Is the U.N. trying to keep Africa poor?

by Ricardo Hausmann, guest blogger

Thanks to Dani's blog, I learned about the website to track progress on the MDG. I was also impressed by the fact that the UN website also flagged a story calling for a 5-year freeze on bio-fuels production by a UN human rights expert worried about hunger in Africa.  The argument is pretty straightforward and has already been expressed by Fidel Castro and Hugo Chavez. It is that using food as fuel is a crime because food should be used to feed people, not machines. Making food a substitute for fuel raises its price and excludes the poor from feeding themselves. This obviously assumes that the amount of food is given and does not respond to demand, prices and technology. Whys is it that there is agricultural protectionism in this world? Presumably because if the forces of free trade were unleashed in this world, food prices would fall making (mostly rich-country) farmers poorer. At current technologies, there is an excess of arable land that could be productively used and hence the equilibrium price would be too low to support some sense of desired income for farmers.

If biofuels lead to more demand for agricultural products and land it is interesting to ponder how the markets will respond and how the gains and losses will be distributed. In this respect one wonders  what makes a person a human rights expert and how you can go from that expertise to a ban on a technology. What in their training allows human rights experts (and the UN organizations that support them) to work out the impact of an industry on prices, quantities, incomes, investments, growth and inequality. Apparently, this expert concluded that the fact that food prices have gone up is an indication that they did so because of biofuels production, not because of increased food demand in the fast growing developing world which today includes not only East Asia and India, but also much of Africa.  More interesting is the question of how human rights can so easily be promoted by limiting the freedom of people to decide what they grow and how they use their land and skills. And if this is the road to prosperity, why stop at 5 years? Lets ban them forever! In a different assessment, I have argued that a biofuels industry would probably have rather good overall effects on the world and especially on those developing countries that have ample good land that is not being cultivated. Much of this land is in Africa, but it is not being used mainly because infrastructure is inadequate and sugar production has been discouraged over the past three decades because of incredibly distortionary policies in the US and the EU.

Here is a graph of the countries with their relative endowment of  good land that is not being cultivated. It is based on some calculations done with Rodrigo Wagner, using the Geographic Information System.

Note the share of the Democratic Republic of Congo (ZAR),  Sudan, Central African Republic (CAF), Mozambique, Tanzania, Zambia, Angola, Chad and Cameroun. These are countries that have found very few products with which to connect their citizens to the global economy. Prohibiting them from using the biofuels industry as a stepping stone in their development is not something that should be done lightly.  How human rights would be affected is a pretty complex issue and it is irresponsible for the UN to come out against it based on the view of a human rights "expert". It may well be the most important thing to happen to Africa in a long time in terms of creating sustainable livelihoods and justifying the expansion of a sorely needed road infrastructure that could crowd in further investment and development.

Comments

[Per Kurowski]

The current biofuels vs. oil debate is erroneously framed.

The real oil crisis occurred in 1998 when the price of barrel fell under $10 per barrel and the Economist wrote in "The next shock?" March 1999, that "in today's condition the price would head down towards $5", and this is what primarily explains the current high prices of oil.

Had the consumer countries then acknowledged the growth in demand that for instance China would bring to the market (IEA did for instance not say a word about it for years) and expressed their willingness to enter into those reasonable long term contracts that would have allowed producing countries to make the massive investments needed, we would most probably have faced a completely different energy outlook.

Ricardo Hausmann in the FT of today in "Biofuels can match oil production” mentions the possibility of 95 countries investing billions of billions in cultivating 700m of acres, basically in order to produce a cap for the price setting capacity of OPEC.

The idea seems to me quite outlandish. The question to ask Hausmann is what he would do with those 700m acres when oil having been at last given such a real price floor really starts the pumps.

Why don't you give OPEC a price floor without having to go into the environmental and economic nightmare of cultivating 700m of acres and that will have to be subsidized in the future and that we pray will not include the Amazon?

[David]

Hello Mr. Hausmann,

I agree with all of the above, but wanted to add an important point. If in some locations food prices will rise due to biofuels (which certainly can happen)and in addition, these rising prices occur on markets where non-food growing poor people buy food, the danger that they could be worse off due to biofuel projects is real (That does not mean that overall welfare effects for a society are negative) Given the vulnerability of this people and their inability to cope with price shocks, a sometimes more careful approach towards biofuels could be helpful (Someone in the business said, the whole situation reminds him a bit of the "gold rush") Thus a complete ban of biofuels is absolute nonsense, a careful social (and environmental) impact study before implementing a biofuels project is a must!

