Dealing with the global food crisis

Soaring prices for staple foods are creating political tensions from North Africa to Southeast Asia, and the world is scrambling for solutions. Last week, wealthy countries pledged hundreds of millions of dollars in crops, seeds, vouchers and funds for "food security." That may help to stave off the current emergency, but what are the long-term solutions?

Managing Globalization's regular experts from Columbia University have chimed in with their ideas. Here are excerpts from short articles by Jagdish Bhagwati, author most recently of "In Defense of Globalization," and Jeffrey Sachs, whose new book is called "Common Wealth: Economics for a Crowded Planet." The full articles are online at blogs.iht.com/globalization.

Jeffrey Sachs: The fundamental reason for soaring food prices is that growing global demand is outstripping global supply. The tight supply conditions have four elements: (1) chronically low farm productivity in many regions, notably sub-Saharan Africa; (2) the increasing diversion of U.S. and European food output into biofuels; (3) the increasing frequency and vulnerability to climate shocks; and (4) the increasing squeeze on water availability and new arable land for expanded crop production. Each of these should be addressed.

African farmers lack financing to buy critical inputs such as fertilizers and high-yield seeds. The donor countries would do Africa and the world a load of good by focusing less on shipping expensive food aid from Europe and the United States and focusing much more on helping African farmers to gain access to the inputs they need for higher productivity. A good model is Malawi's voucher program for smallholder farmers, which gives impoverished farmers in Malawi the access to a modest amount of fertilizer and improved seeds per household, at an affordable price.

At the same time, the rich countries should stop diverting their food crops, such as maize in the United States and wheat in Europe, and their food-growing land (such as the shift in Europe from wheat and maize to rapeseed) for biofuel production. Using food for biofuels is actually bad for the environment (through the high-energy inputs used to grow the crops and to convert them to biofuels) and is disastrous for global food balances.

A third step, to address the increasing climate shocks, water scarcity, and land scarcity should be much stepped-up research and investment to "climate proof" the food system and further raise yields.

Jagdish Bhagwati: The current food crisis raises questions concerning the appropriate responses in the short term, to take care of the immediate problems, and then in the long term. To understand both issues, it is useful to go back to the food crisis, no less alarming, that broke out after the failure of Indian, Chinese, Russian and other harvests simultaneously and dramatically in 1972.

The current crisis is less a result of droughts (except for Australia) and more a result of diversion of crops such as corn to biofuels production. The growth in demand from the developing countries such as China and India, with their dramatic growth rates, has also increased demand sharply. As before, hoarding has followed, as has the proliferation of export restrictions.

The present crisis reflects long-run factors which will likely not disappear. It needs to be addressed differently. For the short-term, it is practically impossible to tell governments not to hold back supplies. On the other hand, for the importing countries, the International Monetary Fund can provide short-term assistance for balance-of-payments support, so imports can be financed at higher prices. The permanent loss of income from paying more for imports can be offset by enhanced aid flows from multilateral and bilateral agencies for the poor countries.

For the long-term, the measures to moderate the prices of food grains will require attention to at least three policies where we will have to rethink matters: (1) a moderation of the planned reliance on biofuels and turning to nuclear energy instead; (2) the acceptance of genetically modified foods which promise to continue the green revolution in the modern age; and (3) the shift in governmental investment priorities to agriculture.