In a very good article in the latest issue of Science, Jo Swinnen and one of his coauthors explain that, as with many other changes in economic circumstances, rising food prices are a boon to some people and a bane to others. Here is the summary:
Spikes in food prices have pushed food security to the top of the global policy agenda. Price increases have mixed effects on poverty and hunger: They increase the cost of food for consumers but increase incomes of farmers, who represent the bulk of the world’s poor. Net effects will differ depending on whether poor households or countries buy or import, or sell or export food (infrastructure, institutions, and market imperfections will play roles, as well). Policies to influence prices imply winners and losers, not just between rich and poor, but also among the poor. These nuances are too often absent in public debate, to the detriment of policy-making. Moreover, the arguments put forward today, that high food prices generally hurt the poor, are in contrast with those put forward a few years ago, that low food prices were hurting the poor.
Put simply, when food prices rise, food producers benefit and food consumers lose out. But while the media used to causally link low food prices to poverty and hunger, it was high food prices instead that were blamed for poverty and hunger during the food crises of 2008 and of 2010-2011.
Swinnen and his coauthor link the change in perceptions to the fact that donors react more to negative stories than they do to positive ones, and so NGOs might sing a different tune depending on the context — “low food prices are bad” during episodes of low food prices, “high food prices are bad” during episodes of high food prices.
Of course, this must necessarily remain speculative given that it is very difficult (if not impossible) to credibly identify the causal impact of NGO activity on perceptions of the differential welfare impacts of changes in food prices on different groups.
Still, the point needed to be made that food prices have different impacts on different groups, and Science is perhaps the best outlet to make that point. The only claim I find contentious in the article is the claim that food producers represent the bulk of the world’s poor. Maybe so (it is difficult to know given issues of measurement and bad data), but being a producer does not necessarily mean that one is a net seller of food — many food producers are smallholders, who must inevitably buy food from market in order to ensure their subsistence.
What truly matters as far as food prices go is one’s position vis-à-vis the market: net buyer of food, net seller of food, or neither. When food prices rise, net sellers benefit and net buyers lose out. When food prices fall, net sellers lose out and net buyers win out.
Since the vast majority of the world’s seven billion individuals are net buyers of food, if we have to pick a soundbite for the media, it is perhaps best to stick with the soundbite that says that high food prices are bad. My belief is that good media outlets will go beyond the soundbite and convey the complexity of the impacts of changes in the price of food to their audience.
(HT: Mathieu Perreault, La Presse.)