How the Free Market Leads to Famines

The Economist’s latest article on global developments in agriculture involuntarily provides arguments for critics of free trade: the stampede for poor countries’ lands, price volatility and, above all, the success of national policies for food self-sufficiency. Laurent Pinsolle tells you more about it.

In its November 21 issue, The Economist looks into the fascinating theme of agriculture and wonders what we shall do to feed the world. Although it supports deregulation, the uber-capitalist free market weekly nonetheless provides arguments for its opponents.

Of course, this issue provides the opportunity for the British magazine to decry the limits set on market mechanisms. In fact, when faced with the 2007 surge in agricultural product prices, many countries took radical measures, such as forbidding exports, a policy which ricocheted, provoking serious crises in importing countries. The upsurge in prices provoked a historic increase of about a hundred million in the number of malnourished people in the world.

The Economist makes itself the advocate of free trade in agricultural markets and calls for the suppression of tariff and other trade barriers recently established. Yet, its exposition of this issue clearly shows that market mechanisms lead to the dramas we’ve experienced for several months. In fact, the invisible hand leads to concentration in production that makes prices for agricultural products more volatile, threatening the planet’s poorest populations.

Even worse, The Economist spends quite a bit of time reviewing the phenomenon of the purchase of arable lands in Third World countries by agricultural product importers, such as China, South Korea or the oil-exporting countries. No less than 20 million hectares of the best lands in poor countries of Africa and Asia have been purchased in this way by richer countries, seriously handicapping those countries’ ability to develop their own agriculture …

Paradoxically, The Economist develops examples that demonstrate the value of public intervention. It cites the case of Malawi. This little African country imported 40 percent of its food in 2005. But the development of agricultural subsidies to the agricultural sector (amounting to 4 percent of GDP) has transformed this country, since it now exports 50 percent of its produce after having tripled its corn production in just four years. In the same way, following rice shortages, today the Philippines are zeroing in on self-sufficiency.

The overall dossier shows one thing very clearly: market liberalization leads to specialization and concentration in production, which makes agricultural prices more volatile. In fact, with a more concentrated market, the slightest incident in the big producing countries provokes major tension that may make prices soar or collapse. Even when socializing agricultural production is not the issue, less concentration may give stability to the system.

That’s why self-sufficiency still has a bright future before it and the odds are that, in spite of the WTO, many countries, including developing countries, will prefer to regulate their domestic market to allow their agriculture to develop, an essential phase in economic development. And in any event, the predictable rise in carbon prices will end up making trade in agricultural products more expensive, which would have to promote relocalization of that activity.

The free trade record is there: the number of people suffering from malnutrition in the world has been increasing since 1995. Consequently, it is high time to return to a more local and more stable vision of agriculture that benefits everyone.

Translation: Truthout French Language Editor Leslie Thatcher