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close this bookFood and Nutrition Bulletin Volume 07, Number 1, 1985 (UNU, 1985, 80 pages)
close this folderRealistic approaches to world hunger
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View the documentRealistic approaches to world hunger: How can they be sustained?
View the documentRealistic approaches to world hunger: Public health measures
View the documentRealistic approaches to world hunger: Policy considerations

Realistic approaches to world hunger: How can they be sustained?

C. Peter Timmer
Harvard Business School, Boston, Massachusetts, USA.

We are searching for realistic approaches to solving the problems of poverty and hunger. What can an economist contribute to this search? Economists are, by their very nature and training, interested in incremental change-not in revolutionary or even structural change. There are two elements to realistic approaches. The first might be called "hunger action." What can we do now? We know the food is available. The world's farmers produce enough food, if evenly distributed, to provide 3,500 calories per capita per day throughout the world. Yet hundreds of millions of people do not get enough to eat. The estimates vary from 400 million to 1,200 million, but no matter what, the number is large.

How is a connection established between food availability and productivity of the globe and hundreds of millions of the hungry? It is certainly understandable that many people concerned about hunger become frustrated with trying to affect these problems at the level of government policy where programmes are developed that work through an economic structure that seems to do little to remove the inequalities in the system. The temptation is to turn to the local level and intervene where there may be an impact.

While there can be an impact at the local level, there is, however, a second aspect to realistic approaches to world hunger-the sustainability of the issue. If progress is made at the individual level, at the village level, in reaching people to generate social mobilization and cause the ferment at the local level, how do the problems stay solved? Several societies have, in effect, opened the granary and turned the food over to the poor, only to discover that they did not have the capacity to refill the granary. How does one build the productive base in the economy to continue to provide jobs, incomes, and enough food to refill the granaries?

Most governments must deal with significant tension between how these problems are solved in the short run and how the solution can be sustained. Only if those tensions are understood can they be resolved.

It is also necessary to distinguish between what is feasible in an ideal world and what is sustainable in the world in which we actually live. Should we be devoting our attentions to changing the world, to making it a more desirable and equitable place in which to live, or should we be devoting our energies to solving the problems in the world as it exists? Bertrand Russell said that all sane people adapt to the realities of the world. Only insane people try to change the world. So all improvements for mankind come from insane people.

I hope Russell's dictum is not true, because the approach I am about to present is one that takes the world as it is and strives for incremental change-to chip away at these problems at the margin. It is, if you like, the approach of a neoclassical economist to the problem of world hunger. I want to focus on changes in government policy that are complementary to the more local and individual-oriented approaches.

It is well recognized that the problem of hunger cannot be solved without solving the problem of poverty, and it is only in the context of government policy that we can solve the problem of poverty. There are major difficulties in designing policy so that it facilitates the more direct efforts at the local level to deal with the problem of hunger. But one approach is to focus the government's efforts on its food policy. The only sustainable solution to hunger is to eliminate poverty, and the historical record shows that the only way to do this is to have a healthy and dynamic food economy.

The problem of poverty and hunger will not be solved in any country by redistributing the existing resources. That might be a temporary fix, but it is not a long term solution. Two countries-China and Sri Lanka-are very clear examples of this point. Both discovered that their short-run policies that made food free or readily available to everybody succeeded in reducing infant mortality, increasing life expectancy, and achieving the most equitable distribution of food resources of any two low-income countries in the world. But both countries discovered that they could not sustain massive subsidies on the basis of an economy that was stagnating. When 30 per cent of the national budget is devoted to food subsidies-an amount larger than education, defence, and health combined-it points to major problems that the government is having in devising appropriate policies for its food sector.

To relieve the strain on the government budget, each country has introduced massive changes in the structure of the economy, changes that have recreated significant problems of equitable access to food As China and Sri Lanka show, these problems cannot be solved only by short-term measures. They come back to haunt.

Resources must be put into the food sector. It must be made to grow, in an equitable fashion, and rapid overall economic growth must be fostered. The production side of the food equation cannot be ignored, partly because of population growth and partly because diets will change if poverty is successfully eliminated. Higher incomes bring improved quality of diets, particularly more meat in the diet, which requires far more grain. A healthier food production sector is also needed because that is where much of the world's poverty is. It is where most of the world's productive jobs can be created in the next 10, 20, or 30 years. If agriculture is neglected, so is poverty.