One final remark: Environmental impact of Biofuels is far from being straightforward. There are deforestation risks (see Mabira forest in Uganda, or examples in Indonesia) and overall CO2 balance is disputed.

Regards

David

[Random African]

errrrr..
a ban on biofuels production would keep africa poor ?

that's a weird conclusion.

I mean, biofuel production is and will be subsidized in the west, and one has to hope that this fact would change before even considering the possibility of Africa taking up on production.
And let's even talk about subsidized imports by african governments..

[Chandan]

Having "ample good land" does not guarantee increased production. There are cases where production is stagnant even when there is good land. Either people are deprived of producing what they want to produce (because of conflict, displacement, and other exogenous factors) or farmers are simply disinclined to engage in productive production because of the distortionary agricultural policies in the EU and US. Models that show the possibility of increased production (and endowments) in Africa and South Asia are simply out of touch of the reality. The question is who is going to engage in production even if there is ample good land? The government or the people? People need incentives, which is missing at present, to engage in an economic activity like agricultural production, whose market is based inside and outside domestic border.

Also, given the present status quo in trade agreements(i.e. agricultural subsidies in the EU and US), it might hurt the poor people if there is an increased demand for biofuels.

[David a]

re: David

What do you mean by: "...and overall CO2 balance is disputed."?
Do you mean like Bjorn Lomborg-disputed? Or that the whole CO2-phenomenon is disputed?

[Random African]

he means the effect of biofuels on the overall CO2 balance. which many estimate to be between inexistent and negative as the production of biofuel needs as much or more fuel as it saves.

[JMG3Y]

Professor Hausmann wrote: "At current technologies, there is an excess of arable land that could be productively used"

This seems such a crucial point. What is the land currently being used for and what are the condition and potential productivity of the soils? What physical, social, cultural and economic factors are preventing the transition? I presume such information is somewhere on the Harvard Center for International Development website (or collaborator's websites) but I didn't spot it in a brief scan.

Thanks.

[an observer]

1. what in our training allows economists to discuss properly "well-being" or "welfare"? lets call amartya
2. how much is science, how much faith in markets?
3. just because chavez and castro are stupid...
4. the world needs dialogue and humbleness, not "figures-based" diatribe. the idea may be wrong, the concern though is pretty valid.

[Random African]

"What is the land currently being used for ?"

it's either not used or used for subsistence farming.

"what are the condition and potential productivity of the soils?"

the size of DRC and Brazil on the graph seem to imply that the Central African rainforest and the Amazon rainforest are in his calculation. Rainforests have relatively poor and fragile soils.

"What physical, social, cultural and economic factors are preventing the transition?"

Well.. Cuttting the Amazon and Congo trees to plant soy and maize is a bad carbon offset move as the trees actually reduce the CO2.
Socially you'll get to fight conservationists, environementalists, indigenous rights orgs etc..
Cultural factors ? Land ownership issues etc..
Economic factors ? well he says "at current technologies". Good luck with using it in DRC.

[Andrew]

The main issue being ignored in the agrofuel debate, in my opinion, is water. Nearly 90% of the available fresh water in most nations goes towards agriculture. Particularly in the African nations, there are 2-3 magnitudes of variation in the availability of fresh water in geographic areas, and most of the water tables with "unused" agricultural land are at the providing end of a water source for areas in which fresh water is an extremely scarce commodity. Agriculture is also far and away the #1 polluter of this world's water supplies.

Multiple independent studies have also shown that the net energy gain from agrofuels is almost nil, making it a sorry alternative indeed.

One must additionally take note of the ecosystem services provided by the millions of species in our rain forests, the destruction of which no one could possibly know the consequences.

Clearly, there is no need for human rights to enter the equation in order for this to be a complex issue, and the UN by way of the IPCC is aware of all of the aforementioned points.

[Andrew]

I misstated: it is not 90% of available fresh water, but 90% of fresh water used.

[Colin]

And I hope Africa wasn't relying on the UN to pull itself out of the blackhole the continents currently in. A real shame.

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