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Higher Wheat Prices Mean that People Go Hungry
The NYT discusses the impact of higher wheat prices around the world. One of the effects is that people in some parts of the world can no longer afford enough bread.
This really should not be a surprise, but it might be to the NYT editorial board. They have repeatedly condemned U.S. agricultural subsidies in strong terms, claiming that they were obstructing development in many poor countries. While there was some truth to the NYT's complaints, the reality is far more ambiguous. The higher world agricultural prices that would come from eliminating U.S. subsidies benefit producers in the developing world, however they hurt consumers. The net effect on the developing world from eliminating these subsidies is likely to be small in either direction, and there is no doubt that there are some big losers in the process.
The NYT was very misleading in implying that the elimination of U.S. agricultural subsidies unambiguously helps the developing world, as this article makes clear.
--Dean Baker
COMMENTS (9)
Dean,
Are these wheat prices the effect of real supply and demand or is this a result of the hedge funds looking for another market to play?
For example wasn't there a study that said of a $90/barrel of oil %30-35 of it is from speculation. That means we are paying %50 more so that the hedge funds can gamble.
Also:
http://marketplace.publicradio.org/display/web/2008/03/07/meaw_pm_adv_rice_market
James Barnett: "The thing to remember for rice is again it's a small market in the US. It definitely provides opportunities to trade but it can only absorb so much speculative interest before it quits functioning as an active market reflecting real prices in the real world."
The danger is prices on the exchange could spike. Chicago's rice market is used as a price benchmark around the world. So inflated prices here could hurt countries that depend on rice as a primary food source.
Are people going to go hungry just so hedge funds can gamble?
Posted by: Anonymous | March 8, 2008 6:45 PM
Maybe higher prices and less US subsidies help develop their export markets and improve their governance. Its healthier than donating food and controlling their markets.
Its like a version of the oil curse.. Its about bad governance, not a physical shortage of wheat.
Zimbabwe was once a large food exporter in Africa.
There are also containers of donated food rotting in Haiti's docks..
http://www.guardian.co.uk/world/feedarticle/7364422
I bet if it were homegrown food for export there would be riots if it was going to waste..
Posted by: Anonymous | March 8, 2008 11:42 PM
Off topic, but ...
Dean Baker was quoted in the NY Times, Saturday IIRC on our lousy financial situation.
Doug Henwood says that when things really get bad, reporters start asking his opinion.
I suppose the NYT was doing the same thing with Dean? Normally, the liberal/left is ignored.
Posted by: John | March 9, 2008 10:43 AM
In part they are discussing different subjects.
For example, eliminating agroproducer subsidies here in the U.S. may allow 3rd world agroproducers to export more to the U.S. for cash sales, but this does not in ANY way directly suggest that the poor in that very same hypothetical 3rd world nation would in any way benefit.
If some large locally or multinationally owned 3rd world agroproducer exports more crops to the U.S., it does not automatically suggest that this new income for the large landholders will manifest as income for local poor people.
The two issues are not directly connected.
A local large landholder could grow very wealthy on export crops while the local poor become more impoverished.
Malawi has had a bit more luck helping its small and medium producers by having the government directly aiding farmers with fertilizer, fuel, water, etc. Production and incomes have gone up while famine has plummeted.
The NYT does not care about the fortunes of third world poor people, and although U.S. subsidies for its own agroproducers is hypocritical given its doctrine of "free trade", the latter may or may not help the former.
(I'm in favor of stopping most of these ridiculous subsidies, but I try to be pretty clear eyed about the NYT's interests in the matter.)
Posted by: El Cid | March 9, 2008 11:15 AM
Are people going to go hungry just so hedge funds can gamble?
Posted by: Anonymous | March 8, 2008 6:45 PM
you ask that as if discussing a bad outcome. Of COURSE people will go hungry 'just' so hedge funds can gamble. People will in all likelihood starve to death for just that reason.
But they'll almost all be anonymous brown people, living on pennies-per-day in distant places with (to most Murkins) unpronounceable names.
MUCH better that they starce than that some hedge-fund trader NOT make his Million-Dollar bonus.
WTF is wrong with you?
Posted by: Anonymous | March 9, 2008 1:47 PM
For the record, I think that most U.S. farm subsidies are wasteful, but I think the NYT and proponents of recent trade deals have hugely misrepresented the effect that their removal would have on the developing world. Some countries who are large producers of crops that directly compete with U.S. production may benefit (although this says nothing about distribution), but other countries will lose by having to pay more for essential agricultural products. This fact should have been evident to any informed observer.
Posted by: Dean Baker | March 10, 2008 6:42 AM
it's really make me surprised
thanks for posting
Posted by: العاب | March 10, 2008 6:48 AM
Good article .. it's really make me surprised
Posted by: العاب | March 10, 2008 6:57 AM
Dean,
This should have been a no-brainer for you.
Most U.S. farm subsidies are the most pernicious form of protectionism...they were not meant to be...yet, they are far worse than any tariff.
Posted by: S Brennan | March 10, 2008 11:21 PM