Waylaid Dialectic

May 19, 2010

Hunger thy Neighbour

Filed under: Trade — terence @ 1:21 pm
Tags: , , ,

Walden bellow writes:

The Philippines provides a grim example of how neoliberal economic restructuring transforms a country from a net food exporter to a net food importer. The Philippines is the world’s largest importer of rice.

At a first glance this seems like a meaningless charge to lay at the feet of neo-liberalism. As a country develops, it makes perfect sense that it will start producing less of its own food. Moreover, if rice can be imported cheaper from elsewhere, consumers of rice benefit, and factors of production previously involved in rice growing can reallocate into other enterprises or be compensated. This is hardly the end of the world. England imports most of its food. Is anyone suggesting it should de-industrialise to change this?

On its own a change from being a food exporter to being a food importer is consistent with rising welfare, and orthodox trade theory would suggest it is unproblematic.

However

Imagine for a moment you’re living in a world where demand for food is about to outstrip supply. Where food prices are about to start rising rapidly. A world a bit like this one described by Jeremy Harding in the London Review of Books. A world a bit like our own prior to the Great Recession. What happens in that kind of world? One thing which might happen, if you’re really lucky, is that some bright spark will come up with a new Green Revolution, a way of producing food much more efficiently. If this happens the day of reckoning gets postponed a while.

But if it doesn’t happen things get scary. In the Philippines case, initially, if the price of rice rises enough, the country might become a net food exporter again. Farmers will be better off; urban consumers worse. Walden Bello might be happy. However, if prices keep rising, acquiring food becomes a real problem for anyone who is not either wealthy or benefiting from rice exports. Then political economy kicks in. All of a sudden the masses start asking: ‘Why are we exporting rice when people here starve?’; ‘Why should farmers get rich while others suffer?’ These are perfectly reasonable questions. And if prices rise enough, and if enough people are made worse off, governments will likely act. Ideally, by taxing farm profits and redistributing income to those hurting from food prices. But such policies – tax and transfer – don’t always work very well in the shaky institutional environments of developing countries. Instead, what is likely is export controls – preventing or restricting the export of rice. This is pretty much what Argentina did with beef in 2006.

Such policy makes sense for an individual country. Just like raising tariffs did for individual countries in the face of the Great Depression. They make sense for any one individual country acting on its own. But if everyone does it (or at least all the big food exporters do) then everyone becomes worse of. Global trade in food starts to unravel compounding the already existing issues and everyone has less of everything. Call it hunger thy neighbour. Coming to a planet near you*.

*Or, more accurately, maybe coming to a planet near you. But let’s really, really hope it doesn’t.

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