Questions from China about the Food Summit

A reporter (Xu Jingjing) from China's Life Week magazine writes with questions about the FAO's food summit.  Here are the questions and my answers:

1.        Do you think it is a productive summit? If it is, what are the most important outcomes? If it’s not, why this happens?

I think it's great that the summit took place.  And there may be some productive results from it. But I'm an academic and am not very connected to international political events like this one.  It's hard for me to judge whether it is a success, or even how to measure the success of such events.

2.        Some comment said world leaders at the food summit on Monday rallied around a new strategy to fight global hunger and help poor countries feed themselves. Is it a substantial progress or just on rhetoric?

I think I'll defer to my answer to question 1.  It's often hard for me to discern the difference between rhetoric and substance.  Maybe in 10 years I'll be able to look back and see more clearly what was successful about the summit and what wasn't successful.

3.        FAO had hoped that leaders would commit to raising the percentage of official aid spent on agriculture to 17 percent -- back to the 1980 level -- from 5 percent now. That would amount to roughly $44 billion annually. But it failed. Why the percentage of official aid spent on agriculture has been decreasing in the past 30 years?

I don't know all the causes for the decline.  Geopolitics and moneyed interests run events like these. 

One reason could be that, at least to the pocketbooks and in the minds of people in rich countries, agriculture is a small issue.  Few in developed nations really think about the price of rice or about agricultural production systems.  At least not on a regular basis--staple food prices are so small relative to our incomes that it's simply trivial.  Obviously that's not true for the poorest 3 billion people in the world.  Historically basic commodity prices were a larger share of all our incomes so maybe everyone cared about it more.

While $44 billion from all OECD countries combined is not that much, all of these countries are still suffering from the worldwide recession.  And most have large budget deficits.  Leaders of these countries probably don't want to be susceptible to claims that they are favoring the poor in foreign countries over the poor in their own countries.  The U.S. Department of Agriculture claims 14 percent of the U.S. population is "food insecure,"  a term that does not imply malnutrition or hunger approaching that of the world's hungriest billion.  Nevertheless, statistics like these make it more politically challenging for leaders of OECD to contribute more resources to the poor in foreign countries.

Some may also be skeptical about the ultimate effectiveness of this kind of aid.  Many believe a large portion of foreign aid goes to corrupt bureaucrats rather than to poor local farmers.

4.        Earlier this year the International Food Policy Research Institute said that since 2006 15-20 million hectares of land in poor countries had been sold or were under negotiations for sale to foreign buyers. How did this situation deepen the food crisis? The FAO plans to draw up guidelines to try to safeguard the sometimes conflicting interests of local farmers and investors for the governance of land. In your opinion how to solve this problem?

I think it is hard to say whether this will turn out to be a positive trend or a negative one.  A reasonable comparison might be to U.S. manufacturing in China, which has probably helped to spur growth there and lower prices of manufactured goods here in the U.S.--overall a good thing, in my view.  Similarly, foreign investors may be able to bring in modern farming practices and inputs and thereby better manage the land and achieve higher yields and production efficiency in poor countries.  The downside is that it could relegate farmers in poor countries to a modern form of serfdom. 

It seems to me poor countries, perhaps working with FAO or other NGOs, should work with local governments and poor farmers to develop contracts with investors that would allow the local farmers to maintain some ownership of the land and profits from farming operations.  This could be done with creative lease agreements that might include revenue-sharing arrangements with local farmers.  If local interests retain some rights to their land it would help mitigate the downside and increase the upside to these kinds of arrangements. 

The big problem is when poor farmers are simply pushed off their land without compensation.

5.        FAO hoped countries would adopt 2025 as a deadline to eradicate hunger. But the declaration instead focused on a pledge set nine years ago to halve the number of hungry people by 2015. Do you think whether the target can be achieved? Why?

It's nice to have a goal.  But without a clear idea about how to achieve the goal it is largely symbolic.  This is a big and very complex problem and I don't think anyone really knows how to solve it, so I'd say the goal was largely symbolic. 

6.        Seeking to drum up private sector support, FAO brought together leading food and agribusiness companies, including Nestle, Unilever and Cargill, for a two-day meeting last week. How do you think about this approach to fight against hunger?

I don't see a fundamental problem with it.  These companies are mainly interested in earning profits.  But part of their profit model involves maintaining a good public image. In many cases they might be willing to provide aid to the extent that it bolsters their image.  They are also acutely aware of the larger economic forces at stake and I suspect they will, in one way or another, make those forces clear to those trying to fight hunger.

7.        Since last year's record levels, the prices of staple commodities like rice, corn and wheat have fallen. In your opinion, will the further rises are inevitable? Why?

Right now I'm not very optimistic: I think prices will rise a lot further.  Prices fell largely because of the near collapse of the world economy, and with it, demand for commodities.  As worldwide growth and demand is restored, I think prices will rise again. 

For prices to fall over the long run we need crop yields to grow faster than demand.  Demand will grow rapidly with population and particularly with rapid income growth in places like China and India.   Ethanol subsidies--which divert about a third of the U.S. corn crop (enough to feed hundreds of millions)--are also growing demand.  My research with Wolfram Schlenker of Columbia University estimates that rice, corn, soybean, and wheat prices are about 30 percent higher due U.S. ethanol subsidies.  This has surely contributed to the hunger problem.

On the supply side I believe water shortages and climate change pose serious obstacles to yield growth.  The hope is that the climate scientists are all wrong (which seems unlikely) or that genetically modified crops will accelerate yield growth. 

8.        In your opinion what are the most critical problems needed to be solved to fight against hunger?

In my view the most critical problems are extreme poverty and rapid growth of income inequality, both within and across nations.

A strange and tragic reality is that extreme poverty and food shortages are exacerbated by a large portion of the world rapidly becoming richer and climbing out of poverty while another portion of world languishes.  Continued growth in the OECD countries, and rapidly emerging growth in China and India,  greatly increase demand for the world's food resources. 

There is nothing wrong with growth.  But rapidly growing demand--particularly for meat and animal-based food products--may well cause demand for staple grains to grow faster than supply, leading to price increases.  If prices rise too much, then the remaining poor simply cannot afford to survive and food aid becomes very difficult to provide.

If income growth were more equal, things would be different.  While food prices would be a lot higher, hunger, famine and nutrition-related diseases would not be the problems they are today, because all would be able to afford the higher prices.  Instead, higher prices would cause substitution away from foods that are more resource intensive (like meat and animal products) and toward consumption of less resource-intensive foods, like staple grains, beans, and vegetables.  Wealthier nations like the U.S., which suffers from obesity-related problems stemming from overindulgence in meat and other resource-intensive food, would likely see health benefits from this kind of substitution.

It's going to be hard to solve the big and complex problems of extreme poverty and income inequality.  I don't pretend to know the answers.  I expect there are many answers that vary widely by location.

Instead, and looking at the more immediate future, I would suggest smaller, more targeted policies like:

(1) Stopping ethanol subsidies.

(2) Increasing public funding for organizations like CIMMYT the IRRI and funding of basic crop sciences at research universities and experiment stations.

(3) Taxing meat.

I think these three simple policies would probably reduce the number of hungry and undernourished by hundreds of millions and would have few negative unintended consequences.  But they would likely face large political headwinds, too.