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Food Price Policy in an Era of Market InstabilityA Political Economy Analysis$

Per Pinstrup-Andersen

Print publication date: 2014

Print ISBN-13: 9780198718574

Published to Oxford Scholarship Online: January 2015

DOI: 10.1093/acprof:oso/9780198718574.001.0001

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(p.vii) Preface

(p.vii) Preface

Food Price Policy in an Era of Market Instability
Oxford University Press

In 2007–8, international market prices for rice, wheat, and corn all spiked sharply upward. By April 2008, the price of maize (corn) available for export had doubled compared to two years earlier; rice prices had tripled in just three months; and wheat reached its highest price in 28 years. Riots broke out in a number of developing countries, and it seemed that hunger was certain to increase as well. The New York Times, in a lead editorial, declared these surprising changes to be a ‘World Food Crisis’. Robert Zoellick, President of the World Bank, warned that high food prices were particularly dangerous for the poor, who must spend half to three-quarters of their income on food. ‘There is no margin for survival’, he said.

A global financial crisis in late 2008 to early 2009 caused international food prices to fall briefly, but then in 2010 wheat prices increased sharply once more, and just as this second food price spike seemed to be passing a severe summer drought in the USA in 2012 sent international corn prices spiking upward yet again.

This unusual series of international food price spikes between 2007 and 2012 reset global expectations and debates over food. The spikes were not just disruptive on their own terms, they called into question what had been a comforting assumption among most economists that over the long term agricultural commodity prices would fall rather than rise, and that international food markets would be a reliable source of supply.

Controversies persist over both the causes of these commodity price spikes and their impacts on poverty and malnutrition worldwide. In their recent State of Food Insecurity in the World (2012), the Food and Agriculture Organization (FAO) reduced their estimates of the incidence of malnutrition due to the 2007–8 food crisis, noting that ‘Some large countries were able to insulate themselves from the crisis through restrictive trade policies and functioning safety nets, but trade restrictions increased prices and volatility on international markets’. Moreover, some import-dependent small countries, especially in Africa, were exceptionally hard hit. A key distinguishing feature was the success of food security policy implementation to mitigate the effects of world markets on domestic outcomes.

(p.viii) Most countries pursued a wide range of policies to stabilize their food prices at home. Import tariffs were reduced; exports were taxed or banned; parastatals imported grain; buffer stocks were released; domestic prices and production were subsidized; and safety nets were expanded. Policies typically utilized existing institutional mechanisms, designed more often to address production shortfalls rather than world price spikes, with few innovations in policy regime noted. It was also easier to expand existing safety nets than to institute new programmes. Political decision-making at times hampered the need to change or expand the scope of those institutions. As a consequence, a wide variety of outcomes was observed, due as much to problems of implementing existing policies as to picking the right mechanisms.

Contemporary scholarship on this dangerous new market dynamic has long been hampered by a poor understanding of how national governments make policy decisions when caught in a suddenly destabilized international food price environment. Why do most cut tariffs, some subsidize imports, and a few ban exports? Why do some have domestic buffer stocks they can release, while others do not? When they release such stocks to keep domestic prices low, do they target the poor and vulnerable, or only the urban middle class and their own power base? Why do some try to keep domestic prices low for consumers under circumstances of shortage, when a price increase might be necessary to encourage more domestic farm production? Why can some governments quickly adjust policy settings to adapt to changing international circumstances, while others face problematic delays? Why do some countries focus on stabilization, helping consumers broadly, while others utilize safety nets to protect the poor? Reliable answers to these political economy questions are elusive because they require carefully structured comparisons of policy actions taken within dozens of separate political systems, something that can be accomplished only by a large and well-led international team of scholars, each with a different country specialty, but all asking the same questions under a common research template, applied over a common time period.

When the original price spikes of 2007–10 took place, it was Professor Per Pinstrup-Andersen, previously Director General of the International Food Policy Research Institute (IFPRI), who saw the research opportunity, assembled the necessary international team of scholars, and hammered out the common political economy template. The results of this careful effort are available to all in this newly published book. As advisors to this ambitious project, we knew it would be a one of a kind achievement that political economy scholars would be able to use for years as a valuable resource. We witnessed the diligence and commitment of the research team both in polishing (p.ix) the separate country chapters and then in assembling and comparing the findings of these chapters to derive the larger generalizations that finally emerged. We commend the research team and its leader, and thank them for this important book.

Philip Abbott, William Lyakurwa, and Robert Paarlberg (p.x)