IFPRI Policy Seminar

Why Ending Hunger is so Hard: Finding the Right Balance between Market Outcomes and

Government Interventions to Improve Food Security

February 23, 2015

C Peter TimmerCabot Professor of Development Studies, Emeritus

Harvard University, Cambridge, MA,

Non-Resident Fellow, Center for Global Development

Author

Food Security and Scarcity: Why Ending Hunger is so Hard

University of Pennsylvania Press, 2015

Why is ending hunger so hard?

Ending hunger is hard because it is a lengthy process that requires sustained policy attention and

public resources at the same time that private markets are the arena for nearly all the decisions

that matter. The food system is at the core of this process in both the long run and short run. In

the long run, the food system is a key element of the structural transformation, which historically

has been the only sustainable pathway out of poverty. In the short run, the food system is where

many of the poor make their living, and also face the risks of volatile food prices. Volatility

matters--no country has been able to sustain rapid economic growth until its citizens and

investors were confident that food was reliably available in the main urban markets at reasonable

prices. Ending hunger requires that each society find the right mix of market forces and

government interventions to drive a process of economic growth that reaches the poor and

ensures that food supplies are readily, and reliably, available and accessible to even the poorest

households. This is the central message of my new book on Food Security and Scarcity: Why

Ending Hunger Is So Hard (University of Pennsylvania Press, 2015).

Main Message: The “Wicked Problem”

• Markets have to do the “heavy lifting”– Engineering functions: move inputs and outputs

– Locus for price discovery and efficient exchange

– Signals for producers and consumers efficient resource allocation (simply cannot sustain poverty reduction without this)

• Governments have to do the “right things” and not do the “wrong things”– …but what’s “right” and “wrong” varies by country and

changes over time: continuous policy analysis & flexibility

• The political economy of this is tricky

Defining Food Security: 3 Pillars and 2 Platforms

• Pillars– Availability: Food production + imports – exports

– Access: Produce or buy (and Malthus vs Sen)

– Utilization: Sanitation, health, nutrition

• Platforms– Stability: Both access and availability

– Sustainability• Agro-ecological

• Incomes of the poor

• Household level (micro: degree of undernourishment)

• National level (macro: reflected in urban markets as stable prices for staple foodstuffs)

• Global level (international market prices and the race between growth in demand and supply)

• Policy issues different from level to level

Three levels of food security

Time period (and change from previous time period)

Region/Indicator 1990-92 2000-02 (change) 2010-12 (change)

World

Prevalence 18.6 14.9 (-3.7) 12.5 (-2.4)

Food supply 114 117 (+3) 121 (+4)

Food deficit 7.2 5.8 (-1.4) 5.1 (-0.7)

Food security gap 6.8 11.2 (+4.4) 15.9 (+4.7)

Sub-Saharan Africa

Prevalence 32.8 29.7 (-3.1) 26.8 (-2.9)

Food Supply 100 104 (+4) 109 (+5)

Food deficit 13.7 12.7 (-1.0) 11.8 (-0.9)

Food security gap -13.7 -8.7 (+5.0) -2.8 (+5.9)

Southeast Asia

Prevalence 29.6 19.2 (-10.4) 10.9 (-8.3)

Food supply 100 107 (+7) 120 (+13)

Food deficit 12.3 7.4 (-4.9) 4.3 (-3.1)

Food security gap -12.3 -0.4 (+11.9) 15.7 (+16.1)

Notes:

Prevalence = prevalence of undernourishment according to FAO, “State of Food Insecurity” (2012)

Food supply = Average dietary energy supply adequacy, with 100 = “adequate on average”

Food deficit = The “depth of the food deficit in kcal per capita per day” as a % of MDER (minimum dietary energy requirement)

Food security gap = (Supply – 100) - (100)*Food deficit/MDER

Source: FAO, State of Food Insecurity, 2012

Food Security Indicators

What is driving food security? The changing global environment

• Surprisingly rapid economic growth occurred, especially in Asia, with hundreds of millions of people pulled out of poverty.

• A communications revolution at both the household and international levels has radically reduced transactions costs and increased access to knowledge.

• Global financial markets became interested in “emerging economies.”

• The rapid emergence in the 1990s of China and India as global growth engines meant a gradual shift in the drivers of demand for commodities and natural resources.

• High energy prices have turned out to be a “game changer” for agriculture and the food economy.

• Climate change is imposing itself as a reality on the increased probability of extreme weather events in general, but also on both global and localized food security outcomes in particular.

Five key components of the agri-food system: Drivers of structural transformation

Supply Chain and Retail Revolution

Factor Market

Urbanization Integration

Structural Transformation

Agricultural Dietary

Transformation Transformation

The Three Transformations

• Structural Transformation

• Agricultural Transformation

• Dietary Transformation

• …each driven by deep and basic global forces, as well as highly specific local factors

Structural Transformation, 1965-2000

What if structural transformation fails?

• Almost always linked to a failed agricultural transformation

• Labor “pushed” out of agriculture to urban slums rather than “pulled” into higher productivity urban jobs

• Surplus labor ends up in low productivity service sector—how do you “do” a structural transformation from there?

Agricultural Transformation: Global Land and Labor Productivity, 1961-2010

Increases in land and labor productivity needed to achieve post-2015 SDGs

Log of Agricultural Output per Hectare

(2004-2006 Int. dollars)

Constant land area per worker

Increase in land productivity to 2030

? 2030 endpoint

2015 base

Increase in labor productivity to 2030

Historical path of productivity increases

2000 base

Log of Agricultural Output per Worker (2004-2006 Int. dollars)

Notes: Diagonal line (45 degree) represents constant hectare-per-agricultural-worker ratios.

Land productivity must increase to meet food demand in 2030 if area expansion (deforestation)

is to be kept to a minimum. Labor productivity must increase in smallholder households if goals

for poverty reduction and elimination of hunger are to be met. As drawn, some of the increase in

labor productivity is achieved through higher on-farm yields and some comes through increases

in farm size. This combination implies that some smallholder farmers leave the agricultural

sector for better income opportunities off the farm, whether in rural non-farm activities or in

urban employment. The length of the diagonal arrow (2000 to 2015 and 2015 to 2030) is a

measure of the rate of total productivity increase in agriculture. For example, for the 15-year

period from 1995 to 2010, global agricultural productivity increased by 2.9% per year, a result of

labor productivity increasing by 1.78% per year and land productivity increasing by 2.28% per

year. During this period land area per agricultural worker actually declined.

Dietary Transformation:

Annualized percentage change in rice consumption by quintile and location, Indonesia, India, and Bangladesh.

R refers to rural quintiles, U to urban quintiles. Period over which changes are calculated are 1967-2006 for Indonesia, 1983-2005 for India

and 1983-2005 for Bangladesh.

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

R1 R2 R3 R4 R5 U1 U2 U3 U4 U5

Indonesia India Bangladesh

Engel curves over time for urban Indonesia

Price Levels and Price Volatility

Poverty, Vulnerability and Pro-Poor Growth

• A “behavioral perspective”– Loss aversion, time inconsistency, other-regarding

preferences, herd behavior, and framing of decisions

– All of these imply serious welfare losses from food price instability

• A policy approach to food security– Micro/macro; short-run/long-run

– Volatile food prices keeps focus on wrong things

– How/where do you learn how to do this?

Political Economy of Food Security