Development Economics

A Review – Food Price Increases: Causes, Impacts and Responses – Part VII: Price Spikes Policy Solutions

Written by Stephen C. Smith

Price Spikes

Even Stronger Safety Nets – To protect against the unconscionable consequences of spikes it becomes all the more important to expand nets and programs to respond quickly to protect child nutrition. Lustig recommended that countries “use targeted safety nets – cash transfers, food stamps, school feeding programs, food-for-work, food distribution programs” that reach poor families and vulnerable people.

Emergency Controls on Biofuel Supports – Several speakers noted that it is essential to place limits on OECD demands – and legislative mandates – for biofuels. At least, to roll these back during times of sharp price spikes.

Better Food Stock Reserves – De Janvry, drawing from the report he helped prepare, underlined that the now “low level of world food stocks [is] clearly associated with price spikes.” Thus he emphasized the need to “secure a minimum level of world food stocks for price stability,” and that the global community must as he put it “re-open the debate on coordination of storage policies.” Torero similarly proposed the need for a global emergency grain reserve to handle food price crises. Several other speakers concluded that regulation and global coordination of food stocks, food reserves, and other policies are now more important. von Braun also recommended establishing a “grain reserves policy at global level,” which would include an “emergency reserve, shared physical reserves, and a virtual reserve.” A new organization would engage in curbing food price volatility: an “international grain reserves bank.” Participants raised thorny questions about how to make such a bank work in practice; creating one is probably some years off.

Keeping Speculation in Check – De Janvry and the high level panel called for improved international trade rules (through the WTO), and to regulate speculation – keeping it from becoming a destabilizing force.

Keeping International Trade Open – von Braun stressed the priority of keeping trade open “at times of global and regional food shortage,” concerns also raised by other speakers.

Better Monitoring and Information Dissemination – Torero proposed an international working group to regularly monitor the world food situation and trigger action to prevent excessive price volatility. This was similar to one of the roles proposed by von Braun for creating “a new multilateral organization… to watch matters and to guide policy.” Recently, the World Bank has begun such an effort, publishing a Food Price Watch series. In a piece of optimistic news, the report for November 1, 2011, the Bank reported that various factors “bode well for food prices in the coming months.”

Regulate as Needed – But not Heavy-handedly – In addition, regulation cannot be too heavy-handed because “Unconditional control of speculative transaction would undermine the stabilization effect,” as Torero noted. So, a balance has to be found.

Need for Better Global Governance Alain de Janvry proposed that “With globalization”, there is “no food security without global governance,” and asked a basic question, “Can the world get organized to avoid recurrent food crises?” But markets and global governance solutions are not enough. The involvement of the citizen sector is also vital.

The three changes in food price dynamics – toward higher prices, greater variance, and dangerous price spikes – have harmed many people living in poverty. But as a result of the conference, it became clear that much has already been learned about causes, current responses, and innovative longer-term solutions.

About

Stephen C. Smith is Professor of Economics and International Affairs at the George Washington University where he currently serves as Director of the Institute for International Economic Policy. 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/).

About the author

Stephen C. Smith

Stephen C. Smith is Professor of Economics and International Affairs at the George Washington University where he currently serves as Director of the Institute for International Economic Policy. 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/).

1 Comment

  • Thanks for sharing this, it is sad to know that the price of the fruits are increasing today, but we need to accept this because the farmers are working hard to harvest those fruits.

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