research has slowed. GM-crop research takes a very long time to come to fruition, and its core benefit, the permanent reduction in food prices, cannot fully be captured through patents. Hence, there is a strong case for supplementing private research with public money. European governments should be funding this research, but instead research is entirely reliant on the private sector. And since private money for research depends on the prospect of sales, the European ban has also reduced private research.

However, the worst consequence of the European GM-crop ban is that it has terrified African governments into themselves banning GM crops, the only exception being South Africa. They fear that if they chose to grow GM crops, they would be permanently shut out of European markets. Now, because most of Africa has banned GM crops, there has been no market for discoveries pertinent to the crops that Africa grows, and so little research — which in turn has led to the critique that GM crops are irrelevant for Africa.

It seems to me an exceptionally well put together, thoughtful article, and well worth your attention.

Image of a Brazilian farm from Flickr user de Paula FJ, used under a creative commons licence. Pretty sure this isn’t a big high yielding commercial farm — but it is pretty…


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