Food, Fairness, and Global Markets: June 4, 2015

Madison Powers – for more, see:

I. Feeding the World in 2050: challenges of supply and demand

Demand-side problems

  • the world will need 70-100% more food production by 2050.
  • Demographic Transition: world population to increase from 7 billion to 9 billion by 2050
  • Nutritional Transition: more people obtain a larger share of their protein requirements from sources other than plants
  • the nutritional transition exacerbates the risk of dramatic increases in food prices
  • for the 2 billion people who make less than $2 per day, food costs are 50-70% of their household budgets

Supply-side problems

  • the world is running out of land suitable for agricultural cultivation.
  • Roughly 70% of the world’s arable land is used already for some human activity, including agriculture.
  • Worse yet, between 30-40% of the land under cultivation has become too degraded to support agriculture over the long-term.
  • One reason is increased soil or water toxicity rendering the land unsuitable for the cultivation of food crops.
  • the rate of topsoil depletion vastly exceeds the rate of replenishment in all regions of the world.
  • The depletion-to-replenishment ratios range from 10 to 1 in the American agricultural heartland, to as much as 60 to 1 in China.
  • A further wrinkle: the global conversion of agricultural lands to the production of biofuels.
  • much of the world is running out of accessible fresh water.
  • groundwater mining and other wasteful water management practices, have led to the depletion of aquifers around the world.
  • By 2025, 1.8 billion people are projected to experience absolute water scarcity, and 2/3 of the world will be living under severely water-stressed conditions.
  • The major stocks of fish and other aquatic life in the world’s oceans are projected to decline 70 to 90% by mid-century.

II. Market Fundamentalism and Market Fairness

  • assumes that actual markets work sufficiently close to the ideal: the likely outcomes of unregulated markets are efficient and fair
  • modest ideals of fairness that market fundamentalists make
  • 1st, markets should not be distorted by anti-competitive practices, such as the concentration of excessive market power in the hands of a very few buyers or sellers,
  • this is because they would unfairly exclude other potentially more efficient competitors or allow those with asymmetrical market power to unjustly capture for themselves the economic gains that would otherwise reward efficient, socially beneficial operations
  • 2nd, patterns of market transactions that are mutually beneficial to the parties should not impose severe negative externalities, or uncompensated harms, on third parties

III. Contract Agriculture and The Concentration of Market Power

  • The proposed solution: replace local production with export commodity production, organized within a system of contracts between global purchasers and local producers and growers
  • World Bank, USAID, and the US State Department support
  • Agricultural markets now: an elongated supply chain
  • A few large global buyers exert control over every aspect of the supply chain
  • a dwindling number of competing commodity buyers for most products in nearly every region of the globe
  • the pipe dream of small holder prospects: big only buys from big
  • Even getting big is not always adequate protection; the buyers are able to dictate prices to the farmers, driving down the economic return for commodities, sometimes below the costs of production

IV. The Global Land Grab: Negative Externalities and the Natural Resource Curse?

  • Affluent nations and private corporations are pursuing land globally, especially in developing countries where land is cheap, and governance is weak
  • using the land to produce crops almost entirely for export to the citizens of the more developed nations
  • World Bank: “Doing Business” and “Enabling the Business of Agriculture”
  • NGOs that track the global land grab have amassed powerful evidence of its many adverse effects.
  • Parallels to the “natural resource curse” of extractive industries
  • invite exploitation from the outside,
  • enable autocratic leaders and their cronies to finance their own lifestyles, and
  • build up infrastructure and arms that allow them to remain in power through repression and elaborate systems of bribery and patronage
  • gross national product (GDP) – a measure of aggregate economic production – goes up with foreign direct investment.
  • But most of the wealth leaves the country, leaving GNP - gross national product - the amount of money that stays within the nation – unimproved
  • the real profits are in the commercially tradable finished goods sold to the global affluent, and the profitsgo to the global affluent.
  • the wealth that does stay in the country is not distributed to the poor, or invested for the sake of improving infrastructure that improves the well-being of future generations.
  • GDP also fails to register the long-term costs: environmental degradation from extractive industries, and the depletion of the narrow resource base upon which these economies are overly dependent.
  • A common side-effect of state-sponsored foreign investment in extractive industries is the dispossession of the rural poor
  • 4 billion people live outside the protection of basic rules of law establishing rights to property, remedies for dispute resolution, and protection against the harmful activities of others.
  • multinational corporations doing business in the developing world now have fewer incentives to contract with small holders.
  • the leasing and purchasing arrangements entered into by governments often provide no direct economic return.
  • Some contracts for hundreds of thousands of acres provide only the vague and unenforceable promise of overall increase in GDP.

Conclusion:

  • Why should we believe that contract agriculture or extensive foreign investment in agricultural land is the best bet for the global poor?
  • The alternative is fundamental land reform, with legal ownership rights that cannot be overridden by authoritarian governments, and legal rights protecting their land and water from devastation by others.
  • Extending private property rights, with the protections of the rule of law to 4 billion people, is not one of the primary solutions being promoted by the World Bank and other market fundamentalists.
  • While the interests of the global poor figure foremost in their pro-poor arguments, the only clear beneficiaries of contract agriculture and the global land grab are the global affluent.