Why is the food economy so important to the elimination of poverty? Because pumping purchasing power into the rural economy is the best and fastest way to redress some of the important inequities in income distribution around the world. But food production does not need to be increased by 10 per cent for rural incomes to rise by 10 per cent. Governments can do it much more quickly and maybe even more efficiently than that, given the characteristic biases that exist around the world against the rural sector. Raise the prices, pay the farmers more, and pay them what their production is worth in terms of the opportunity costs of the resources that it takes to produce it. But what will happen to the 10 million people in 20 different cities in the world cited by Joseph [in the following article] who depend on cheap food if farmers are paid what food is really worth? They will be in nutritional trouble, and that is why targeted food subsidies must also be designed to reach poor consumers. Food subsidies must be targeted by using food stamps or ration shops because food cannot be subsidized for the entire economy or the nation will go bankrupt, which will certainly not solve the problem of poverty.

The food sector must be seriously considered because of its links to economic development. Economic history records no examples of countries that have grown and become rich that did not undergo a revolution in agriculture that made fundamental changes in the productivity of their agricultural sectors. The ultimate success of agricultural development is a shrinking agricultural sector. This involves a structural transformation of the economy that reduces agriculture to a smaller share of economic activity. But a country cannot leap-frog economic history and reduce agriculture to a diminished share by neglecting it and declaring that the country is modern, prosperous, and rich. It simply does not work that way. It must be done the hard way.

What are the elements of a healthy food economy? Initiatives to assure adequate food consumption are a start. Agricultural development strategies in the past 20 years have neglected the consequences of those strategies for food consumption. Agricultural development is by its nature a long-term process. It takes at least 10 years to develop the research base. It takes 20 years to develop an agriculture where farmers respond quickly to both price signals and new opportunities and invest in productive inputs. In the interim, hunger remains a problem that can only be dealt with through sensible and affordable food subsidies.

Second, a production strategy is essential. The farm sector cannot be ignored because there is plenty of PL 480 food grain available {US Public Law 480, Title II, the "Food for Peace" programme). Food aid has served as a significant disincentive to many Third World countries to structure their priorities for the rural sector. The ready availability of food aid takes the heat off. The possibilities of massive new food aid initiatives is worrisome. All of the very painful lessons learned in the mid-1970s may be undone: the rural sector must not be neglected.

The third element in a healthy food economy is attention to the marketing system. Markets in socialist and capitalist countries alike play critical roles. Markets provide the most efficient vehicle for conveying signals to farmers and consumers. From a market perspective, high prices for food are good. Why? Because they indicate that a deficit exists; they provide a signal to the farmer to produce more and a signal to the consumer to restrict and substitute something else. By the same token, low prices reflect a surplus; they are good because they say the commodity is available in abundance. They indicate that society should not be putting its scarce resources into expanded production, and that it is fine for consumers to use more of it. Agriculture is one of the least stable industries in the entire economy, with frequent swings from surplus to deficit. The marketing system provides both the signals that adjustments are needed and the channels for finding substitute end uses or commodities.

But when prices rise or fall, where is the burden of adjustment? Who adjusts? At an individual level, it is the poor in a free market economy who have to pay the price of adjustment. Rich people do not change their food consumption patterns when prices change. It is the poor who are forced to adjust. At the international level, it is the poor countries that must adjust when there is global scarcity or surplus. Japan and the European Community are two of the most irresponsible in the world food system. Why? Because they do not adjust. The amount of their imports remains just about the same, no matter what the world price or global availabilities. They continue to export no matter whether the world is in surplus or deficit.

The burden of adjustment is on consumers in poor countries and in the United States, which still more or less operates a free price system. Adjustments to market signals are important because the instability is real. The policy question is: Who has to pay the burden of that adjustment? It is much better to have rich US consumers adjusting through their meat consumption than it is to have consumers in Bangladesh forced to adjust their caloric intake when grain supplies are scarce. It would be even better if rich consumers in Europe, Japan, and the Soviet Union were also adjusting.

The fourth element of a healthy food economy is the macro-economic setting. There are almost no success stories in rural development in the context of a hostile macro-economic environment. It is not the Minister of Agriculture who determines whether agricultural development is successful. The Minister of Finance and the Chairman of the Central Bank have the responsibility for foreign exchange rates, interest rates, minimum wage policies, the elements of macro-economic policy, budget allocations, and inflation. Those are the keys to rapid growth in agriculture because such growth happens only in a commercial environment-the marketing links between the macro-economy and the rural community are very powerful.

