It's Complicated
Peter at The Duck reminds readers of the larger cycle leading to higher food prices worldwide.
To recap, this implicates:
- Global Warming causing a drought
- High oil prices, raising costs for farmers, shippers, and sellers
- Ethanol and bio-fuels (meant to reduce the first two) sucking corn off the market
- Farm subsidies distorting food prices
- Lack of open markets
- Development in large countries (China, India) leading to increased meat consumption
- Integrated global commodities markets, allowing for speculation
Add in Australia's water pricing policies.
So, I assume the solution will be just as complicated. That hasn't stopped Tyler Cowen form trying to advocate one: «...governments are making matters worse by constraining what farmers can store and export.»
Yet, Dani Rodrik comes along and complicates the picture again.
I am puzzled more generally by how the commentary on the world food crisis misses this basic point. It's all about how the price rise is an unmitigated disaster for the world's poor, with nary a comment on the fact that some of the beneficiaries are also among the world's poorest. (Some of you will say that all the price increase is absorbed by margins, with little of it showing at the farm gate--but I doubt that is true.) The panic on the part of governments is understandable. They are much more sensitive to the urban poor, who can create greater havoc than the rural poor. But what about the rest of us?
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