Another round on food prices

Johan Swinnen responds to Oxfam:

Let me start by thanking Dani Rodrik for putting a reference and summary of my report on his weblog. I also want to thank Mr. Bailey from Oxfam for his response and reference to two Oxfam reports.

In fact, unlike Mr. Bailey’s claim that they contradict my arguments, I think these reports are fully consistent with my arguments; and I invite everybody to read my paper and the Oxfam reports.

In the post-food crisis 2008 report, there is a section “Few winners, many losers” where it is concluded that “only in a few countries are small producers benefiting from higher prices” (p9). Then there is an entire section on “Why are small farmers losing?”, emphasizing that they are often net consumers, that they face many constraints, that small farmers are often women who face greater challenges, etc.

In the 3 pages Summary, there is no mentioning at all that some may have benefited in the developing world – it’s all about the losers. The most positive statement is that “The few developing countries that have followed different paths and invested in smallholder agriculture and social protection have proved to be more resilient to the crisis than their peers.”

Similarly, in two substantive press releases by Oxfam in 2008 on the same issue (*), there is no mentioning whatsoever about benefits (except for “big food trading companies” and some farmers in rich countries). Instead, Oxfam only writes that “the crisis is hurting poor producers and consumers alike” and “high food prices have pushed millions of people … into hunger and malnutrition” and “small farmers have failed to benefit from higher prices” because they are net consumers of food, they are not well integrated in market, they are vulnerable to changes in the weather, are not able to store food, and poor roads and infrastructure block them from getting to the market. Moreover, it is claimed that “farm workers are even less likely to benefit from high prices” because they are very exposed as consumers and have little hope of getting a better wage.

Let’s compare this to the 2005 report. One would assume that if small farmers are net consumers of food they would benefit from low prices – the core argument of the 2008 report. Yet, in the entire 2005 report, there is not a single mentioning that small farmers and rural households are net consumers of food, nor that they are not well integrated in the market and thus less affected by price changes, nor that farm workers may benefit from low prices as they are very exposed as consumers. In fact the only mentioning in the entire report of any benefits from low food prices is a reference to “some economists” (**) who point out that rich country dumping could benefit the urban poor by providing a cheaper source of staple food. However this argument is immediately dismissed as being short term thinking and that in the longer run it must lead to higher food insecurity. The 4-page summary mentions nothing at all about (potential) benefits from low food prices, or that farmers may be net consumers.

Mr. Bailey also claims that one should not expect anything else from a “campaigning organization” and that Oxfam’s role is to raise urgent issues up the agendas of policymakers, politicians and publics precisely to help the losers …

This is close to my argument made in the paper that “One explanation for these observations could be that one should not expect anything else from NGOs. One may argue that, after all, these are advocacy groups and their primary objective is not to provide objective and carefully balanced analyses, but rather to raise attention to problems and to pressure governments to do something about it, or to raise funds for their own projects.” (p9)

In summary, Mr. Bailey’s response supports my arguments.

Finally, while I actually agree with some of the policy prescriptions of Oxfam, I disagree with Mr. Bailey’s final argument that this is just a minor issue of not nuancing the headlines – an issue where only academics worry about. It is certainly the headlines, but not just the headlines. There is far less nuance in the main reports than claimed. Moreover, my concerns about this issue did not emerge from academic considerations, but from being intensely involved in policy discussion on food policy an poverty over the past decades, in Washington, Brussels and many other places. The absence of nuance in such headlines and in reports do have real world implications on the public debate and decision-making.

(*) see:

http://www.oxfam.org/en/pressroom/pressrelease/2008-07-06/g8-must-not-forget-poor-crippled-food-crisis

http://www.oxfam.org/en/campaigns/agriculture/food-price-crisis-questions-answers

(**) the reference is to writings by well-known economists A. Panagariya and J. Bhagwati.

Comments

[Timothy A. Wise]

As I noted in a previous comment on Oxfam's post on this blog, I think the issues here go beyond messaging and whether the pre- and post-food-price spike messaging is consistent. I pointed out that the recent scenarios were really ones of persistent low prices following by high price volatility. Volatility itself, as many economists will attest, benefits mainly traders and speculators. In that sense, there is no contradiction between Oxfam's point that persistent low prices have not been good for the poor in many developing countries and the point that the recent commodity price spikes weren't either. I explain the argument in more detail, and defend the argument for moderately high and sustained prices, in a post on Triple Crisis Blog:
http://triplecrisis.com/are-high-agricultural-prices-good-or-bad-for-poverty/

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