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Thursday, 26 November 2009

How to feed the world

In 1974, Henry Kissinger (Henry Kissinger), then Secretary of State, spoke at the first World Food Conference that no child will go to bed hungry in 10 years. Slightly more than 35 years later, during a UN food summit in Rome, 1 billion people go to bed hungry.

Promise Kissinger failed and will continue to get worse. None of the agricultural problems that led to a surge in food prices and the increased number of hungry in 2007-2008, has not been resolved. In 2050 the world population will grow by one third, but the demand for agricultural products will grow by 70%, the demand for meat will double. This growth is in some sense can be considered good news because it means the growth of welfare in poor countries and middle-income countries. However, this growth would be achieved without development of a large number of new land by farmers (there are some opportunities for expansion, but the small ones) and without the use of large quantities of water (in some parts of the world's water supply is very problematic or worse). Moreover, this growth will occur against the background of the struggle of farmers with the consequences of climate change, which will ultimately do more harm than good for the farmland around the world.

May already be too late to avoid a new round of price increases. Despite the global recession and the biggest grain harvest recorded in 2008, food prices are rising again. However, in countries now have a brief opportunity for the approval of long-term pricing policy, without the distraction of panic measures. Politicians need to do two things: invest in the productive capacity of agriculture and improve the functioning of food markets.

The Government made the first but not the second. Over the past year, investment is growing faster than expected. But distrust of markets and the reaction against farm trade, grow. If the government not keep these impulses, they will reduce the profit from the growth of investment.

A quarter century of inactivity
Over the past 25 years, investment in agriculture declined relentlessly. In 2005, most developing countries have invested about 5% of government revenue in agriculture. The share of Western aid devoted to agriculture fell by about three-quarters between 1980 and 2006. This reduction in investment performance hit. During the green revolution in the 1960's, productivity grew by 3.6% per year. Now, this growth is only 1-2% per year in poor countries, the yield does not increase at all.

Fortunately, the jump in food prices in 2007-2008 forced the government to wake up from the 25-year neglect of this issue. World Bank and many developed countries has doubled investment in farming in poor countries. In themselves poor countries, agriculture ceased to be a minor matter for the government, and if the Minister of Agriculture to do something - it becomes an event that should be concerned about everyone. That's how it should be: agriculture, undoubtedly, is the most important economic activity in poor countries.

Part of the new expenditures of public funds account for insurance of poor farmers, which is also the basis for poverty reduction: three-quarters of the world's poor live in rural areas. However, ultimately, the money will bring dividends, will be established only if the access of farmers to markets. Lack of reliable markets - is a great obstacle to rural development, because without this, farmers have no incentives for efficient growth. Therefore, development of roads in rural areas is welcome, as well as measures to increase the quality of the local markets (for example), dissemination of information on prices and the construction of silos. There is also a sense in the temporary subsidies better seeding and fertilizing the land in countries where local markets can not ensure this, all these measures can serve as an example of correct market failure.

Stimulating food production without the development of new land and water use will also require new technologies that will play an increasingly important role in the next 40 years than it did in the past 40, when people are somehow lived through the results of the Green Revolution. Technologies involves many things: drip irrigation, no-tillage treatment, more efficient use of fertilizers and pest control. One way to increase yields clearly stands out: the development of genetically modified (GM) crops, which, for example, requires less water. GM crops may become more acceptable if they are developed in state institutions, rather than in large private companies, and seedlings will be given, rather than sell.

I'm not alright, Jack
There is, however, the danger inherent in all activities of government: the temptation to self-sufficiency. Rising food prices in 2007-2008 led all countries rightly worried about the "continuity of food supply. However, over the past year "continuity" (meaning that should be enough for subsistence) was shaded by "self-sufficiency. Self-sufficiency has become a common priority for policy in many countries.

Self-sufficiency in itself is not bad. If poor countries have a comparative advantage in producing their own food, these must be used (many will do so). The problem is that the new rhetoric of self-sufficiency coincides with increasing distrust of markets and trade. Importers of grain is no longer trusted by the world markets in ensuring their needs. Illegal invaders "fall upon the land overseas to grow food. Everywhere, governments are more actively take part in agriculture through subsidies on capital investments. In these circumstances, self-sufficiency can be easily vovzvesti security barrier.

It is not beneficial to anyone. As shown by the European experience over the decades, the pursuit of self-sufficiency, especially excessively wasteful. Self-sufficiency and would lead to the freezing of the structure of agricultural production at the very moment when climate change affects various parts of the world in different ways, and trade between them is more important.

The Economist

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