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August 13, 2010

Feeding the Poor

A recent headline in the New York Times blared, "India Asks, Should Food Be a Right for the Poor?" [Jim Yardley, 9 August 2010]. Before examining Yardley's article, I'm going to answer the question about feeding the poor using information from Children's HealthWatch ["Why food matters," Washington Post, 12 December 2009].

"Studies show that growing up in a home without adequate food can damage children in many ways. Even if they are not hungry themselves, babies and toddlers in households with slight food shortages are more likely to be hospitalized, at risk for developmental delays and to be raised by mothers who are depressed. While not all children develop these problems, here are some of the other effects researchers have found can be associated with food shortages:

-- Slower brain and cognitive development by age 3.

-- Less ready for school by age 5.

-- Lower academic performance ages 6 to 17.

-- Slower physical, mental and social development through age 17.

-- Worse social skills and behavior, and greater chance of mental health problems, ages 6 to 17.

-- Children report themselves as less happy ages 6 to 17."

If those results don't convince you that feeding poor children is important, consider the broader effects on the family.

"Research shows that hunger and poor nutrition among children are rooted in a complex web of strains on poor families, not just a shortage of food. This is because parents must make hard trade-offs in how they spend scarce money, and groceries sometimes suffer when other bills mount. Here are some specific effects:

-- Children whose families are on waiting lists for government housing subsidies are eight times more likely to be underweight than those whose families already are getting housing assistance.

-- In poor families that do not get the government's main form of energy assistance, ... babies and toddlers are nearly one-quarter more likely than those who get the help to be underweight and one-third more likely to have been hospitalized."

Even people who are opposed to welfare programs in general understand that poverty can perpetuate and exacerbate future problems that inevitably become an economic drain on society. Addressing challenges like hunger can mitigate some long-term effects and are therefore cost-effective. Returning to Yardley's article, India does not dispute the importance of good nutrition for its poor; what they are questioning is how best to meet their needs. Yardley explains:

"For the governing Indian National Congress Party, which has staked its political fortunes on appealing to the poor, [the] persistent inability to make government work for [impoverished] people ... has set off an ideological debate over a question that once would have been unthinkable in India: Should the country begin to unshackle the poor from the inefficient, decades-old government food distribution system and try something radical, like simply giving out food coupons, or cash? The rethinking is being prodded by a potentially sweeping proposal that has divided the Congress Party. Its president, Sonia Gandhi, is pushing to create a constitutional right to food and expand the existing entitlement so that every Indian family would qualify for a monthly 77-pound bag of grain, sugar and kerosene. Such entitlements have helped the Congress Party win votes, especially in rural areas. To Ms. Gandhi and many left-leaning social allies, making a food a legal right would give people like Mr. Bhuria a tool to demand benefits that rightfully belong to them. Many economists and market advocates within the Congress Party agree that the poor need better tools to receive their benefits but believe existing delivering system needs to be dismantled, not expanded; they argue that handing out vouchers equivalent to the bag of grain would liberate the poor from an unwieldy government apparatus and let them buy what they please, where they please. 'The question is whether there is a role for the market in the delivery of social programs,' said Bharat Ramaswami, a rural economist at the Indian Statistical Institute. 'This is a big issue: Can you harness the market?' India’s ability, or inability, in coming decades to improve the lives of the poor will very likely determine if it becomes a global economic power, and a regional rival to China, or if it continues to be compared with Africa in poverty surveys."

Frankly, I side with those who are pushing to let markets help deliver social programs. Certainly there needs to be government oversight to help reduce corruption, but markets are generally much better at distribution than governments. One program that politicians in India might want to keep an eye on is being implemented in Kenya ["Exploring a market-based approach to malnutrition," by Sarah Murray, Financial Times, 27 January 2010]. Murray reports:

