Development Economics

A Review – Food Price Increases: Causes, Impacts and Responses – Part VI: Price Volatility Policy Solutions

Volatility 

Safety Nets – People living in poverty will benefit from expanded safety nets, social protection and especially policies and programs that can respond quickly to protect children’s basic nutrition. Nora Lustig posed it as a question, “Even if aggregate poverty measures show a decline (most don’t), shouldn’t we protect the extreme poor from becoming poorer as a result of higher food prices?”

Trade Rules – Like other analysts, de Janvry and the high level panel called for improved international trade rules (through the WTO). De Janvry also noted that “negotiations on agriculture were conceived and conducted in the context of structural overproduction” by major producers who subsidized production and exports. WTO negotiations failed to resolve this problem.

Global agreements for Food Access – Addressing the emerging problems, de Janvry proposed that “negotiations need be reopened from the perspective of access to food for consumers in poor countries,” particularly “Multilateral rules for disciplines on export restrictions, better respect of contractual obligations by commercial actors,” and protection of “poor consumers from undue competition by rich consumers.”

Any Biofuel Policy Should Stabilize – De Janvry also noted that mandates for using biofuels could be used “counter-cyclically.” This means that only when food prices are so low that they harm small farmers would we stimulate demand – for example through corn for use as ethanol – but remove subsidies and mandates as soon as prices start to rise to where they can harm poor consumers. As a key part of this, “Mandates and subsidies for biofuels should be coordinated to help stabilize world food prices instead of contributing to price spikes.”

Help Subsistence Farming as a Safety Net – De Janvry, drawing from the HLPE group, also recommended a “focus on subsistence farming as a cheap and effective safety net for the poorest rural and peri-urban” people.

About

Stephen C. Smith is a Professor of Economics and International Affairs and Chair of the Department of Economics at the George Washington University. He received his PhD in economics from Cornell University and has been a Fulbright Research Scholar, a Jean Monnet Research Fellow, a Brookings Visiting and Non-Resident Fellow, as well as an IZA Research Fellow. Professor Smith is the author of Ending Global Poverty: A Guide to What Works (Palgrave Macmillan, 2005); co-author with Michael Todaro of Economic Development (12th Ed., Addison-Wesley, 2014); and co-editor with Jennifer Brinkerhoff and Hildy Teegen of NGOs and the Millennium Development Goals (Palgrave Macmillan, June 2007). He is also author or coauthor of approximately fifty journal articles, and numerous other publications. (Further details at https://www.gwu.edu/~iiep/ssmith/).

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