The so-called Global Food Crisis: Misconceptions and Facts

Recently, a commentator published an article about the free market and food security on a much patronised Ghanaian news website. Full of passion, but, unfortunately, lacking in depth of analysis, his views summarises a great deal of the reactions to the so-called global food crisis that have come from leftist or left of center pundits in recent weeks.
In markets food prices increase daily.
In markets food prices increase daily.

Recently, a commentator published an article about the free market and food security on a much patronised Ghanaian news website. Full of passion, but, unfortunately, lacking in depth of analysis, his views summarises a great deal of the reactions to the so-called global food crisis that have come from leftist or left of center pundits in recent weeks.

We are taking the opportunity therefore to use excerpts of his article to address many of the left-leaning misconceptions that have characterised the debate so far.

In said article the writer, one Agbodza, accuses the free market of many crimes, though he takes pains to prove none of them. He acknowledges that the reasons advanced for the general rise in food price levels are numerous and complex, but offers in the same breath a point of view that suggests that free-market driven, private sector - based policies are solely responsible for the supposed crisis. To crown this string of insights, he asserts, without evidence or argument, that "However, the free market private sector has little interest in feeding Ghana by meeting the costs of this required investment."

he facts of the matter, as far as the food security issue is concerned, are in direct contradiction of most of Mr. Agbodza’s claims. We will examine his key assertions one after the other.

"You have land-producing food and you switch it to produce bio-fuel when you cannot feed yourself; who in their right mind will do this except the lunatic free market."

The free market or its proponents have never been the driving force behind the fashionable trend towards farmland conversion to bio-fuel use. Indeed, by free market terms, bio-fuel production was unprofitable, and therefore unadvised, until very recently. The steam that pushed farmers to switch to bio-fuel production in certain countries was supplied by government and foundation subsidies under the well-intentioned, but misguided, belief that bio-fuels could replace less environmentally friendly fossil fuels. The most enthusiastic national producers of bio-fuel, on GDP relativity terms, were countries like Malaysia and Brazil. None of these countries can be accused of a history of being pushed around by free market fundamentalists. More often than not, centrally devised "national development plans" made bio-fuel exploitation a cardinal feature of economic policy. The Brazilian project Mr Agbodza cites has been brought to Ghana under the auspices of the unquestionably leftist Lula Da Silva, President of Brazil, not libertarian activists in Rio.

Mr. Agbodza makes the elementary error that free market ideology is identical to "corporatism", which one will suppose equates to a belief that "syndicalism" is the same thing as scientific Marxism. Rule by giant corporations has been seen under both fascist and communist regimes, but is abhorred by all classical liberals. Corporations are not natural allies of free market enthusiasts. In fact for each group of shareholders of corporation X, the best market conditions might actually be found in the situation where corporation X enjoys a monopoly in the industry granted by a corrupt government. Classical liberal free market ideology is about "competition, competition, competition". The central tenets of the libertarian faith, such as comparative advantage and property rights, are all glued together by the principle of just, free, and unfettered competition amongst enterprises to service the self-determined needs of free individuals on a level playing field guaranteed by impartial institutions. We sincerely doubt that Mr. Agbodza, when he refers to the free market, actually understand the matter at hand to adequate depth.

"What we know for a fact for Ghana is that like all other developing countries we now have to spend a lot more on food imports. There are estimates developing countries spend up to 80% of their budget on food imports."

The point Mr. Agbodza wants to make with the statement above is not clear, but it appears he is rehashing the old theme: "imports bad, exports good". Once upon a time, that viewpoint would have been laughed out of court as "mercantilism". Why do we have to spend "more" for food imports? For as long as I can remember the concern of leftist-statists like Mr. Agbodza had been that we were the victims of price-dumping. As a result of the Common Agricultural Policy, they argued, we, here in Africa, were being inundated with cheap food. Now that a temporary blip in food prices is being observed, the argument has taken a 180% turn: we are being hammered with expensive food. The resolution of this false puzzle is a matter of basic economics.

f food imports were indeed expensive, local producers would simply have exercised their comparative advantage (akin to what some call market arbitrage) and begun to recapture market from importers. If there is a genuine case of alarmingly increasing food imports (an odd scenario giving that malnutrition is supposedly still a concern, and we are yet to see surplus imported food being carted into the sea), the sound inference can only be that they are relatively cheap. If they are, then Ghanaians are saving resources (by buying relatively cheap food) that can be used in other economic endeavours. If a trend is discovered that suggest categories of food that used to be produced in Ghana are now being imported, then that trend should be seen as an economic signal highlighting Ghana’s growing uncompetitiveness across those relevant categories. Those signals are then used by shrewd local investors to shift resources around to areas where Ghanaian production factors suggest greater competitiveness. Jobs lost in the old uncompetitive economic sectors are re-gained by new jobs being created in the competitive economic sectors. A decline in public sector productivity led to retrenchment across the civil service while an improvement in the macroeconomic indicators gingered growth in the banking sector. The consequence so far has been that newly minted gems from the University of Ghana Business School troop to the banking halls of Ring Road Central rather than to the HR department of Cocobod.

To return to the issue of food security, if readers will allow us. Considering that somewhere between 60% and 65% of Ghanaians are engaged in the agricultural sector, whereas in most developed countries the corresponding percentage is lower than 5%, one clearly sees the argument that this amounts to underutilized human resources. The critical issue therefore is that the sector can do with greater efficiency. The cry over rural folk departing to urban centres is misplaced if not positioned within the broader context of efficiency. Basic economics means that the more peasant-style farmers leave the rural areas, the more land is freed. The lower agricultural land is priced (note that there could also be a transfer of "unproductive" agricultural land to more productive use such as, perhaps, tourism) and the more attractive commercial farming becomes. Mr. Agbodza breezily dismissed such arguments as harking to a tired old free market theme of "equilibrium". We will not use that term. We prefer "efficiency". Efficiency means that resources will go to those areas that will best generate economic outcomes that reduces poverty by creating newer, better-paying, jobs, and wealth for entrepreneurs most likely to re-invest (rather than old, competition-hating, elites who probably fancy the Kensington homes Mr. Agbodza rails about).

The private sector will only be interested in solving our food problem if there is higher normal or supernormal profit compared to other avenues and food (rice) imports.

 

Bright B. Simons is Associate Editor of www.AfricanLiberty.org and Director of Development of IMANI: Centre for Education & Policy

 

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