Was the Global Food Crisis Really a Crisis?

By Derek Headey, guest blogger

 

Have higher food prices hurt the poor, or helped them? So far everything we "know" about this topic comes from simulation studies, all of which estimate that poverty or hunger went up by somewhere between 63-160 million people as a result of higher food prices (see here and here and here for previous blogs by Dani on this topic). In a new IFPRI discussion paper I show that these simulations suffer from serious flaws, and that their results are largely contradicted by self-reported food insecurity trends from the Gallup World Poll. The poverty simulations are often quite nice studies, but they are partial equilibrium studies with no wage adjustments, no changes in other commodity prices (like fuel, cotton, coffee, minerals), and no changes in incomes (which were growing all around the developing world from 2000-2008). Hunger simulations have more fundamental problems. Basically they count calorie availability, but the problem with a food or a financial crisis is that it is an access shock, not a production shock. Hence the FAO had to rely on a USDA model (which included reduced "calorie imports") to provide estimates of changes in hunger during the crisis. Yet in my paper I show that USDA's estimates of calorie availability (from early 2008) seem to be contradicted by USDA's own historical data on cereal availability.

Given the limitations of simulation studies, it is surely worth asking what alternative methods have to say. In my paper I make use of the Gallup World Poll surveys conducted in a large number of developing countries both prior to (2005/06) and during the food crisis (2007/08). Gallup (2011) asks a highly useful question on food insecurity: Have you or your family had any trouble affording sufficient food in the last 12 months? Inevitably, there are obvious caveats to any self-reported indicator, as well as some not-so-obvious caveats such as an overly large decline in self-reported food insecurity in billion-plus China. But in the paper I show that changes in this variable have the attractive property of being robustly explained by both food inflation and economic growth. Moreover, even if I make very conservative assumptions about food security trends in China and India, or if I predict changes with an econometric model (which irons out any outliers), then I still find that self-reported food insecurity went down by 63-87 million people, if not more (see the table). In short, I find the exact opposite of the World Bank and USDA/FAO simulations, apparently because economic growth more-than-compensated for any adverse effects of higher food prices. So . . . new data, new doubts. Is it time for international agencies to seriously rethink their approach to measuring food insecurity?

Table 1—Some alternative estimates of global trends in self-reported food insecurity

Estimation scenarios	Estimated change in global food insecurity, 2005/06 to 2007/08
Raw results, 70 countries	-408 million
Raw results, 70 countries, plus assumptions for 16 omissions	-326 million
Raw results, 68 countries, after excluding China and India	+9 million
Raw results, 69 countries, after excluding China	-132 million
Raw results, China and India trends adjusted by error margins	-250 million
Raw results, China and India reductions=3 percentage points	-63 million
Predicted change with econometric model, 88 countries	-87 million

Source: Headey (2011) estimates from Gallup World Poll data.

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Derek, this is very interesting, and I look forward to reading it. I happen to be working on a related topic right now and have been struck by the range of "explanations" of the food crises. The party line seems to have shifted from attributing the '07/'08 crisis to a mixture of supply/demand, weather and other factors with commodity markets acting as a catalyst, to a more recent acceptance (I'm thinking of Timmer here, in his interesting work on rice markets) that commodity markets played a bigger role given the inexplicable plunge in prices. I think your work here will be a good addition to that picture.

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You've made some pretty valid arguments and I'd have to say that the food crisis, in my opinion (even if not an educated one) is very much real.  Would like to hear some more on this topic, even though I work in OHS training these things affect people in every country and industry and we need more education as it will directly affect our health and safety in the long run!

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