Commentary: What role for ‘markets’ in addressing the world food crisis?

Abstract

Food commodity prices have risen dramatically over the last few years, to their highest levels in decades. A constellation of factors have brought about the pressures on food supplies and consequent increase in prices, including crop failures in some parts of the world, the surge in biofuels production and associated use of cropland for fuel rather than food, higher energy prices, and rising incomes in developing countries – which induce diet changes that put more pressure on grain supplies. Moreover, annual worldwide growth in agricultural output has been much slower in the last two decades than in the previous two decades following the Green Revolution. According to a United States Department of Agriculture report by Ronald Trostle (2008), world grain and oilseeds production increased at an annual average rate of 2.2% between 1970 and 1990, while world population growth averaged 1.7% annually. Population growth was lower between 1990 and 2007, averaging 1.4% annually. However, growth in grain and oilseeds production averaged only 1.3% per year in the later period. There is now underway an intense worldwide debate over what kinds of national and international agricultural and food policies are needed to deal with this food crisis on a long-term basis. Pascal Lamy, the Director General of the World Trade Organization (WTO) has asserted that successful resolution of the WTO’s Doha round of trade negotiations could help provide medium to long-term solutions to the world food problem. In his 7 May 2008 report to the WTO General Council, he stated: ‘. . . a WTO deal could help soften the impact of high prices by tackling the systematic distortions in the international market for food. We all aim to substantially lower barriers to trade in agricultural products and diminish levels of trade distorting subsidies, particularly in developed countries that have hampered food production and investment in agriculture in many developing countries’. This exemplifies policy advocacy to place more relianceon ‘markets’.Morereliance onmarketsdoes, indeed, constitute part of the needed long-term response. But markets by themselves will not deliver long-term solutions to the food crisis. In reality, we need both ‘more’ and ‘less’ reliance on markets. First, how do we need more reliance on markets? We do not need a narrow WTO view of ‘free markets’ for agriculture – which in fact do not prevail in the globalized agricultural system and are unlikely ever to prevail so long as national governments are responsive to felt needs of their citizens for food security. But WTO advocates are correct in calling for the European Union (EU) and the United States to dismantle the forms of farm subsidy that until recently have resulted in ‘dumping’ and associated depressed farm prices in developing countries, thereby undermining incentives to expand agricultural production within those countries themselves. The United States supposedly has been on the side of free trade in WTO negotiations, but has consistently failed to really practice free trade in its own farm and trade policies. There is need for much more reliance on true market forces in the US agricultural sector, rather than heavy reliance on artificial markets created by commodity subsidies, highly subsidized crop and farm revenue insurance, taxpayer-funded disaster programmes that encourage production that is ecologically and *Corresponding author. Email: Thomas.Dobbs@sdstate.edu doi:10.3763/ijas.2008.c5003