"Soon, low-income families in Kenya will be able to add to their diet a pre-cooked porridge product that is rich in proteins and vitamins and supplies the nine essential amino acids required by the human body. The porridge will not be delivered under the auspices of an aid agency or a government-funded programme. Most families will buy it as part of a revenue-based approach to attacking malnutrition. The market-based approach to malnutrition is something being explored by large companies such as Unilever, PepsiCo and Danone, as awareness grows of the need to address malnutrition – something that affects not only the poorest communities but also higher income populations – and the potential of doing so through for-profit products. However, some believe that there is a role for smaller entrepreneurs in coming up with hybrid models that can address what is often known as 'hidden hunger'. It is for this reason that Acumen Fund – a New York-based social venture fund that provides financing to enterprises using market-based approaches to addressing poverty – has invested in Insta Products, a Kenya-based private company that supplies organisations such as the World Food Programme and Unicef with emergency relief food. 'The majority of their revenue is going to come from the big aid contracts,' says Omer Imtiazuddin, health portfolio manager at Acumen Fund, which is working on these types of food products with the Geneva-based Global Alliance for Improved Nutrition, a non-profit group that promotes public-private partnerships to fight malnutrition. 'But for Insta this could be a significant source of revenue.' The food product Insta is developing – known locally as uji – is particularly well suited to Kenyan tastes, as the porridge is eaten by 80 to 90 per cent of the local population across all age groups and income segments. ... Acumen Fund’s investment will, over the next six years, allow Insta to establish a local factory to produce and distribute up to 12,600 tonnes of the porridge a year. It will also help pay for product launches and marketing campaigns. The porridge will be priced so that it is affordable for low-income families, with 25 US cents buying a 100-gramme packet that provides a nutritional meal for four."

Returning to India, I agree with Yardley that India sits at crossroad. One path will take it into a much more prosperous future and the other will keep it mired in bureaucracy, red tape, and poverty. Agriculture will play a significant role in deciding which path India takes. Yardley continues:

"India vanquished food shortages during the 1960s with the Green Revolution, which introduced high-yield grains and fertilizers and expanded irrigation, and the country has had one of the world’s fastest-growing economies during the past decade. But its poverty and hunger indexes remain dismal, with roughly 42 percent of all Indian children under the age of 5 being underweight. The food system has existed for more than half a century and has become riddled with corruption and inefficiency. Studies show that 70 percent of a roughly $12 billion budget is wasted, stolen or absorbed by bureaucratic and transportation costs. Ms. Gandhi’s proposal, still far from becoming law, has been scaled back, for now, so that universal eligibility would initially be introduced only in the country’s 200 poorest districts, including here in Jhabua, at the western edge of the state of Madhya Pradesh."

Although Yardley claims that India "vanquished food shortages" with the "Green Revolution" begun in the 1960s and 1970s, some analysts are concerned that the revolution is over ["Green Revolution in India Wilts as Subsidies Backfire," by Geeta Anand, Wall Street Journal, 22 February 2010]. Anand reports:

"Government efforts to continue [the Green Revolution] miracle by encouraging farmers to use fertilizers have backfired, forcing the country to expand its reliance on imported food. India has been providing farmers with heavily subsidized fertilizer for more than three decades. The overuse of one type—urea—is so degrading the soil that yields on some crops are falling and import levels are rising. So are food prices, which jumped 19% last year. The country now produces less rice per hectare than its far poorer neighbors: Pakistan, Sri Lanka and Bangladesh. Agriculture's decline is emerging as one of the hottest political issues in the world's biggest democracy. ... The setback of the Green Revolution matters enormously to India's future. The country of 1.2 billion has positioned itself as a driver of global growth and as a significant commercial power in coming decades. India likely will struggle to get there, and to return to the heady days of 9% economic growth, unless it figures out how to reinvigorate its agricultural sector, on which the majority of its citizens still rely for a living. ... India spends almost twice as much on food imports today as it did in 2002, according to the Ministry of Agriculture. Wheat imports hit 1.7 million tons in 2008, up from about 1,300 tons in 2002. Food prices rose 19% last year."

