"Higher prices in agriculture are actually a positive signal," said OECD economist Denise Wolter as the group presented its African Economic Outlook for 2008 in Berlin.Over the short term, developed nations should provide aid to Africa to counter bottlenecks in food production, she said.
"But the higher prices are also providing incentives (for farmers) to produce more locally," said Wolter.
The OECD forecast that growth in Africa would accelerate to 5.9 percent this year from 5.7 percent in 2007.
This sounds bizarre especially at a time when the African farmers are deprived of the tools to put their incentives arising from higher prices to practice. Farmers lack credit (see this as well)to buy fertilizers, seeds, irrigation, and agricultural equipment. How can anyone bypass this essential stuff (sometimes lifeline of agriculture) and argue that higher prices would incentivize the farmers and encourage them to produce more!
Bob Davis lists four ways to ease a global food crisis over the next year: (i) Stop hoarding, (ii) Buy locally, (iii) Target subsidies, and (iv)Press Japan
Stop hoarding. The current crisis represents a breakdown of the global agricultural market. Skyrocketing prices should boost production of grain, which can be shipped around the world. But not if countries hoard supplies and restrict exports, which is happening in about 40 countries, including China, India, Vietnam, Kazakhstan and Russia.
Buy locally. The U.S. generally ships sacks of food as its food aid. Europe, on the other hand, ships cash so that food can be purchased locally. Sacks of grain are important in feeding starving masses in the Darfur region of Sudan, where there are few locally grown alternatives. But shipping food can undermine local farmers elsewhere.
Target subsidies.About 30 countries have adopted what are called "conditional cash transfer" programs. Poor families are paid to send their kids to school, have them vaccinated and meet other requirements, depending on the country. Begun in Mexico and Brazil, these programs depend on communities to identify families that are poor by local standards.These programs can be used to get more food to the poor. In Jamaica, a new World Bank loan would be used to boost family benefits by one-fourth and expand the program so it includes about 14% of the population -- roughly the proportion of people below Jamaica's poverty line. The bank also wants to boost programs such as one in Ethiopia in which locals are paid in cash and food to build irrigation ditches. While the Ethiopian program sounds like something out of a John Steinbeck novel, it reaches people in need
Press Japan. The price of rice has leapt about 85% since mid-March mostly due to panic buying and hoarding. Japan could do a lot to relieve the pressure. It has a stockpile of 1.5 million tons of rice, mostly imported from the U.S., which it keeps off the market to boost the income of local farmers. Some of the stored rice is several years old, and some of it is fed to animals, says a U.S. Agriculture Department report.
My former colleague Prem Khanal writes in The Kathmandu Post...positive news on food production and capital mobilization, stalemate in the manufacturing sector, and general prices rising up (more than 7%)...(by the way, did I tell earlier that I learnt the basics of journalism from Prem while working at the Post):
Leaping revenue mobilization, rising capital expenditures, reviving demands and continuing healthy remittance inflow give positive indications for the fragile economy. However, sluggish growth, creeping inflation, widening trade deficit, mounting loss due to rising oil prices and nasty power outages could jeopardize the course of revival.
Propelled by strong growth in major agro products like paddy, maize and millet, which jointly represent nearly 30 percent of national agro outputs, the total agriculture production is likely to go up by 5.2 percent, highest since 2003/04 and more than the Interim Plan's target of 3.3 percent.
Production of paddy, which has a 20 percent share in national agriculture output, is estimated to soar by almost 17 percent, thanks largely to good monsoon.
Based on overall performance of the economy during the first three quarters, officials at CBS expect economic growth rate to remain around 3.5 percent, less than the budgetary target of 5 percent.
An astonishing 25 percent growth in revenue mobilization, amid slow economic growth, has been the most remarkable achievement of the government. As the government has already mobilized more than Rs 75 billion revenue till April, which is 70 percent of the revised target of Rs 106.6 billion for the current year, it is likely to meet the renewed target.
Creeping inflation, which crossed 7 percent mark, two percentage-points more than budgetary target, has emerged as the central challenge for the monetary authority. A whooping price rise of almost 20 percent in rice, which commands almost 15 percent in consumer basket, and a 27 percent rise in oil price are some of the factors that inflated the inflation figures.
Notwithstanding a 20 percent rise in trade deficit on the back of shrinking exports and booming imports, the current account posted a surplus of Rs 10.4 billion, thanks to continued strong 28 percent rise in remittance incomes.
Tom Slayton and Peter Timmer of the Center for Global Development (CGD) argue that unwanted rice in Japan can solve the rice crisis, provided that Washington and Tokyo act.
The loss of rice production in Myanmar is worsening the crisis in world rice markets, where prices have trebled this year. Meanwhile, Japan has 1.5 million tons of surplus rice, most of it imported from the U.S. Releasing this rice to global markets would prick a speculative bubble and bring rice prices down fast, while also encouraging China and Thailand to release their surplus stocks.
But first Washington must lift its objections and Japan must decide to re-export rice that it imported from the U.S., Thailand, and Vietnam. Failure to act would mean that high-quality U.S. rice would be fed to Japanese pigs and chickens while millions of poor people suffer from hunger and malnutrition.
More here
There is an interesting video (March 18, 2008) where Bill Easterly discusses about Hayekian insights on economic development and Arvind Subramanian disagrees with some of the Hayekian perspectives that are stretched a bit too far by Easterly. Weird that there is no embed link for the video. So, watch the video here.
Here are some interesting stuffs that I managed to note down:
Well, this is synopsis of what Easterly had to say about Hayek's secret to economic growth. As always he blasted Jeff Sachs (and his new book "Common Wealth"), MDGs, and the development aid agencies in general. I find it hard to believe how Easterly could argue that the growth in the East Asian countries was a result of economic and individual freedom, which, he says, essentially gave rise to creative entrepreneurs. He used this example to discredit the state's and policymaker's role in creating conducive environment for entrepreneurship to take place. The success in South Korea, Malaysia, Taiwan, Japan, etc. were not entirely the result of economic and political freedom (which were obviously comparatively low as per today's standard) but because of careful planning, that did not temper individual and market incentives, by the state.
He also went on to say that the TVEs in China is not the state's invention but a creation of a dynamic social system (he says it happened in a chaotic way). How can he say that this system just propped up from no where when there is overwhelming evidence that household responsibility system and TVEs were deliberate policy interventions as a part of land reform and as a part of an economic program to free up surplus labor from the agricultural sector to the industrial sector. Bill was too clumsy in explaining this and was feebly trying to relate this with the economic and freedom arguments, which obviously were very restricted in China. Too hard to believe Easterly on this! Also, is there a confusion about economic growth and economic development? Easterly was using this synonymously.
Rather than extolling the magic of markets and excessively putting over emphasis on economic and political freedom- while recognizing that these are essential components of growth and development- Subramanian was more cautious and argued that the state has a role to play in spurring economic growth; it has to make choices and decision based on given constraints and there have been a number of success choices as well. He argued that the state can play a crucial role in directing private entrepreneurship and in creating a suitable space for their ideas to flourish.
Watch the full video. For Eastely's paper on bottom-up approach to institutions, read this. AJR's paper is here. See Rodrik's book as well. Also, check out Stern's this book by Nicholas Stern. For those who are wondering who Hayek is, check his popular book here, his 1945 famous paper here, and a short video here. Here is his profile.
Update: Finally, the talk is on Youtube!
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