You might be interested in this Policy forum that Science Magazine addressed today.
Source: http://www.sciencemag.org/content/335/6067/405.full
Mixed Messages on Prices and Food Security
+Author Affiliations
- ↵*Author for correspondence: mara.squicciarini@econ.kuleuven.be
Spikes in food prices have pushed food security to the top of the global policy agenda. Price increases have mixed effects on poverty and hunger: They increase the cost of food for consumers but increase incomes of farmers, who represent the bulk of the world's poor. Net effects will differ depending on whether poor households or countries buy or import, or sell or export food (infrastructure, institutions, and market imperfections will play roles, as well) (1–4). Policies to influence prices imply winners and losers, not just between rich and poor, but also among the poor. These nuances are too often absent in public debate, to the detriment of policy-making. Moreover, the arguments put forward today, that high food prices generally hurt the poor, are in contrast with those put forward a few years ago, that low food prices were hurting the poor.
As recently as 2005, the United Nations Food and Agricultural Organization (FAO) explained: “The long-term downward trend in agricultural commodity prices threatens the food security of hundreds of millions of people …” (5). The dramatic increase of food prices in 2008 caused a major turnaround in opinion. FAO wrote: “Rising food prices … worsen the … food deprivation suffered by 854 million people” (6). This reversal of opinion was fairly widespread with some extreme examples coming from non-governmental organizations (NGOs) (7). In 2005 Oxfam stated: “Low prices [on world markets make] it impossible for farmers in developing countries to compete. As a consequence, over 900 millions of farmers are losing their livelihoods” (8). Three years later, Oxfam argued: “[Higher] food prices … have pushed millions of people in developing countries further into hunger and poverty” (9).
Some might argue that improvements in modeling and measurement (see the chart) have improved understanding of impacts of prices and thus influenced changes in messages. Although this may play a role in some cases (e.g., regarding the impact of biofuel policies on food prices), we believe that, more often, detailed analytical reports with nuanced conclusions are turned into simplistic messages (10–12). In our view, it can be hard to find a relation between underlying analytical work and the policy messages sent by communications departments. For example, the background document for the 2008 FAO Summit on Soaring Food Prices explained that the impact of soaring food prices on the poor may be positive or negative, depending on how much they produce and consume food, and that it may represent an opportunity for promoting agricultural development (13). The FAO press communication at the summit does not mention potential benefits and focuses exclusively on how high prices hurt the poor (14). Studies by World Bank researchers show complex effects of food price changes on poverty in developing countries (15–18), yet official World Bank communications at the time of the crisis largely emphasize how rising prices hurt the poor (19).
Weighted average of meat, dairy, cereals, oil and fat, and sugar price indices. The average during 2002–04 is set to 100. Data from UN FAO, deflated using the World Bank Manufactures Unit Value Index.
One reason for this may be fundraising. In a world where development organizations need to compete for donor funding and attention, there is pressure to demonstrate the relevance and importance of their work (20, 21). Arguing that changes in food prices hurt the poor may help in raising funds. Because donors, like TV viewers and newspaper readers, tend to pay more attention to negative news (22, 23), development organizations have an incentive to portray events negatively (24). This effect is reinforced by other factors, such as the need to be concise in communicating to policy-makers and the public and the pressure for researchers in large organizations to “stay on message.” That is, once an organization has taken a public stance, it will be reluctant to promote research conflicting with this message.
Mass media also play an important role in influencing the policy agenda (25). Emotionally charged media coverage, typically concentrated around “events” or “shocks” (26), invokes public responses, which induce politicians and governments to act (27, 28). The absence of media coverage reduces priority for items on the policy or donor agenda (29). Sudden changes with dramatic effects, such as the 2008 food crisis, not only present challenges to development organizations and experts but also opportunities for them to capture media attention and signal their importance to donors and the public. These factors create incentives to emphasize negative implications and to deemphasize the positive effects.
Bad News but Good Policies?
Development organizations may argue that, although they have changed their messages, they have not changed their basic policy advice. This is true to some extent. Many organizations have maintained their policy prescriptions to invest in agriculture and support small farmers. They have been consistent in their trade policy advice; some favor trade liberalization, others advise against it. However, there are also important shifts in advice.
For example, in 2003 the World Bank emphasized how low prices hurt developing-country farmers, with little mention of potential benefits for urban consumers or how an increase in prices would hurt many poor people in rural areas who are net consumers (30). In 2008 and later, the World Bank argued that the largest number of poor, including rural smallholders, are net buyers and are hurt by increasing prices, with little attention paid to benefits from high prices for farmers (19, 31).
In trade policy, development organizations have largely held their line. Some (such as FAO, the Organisation for Economic Co-operation and Development, and the World Bank) have continued to emphasize the importance of trade liberalization and of the conclusion of the Doha Round of international trade negotiations. NGOs such as ActionAid and Oxfam have continued to recommend reduction of subsidies and elimination of import tariffs in rich countries and the need for import tariffs to protect poor countries. The consistency of this advice is problematic.
If high food prices are hurting urban consumers and many poor rural households in developing countries, NGOs' “consistent” policy advice may yield the wrong effect. Elimination of import tariffs and export subsidies of rich countries and the use of import tariffs in poor countries could increase food prices, hurting the poor and worsening food security, according to the oft-used NGO argument. Arguments that poor countries should use such protections not when prices are high but when they are low are inconsistent with claims that most poor farmers are net consumers. If they are net consumers when prices are high, they will likely be net consumers when prices are low and would suffer from import tariffs. One reason why development organizations have advocated trade liberalization was because it would increase prices for poor farmers (32, 33), at odds with current claims that high food prices hurt the poor, including many farmers.
Implications
Before 2005, recommendations to help developing-country farmers by cutting subsidies in the European Union and the United States typically ignored the fact that this could hurt consumers and net food-consuming farmers in developing countries. The recent reversal in messages, that high prices are bad for the poor, is providing ammunition for those wanting to keep farm subsidies in rich countries. Several food exporting countries, such as India, China, and Russia, blocked exports after global price increases (34). This led to proposals to constrain the use of such export policies (e.g., tariffs, bans, and quotas) under World Trade Organization (WTO) rules. Here, too, there are costs and benefits. For example, export restrictions in rice-exporting countries have been blamed for hurting poor consumers in rice-importing countries. However, several rice-exporting countries like China, India, and Indonesia have many poor consumers at home (who benefit from the policies).
We need to be more honest about what we do and do not know. One striking example is the use of the number of hungry people in the world and how the food crisis changed this. Some development organizations have announced that 1 billion people are hungry (35). Experts have challenged these numbers (36, 37). Impacts of price changes on the number of hungry people are projections, based on models and assumptions, which include uncertainties and should be interpreted with caution. New studies suggest that the number of hungry may have declined, possibly by many millions, despite the food price increase (37). Combined effects of price changes, economic growth, market imperfections, and policy interventions may have resulted in more subtle gradations in the effects on food security even in the poorest countries of Africa (38). In parts of Asia, growth in wages and remittances has been stronger than increases in food prices (39).
We need a more nuanced debate on how global developments and policies affect food security. All changes cause winners and losers, also among the poor. If the objective is to assist those who are hurt by price changes, this is no excuse for simplistic messages.