Keeping hungry populations fed is not just a challenge for India and African countries; hunger and food security are topics that will increasingly engage governments around the world ["Global hunger forces itself to the top of political agenda," by Javier Blas, Financial Times, 10 November 2009]. Blas reports:

"Hunger and food security used to be the staple talking points of agriculture and development officials. But the food crisis of 2007-08 ... elevated the issue to the highest level of government. 'Massive hunger poses a threat to the stability of governments, societies and borders,' [said] Hillary Clinton, US secretary of state. ... 'Food security is not just about food. But it is all about security – economic security, environmental security, even national security.' The move to involve the 'whole of the government', as officials describe it, signals how food security has become a global political preoccupation as the number of chronically hungry people tops 1bn and agricultural commodity prices soar. Policymakers are concerned that high food prices will steadily increase the number of those chronically hungry, triggering political instability in developing countries or forced migration towards rich nations. ... The emergence of food security as a key policy topic reverses almost 30 years of neglect, during which time the share of official development aid devoted to agriculture plunged; by 2006 it had sunk to 3.8 per cent, down from 17 per cent in 1980. ... Food accounts for 50-85 per cent of household spending in emerging markets, far higher than the 10 per cent seen in rich countries. ... The impact of higher prices is being compounded by the urbanisation of developing countries such as Pakistan and Ethiopia. City dwellers spend far more buying food than rural people. ... A straw poll among business executives, policymakers and agronomists at a recent conference held at the FAO found that 85 per cent feared further spikes in food commodities prices, and a third doubted the world could feed itself by 2050."

As recent events in Russia and Pakistan have demonstrated, climate change and natural disasters can result in unanticipated negative consequences. Although there is not a global shortage of wheat, for example, fires that devastated Russia's wheat crops resulted in increases in global wheat prices ["No Wheat Shortage, but Prices May Rise," by Graham Bowley and Andrew Martin, New York Times, 6 August 2010]. Although The Economist agrees that food security has risen to the top of the international agenda and that investment dollars have begun to flood the agricultural sector, it also believes that there are some worrying trends being seen that could undermine global agricultural trade ["If words were food, nobody would go hungry," 19 November 2009]. The magazine reports:

"Alongside the increases in investment and attention is something more insidious: a turn away from trade, markets and efficiency. Depending on how far this goes, the trend could undo much of the benefits of new investment. ... When Thailand and Vietnam, the world’s two largest rice exporters, banned exports, the Philippines, the world’s largest importer, concluded that the international grain trade could no longer be trusted to supply its needs. Fearing what might happen as a result of India’s poor [2009] harvest, ... the Philippines ... concluded contracts to buy 1.5m tonnes of rice—equivalent to 5% of the total annual trade in the grain. This is panic buying driven by mistrust. In turn, India is negotiating directly with Thailand and Vietnam for rice, which would further reduce the tradable supply of an already thinly traded commodity. The large 'land grabs' in Africa and Asia are also signs of distrust in world markets. Food importers which can afford it—like Saudi Arabia, Kuwait, China, South Korea—have opted to grow food on land they own or control abroad rather than import it through international trade. ... Trust in world grain markets seems weak among industrial countries, too. Western countries share the blame for the failure to complete the Doha round of trade talks. They have done little to reduce subsidies to biofuels, which have taken large quantities of maize out of food markets and put it into petrol tanks. ... And just as distrust of world trade seems to be growing, so confidence in domestic markets seems to be falling. According to a review of national farm policies by the FAO, around two-thirds of developing countries have undertaken some sort of non-market-based measures to support farmers since 2007, including input subsidies and price interventions. ... Perhaps the most striking trend is the move from 'food security' towards 'food self-sufficiency' as a goal of national policy. The first means ensuring everyone has enough to eat; the second, growing it yourself. ... This shift towards self-sufficiency coincides with growing scepticism about world trade, examples of price controls and more extensive government involvement. The FAO has even suggested the shift may amount to “a change of paradigm” in farming. Such a shift could undermine the hopes raised by new investment because farmers would get bogus price signals, efficiency would be compromised and because, says IFAD’s head of operation, 'it’s harder to do good projects where the policy environment is poor.' Food policy has never been free. For the past 20 years, agriculture in developing countries has been dominated by a gradual decline in investment and a shift towards a somewhat more liberal policy environment. The first trend is now being reversed, for the better. The worry is that the second trend will be reversed, too—for the worse."

I agree with The Economist that policies that undermine global agricultural trade are not beneficial for the future. The world is going to have to pull together to meet the food needs of a growing worldwide population. Although I believe that regionalization of agricultural trade will probably be the dominant pattern in the future, global food transshipments are also going to be necessary. If predictions are correct that the population will peak around 2050, the world will need every able-bodied individual to keep the global economy growing beyond that time. We can't afford to devalue the world's most valuable resource -- its people -- by denying them sufficient nutrition.

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