… are making a comeback.
After years of timid liberalisation efforts in the agricultural sector the momentum appears to have been lost. Part of this has to do with the hypocrisy of our own rich countries, which has been all too evident throughout the
The spike in food prices during the first half of 2008 has also led to a renewed focus on agricultural development and public investment in poor countries, including new multi-billion-dollar commitments from the G8 leaders at their latest meeting last month. Despite the well-meaning intentions of the donors and the bureaucrats that will eventually manage these funds, the reality is that a large proportion of these funds will likely be channelled towards unproductive subsidies.
I do not think agricultural subsidies in poor countries are necessarily a bad thing – there are informational asymmetries and credit market failures that provide an economic rationale for them sometimes. I even had a fleeting moment of fame two years ago being quoted in defence of the economics of the Malawi fertilizer subsidy in a front page New York Times article. I also believe subsidies can be designed in ways that support market development, which is what we tried to support the Government of Malawi with.
But in practice these nuances become too complicated for the politicians in charge, for whom the heart of the matter always appears to be to increase (or maintain) the size of the subsidies, rather than increase their efficiency and impact. Delivering the subsidies through Government structures rather than market ones also seems too difficult to resist for politicians. Thus we get the massive write-offs of agricultural debts in
I got thinking about these issues again as I was reading “The Wealth and Poverty of Nations” by David Landes. Explaining why the Industrial Revolution and the era of capitalism took off in
As much as I like Landes’ book (a highly recommended read), I am a little disappointed at the way this issue is addressed. Dan Morgan’s “Merchants of Grain” (an obscure source, I know) discusses
Both the G8 leaders discussing poor countries today and David Landes discussing 19th century Britain focus exclusively on domestic agricultural production missing a factor at least of equal importance in achieving food security: liberalisation of agricultural trade, including getting rid of protectionist subsidies to rich-country farmers.
[Apologies for posting without including a single chart - that is a habit I don't want to get into]