Much has been made of the war in Ukraine and freeing up its ports to ship grain as a way to control escalating food prices. High food and fuel prices have incited unrest in Sri Lanka, where mobs stormed the presidential palace. Such scenes may provide a cautionary tale and a glimpse of what may come if the world does not tackle food inflation.
But even the lifting of the blockade of Ukrainian ports will not miraculously solve a crisis that is global in scope. Instead, a structural overhaul of a system that is bloated, inefficient and hypocritical is long overdue.
Every July, I schlep to the United Nations in New York to report on the status of global hunger and malnutrition. It’s the part of my job I hate because I’m always the bearer of bad news, which should not exist in this day and age.
The forecast is grim: even with vigorous global economic recovery, hunger levels in 2030 will be similar to their levels in 2015. Which means we’ve barely made a dent in eradicating this dreadful scourge.
Last year, one in ten people went to bed hungry, while nearly 3.1 billion people survived on starchy staples because they couldn’t afford fruits and vegetables. Two in three children don’t have enough nutrition to grow to their full potential.
But the good news is that the money for such reforms is largely already here. Consider that countries spent some $630 billion annually on agricultural subsidies between 2013 and 2018 — or 13% of the value of global food production. The subsidies doled out favor wheat, corn, rice and other staple crops.
Yet the subsidies have had the opposite effects of what policymakers say they should do. For example, border measures like import tariffs and quotas are meant to ensure food is unharmful to eat. But instead they act as a trade barrier, shielding farmers from foreign competition and preventing the import of lower-cost or healthier foods. This is simply Economics 101.
Similarly, fiscal subsidies — or cash transfers from taxpayers to farmers — have led farmers to switch from growing fruits and vegetables to corn, wheat, rice and sugar — as well as beef and milk in rich countries.
The result: farm subsidies have made healthy diets five times more expensive than starchier ones, making cheap junk food of high calories a staple diet across the world.
The subsidies are also undercutting governments’ efforts to battle diet-related diseases such as diabetes whose costs are projected to exceed $1.3 trillion annually by 2030. Additionally, they drain public resources that could have been put to better use.
Research shows that reforming farm subsidies can lower the prices of fruits and vegetables and increase their consumption without compromising economic welfare. Models from the UN suggest that reducing border measures and market price controls would lower the cost of healthy foods. Such reforms would expand the segment of the global population who could afford them by 0.64 percentage point in 2030 compared with a scenario of no such reforms.
This may not sound like much, but it translates into tens of millions of people who could add fruits and vegetables to their regular diet.
And it would shift the production focus from staple and sugar crops and animal-source foods to plant-based ones, including fruits, vegetables, legumes and nuts and seeds.
A smarter policy, especially in developing countries, is to hand money to consumers, instead of producers, as cash transfers or food vouchers, as it would allow more people to buy healthy foods. Governments should complement this by creating an environment that promotes consumers’ behavior change, using regulations and standards.
Such policy changes would help cut diet-related deaths by hundreds of thousands.
Making changes to agricultural subsidies won’t be easy because of entrenched interest groups like the food and beverage companies, which hold sway over politicians. When a federal soda tax was proposed in 2009 in the U.S., the beverage industry spent tens of millions of dollars to lobby against it. This is a global phenomenon. When the Colombian government tried to pass a food labelling regulation in 2018, the food industry there pressured public agencies to oppose the regulation. Ditto in South Africa, where multinational corporations like Nestlé have a history of opposing policy actions on nutrition regulations.
Some might say that now is the time for more subsidies, not less — or that cutting them would cause the farming industries to collapse. After all, 40% of American farmers’ income come directly from the federal government.
But experience shows that reducing subsidies does not put farmers out of business. For example, when New Zealand removed most farm subsidies amid a budget crisis in the 1980s — until then the government had paid 40% of sheep and beef farmers’ income — farmers cut costs and diversified their land use. Only 1% of farmers was forced out, and New Zealand’s farming sector thrives today.
Of course, some smaller farmers might be adversely affected by rising land prices or lower farm income. Governments should provide social and health programs to protect such vulnerable populations when repurposing support to farming.
Countries can take concerted action to reverse the grim trends, even if Ukraine’s grain exports don’t fully resume. But it will require deep structural reforms and farm subsidies slashed. Otherwise, we can expect more families to go hungry and more angry mobs to overthrow their governments as they did in Sri Lanka.
I hope I can come to New York next summer with better news to report.
(Photo: UN Photo/Mark Garten)