At one level we need to understand, from the history of development, some of the things that do and do not work in food policy. Not enough is known about household decision-making. Most countries do not trust the millions of farmers and the millions of consumers to make decisions in their own best interests. Government officials of most countries-including the United States, European countries, Japan, certainly the Soviet Union and China, and most of the Third World - want to tell their citizens what to grow and how to grow it, what to eat and when, and where to get it. They would like to command the economy to the extent possible because then they would be able to know the outcome. To rely on the results of choices made by tens of millions of individual decision-makers appears risky. All those people cannot be trusted to behave appropriately unless the government has a clear under standing of how farmers and consumers react to changes in prices, taxes, or subsidies, to new technology, or to a new feeding programme at the local school. If how people will respond can be predicted, policies can reach millions. Otherwise, regulation must be at the local level, and that is both inefficient and counter productive.

At another level, the failures and successes of our own policy experiments must be understood-an inherently analytical task. Why did a project work in Sri Lanka when it did not work in the Gambia? Why did Indonesia's macropolicy have a rural orientation when Kenya's did not? It is especially important to an economist to analyse the successes and the failures, because many of us still believe in Adam Smith and the invisible hand guiding individual decision-makers to social welfare. But there is no such invisible hand leading policy-makers to find right policies. If anything, the odds are against finding a good policy unless the analysis has been done to evaluate past policies to determine what is going to work.

The many "ideal" solutions are not appropriate for this paper. The most realistic answers are not new. Ways must be found to create productive jobs. Ways must be found to create price incentives for food production by farmers. Governments need to change priorities for public investment in agricultural productivity-all the way from local research stations and irrigation networks to roads and communications and markets. This requires discerning how to implement and target food subsidies for the poor and being prepared to maintain these food interventions for the long term, not just for a short period. We have learned from economic history that even rich countries have hungry people and that they need food interventions to reach them.

In a Third World context, a policy debate must focus on food prices because food prices are simultaneously the incentives to farmers and the cost to consumers. These countries directly face the dilemma between keeping prices low for poor consumers and keeping them high to increase the incomes of farmers and generate employment and industry in rural areas. That dilemma is difficult to reconcile, but learning how to resolve it involves a debate about food prices. Putting food prices on the policy agenda is the critical issue.

Food aid is a real economic resource, and countries need real economic resources in order to grow. They need capital investment and the jobs and the infrastructure that flow from it. But what is unique about the food in food aid, apart from its dollar value? Most of the benefit of food aid comes from the transfer of financial resources, not because of the food component in food aid.

Other forms of financial assistance can also be a valuable resource to developing countries-loans through the International Monetary Fund, the World Bank, and other development agencies. But these loans often come with conditions attached-the lenders do want their money back, usually with interest. The conditions of the loans usually address economic policy and management issues that lie at the core of national sovereignty. One of the reasons countries so fervently resist the conditions imposed on them by donors is that donors frequently do not understand the actual impact those policies will have in the particular circumstances of the country under consideration. Conditionally urging countries to adopt "sensible" policies is not new; it is not a product of the 1980s. It has been with us for at least two decades. It is a bit sobering to realize that what were thought to be the right answers for these countries 20 years ago, 10 years ago, and 5 years ago are now on the scrap heap of intellectual ideas about development. Consequently, the demands placed on the countries that are receiving assistance should be modest. What is needed is understanding of the individual circumstances and what the actual impact of a policy change will be. In almost no countries in the future will financial aid be large enough or important enough for a country to change its own priorities about what counts in development. That is not the same thing as saying that they should not listen to the World Bank or other agencies about the kinds of policies that might help, because comparative perspective and good analysis are essential.

In addition to productive jobs, rural price incentives, and financial resources, international trade is extremely important for providing the economic base for eliminating poverty. International trade provides signals to the domestic economy, and for the long term it provides comparative advantage-the opportunity to specialize. An economy that is not able to produce something cheaply enough to be competitive in world markets cannot grow because it cannot raise labour productivity. The only way to raise labour productivity is through specialization in trade, and very few countries are big enough not to have that trade cross the borders. To trade across borders a country must be competitive. A country cannot subsidize its foreign trade over the long run, and thus it has to find ways of trading efficiently.

Foreign assistance in building analytical capacity is important because helping countries understand the nature of their own problems is absolutely critical. Universities are crucial to this process, but not all the learning can take place in classrooms. This approach rejects ideology and tries to find things that will really make a difference through direct individual involvement and commitment by working at the grass roots. That is what most of us can do: work at the grass roots. If by doing so we can help a village to grow and reach up to that food system that is reaching down towards it, then something real will have been accomplished. It is establishing that link between the rural economy, the village economy, and the households that is important. If a policy environment that fosters that link is not established, then grass roots efforts will produce only local and isolated successes. A sustainable solution to hunger requires both.