Food: Against Self-Sufficiency

Jim Surowiecki wants to turn the agricultural clock back to the days when countries forced their agricultural producers to feed only a national, not an international, consumer base:

When prices spike as they did this spring (for reasons that now seem not entirely obvious), the result is food shortages and malnutrition in poorer countries, since they are far more dependent on imports and have few food reserves to draw on…

That doesn’t mean that we need to embrace price controls or collective farms, and there are sensible market reforms, like doing away with import tariffs, that would make developing-country consumers better off. But a few weeks ago Bill Clinton, no enemy of market reform, got it right when he said that we should help countries achieve “maximum agricultural self-sufficiency.” Instead of a more efficient system, we should be trying to build a more reliable one.

Firstly, I think that the reasons for this spring’s price rises are not as mysterious as all that. Some of it was due to extreme climate events, like the drought in Australia. Some of it was due to stupid WTO rules banning the re-export of imported food. Some of it was due to the fact that countries such Argentina slapped punitive export taxes on agricultural products in a desperate and largely-futile attempt to keep domestic prices down. And the single largest factor, I think, was the fact that the Green Revolution has been largely powered by nitrogen, a/k/a natural gas: when energy prices were statospheric and rising, and Potash Corporation of Saskatchewan was the most valuable company in Canada, it was reasonable to expect that the cost of food would have to spike upwards just to keep pace with the price of fertilizer.

At the height of the food bubble, Paul Collier delivered an impassioned plea for exactly the opposite of what Clinton and Surowiecki seem to want:

The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market.

Collier’s argument made sense at the time, and it continues to make sense today. The food crisis didn’t repeal Ricardo’s law of comparative advantage, and it’s still sensible for countries to concentrate their agricultural production on what they’re best at, rather than trying to grow every crop necessary to feed themselves — even if such a thing were practicable, which it isn’t. Would Surowiecki really have Ecuador, say, cut back on its bananas in order to start growing corn, if that’s what Ecuadoreans need to eat?

The food crisis has driven home two important lessons: firstly, that global agricultural production needs to be increased, significantly, and secondly, that short-sighted agricultural and tariff policies can cause mass starvation. The solution to both of these problems is a bigger, freer market in agricultural goods — not a reversion to some impossible ideal of self-sufficiency.

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