« Insuring against Insurance Risk | Main | Income Volatility »

Wednesday, May 28, 2008

"The Rich Get Hungrier"

Amartya Sen analyzes the food crisis:

The Rich Get Hungrier, by Amartya Sen, Commentary, NY Times: Will the food crisis that is menacing the lives of millions ease up — or grow worse over time? The answer may be both. The recent rise in food prices has largely been caused by temporary problems like drought in Australia, Ukraine and elsewhere. Though the need for huge rescue operations is urgent, the present acute crisis will eventually end. But underlying it is a basic problem that will only intensify unless we recognize it and try to remedy it.

It is a tale of two peoples. In one version of the story, a country with a lot of poor people suddenly experiences fast economic expansion, but only half of the people share in the new prosperity. The favored ones spend a lot of their new income on food, and unless supply expands very quickly, prices shoot up. The rest of the poor now face higher food prices but no greater income, and begin to starve. Tragedies like this happen repeatedly in the world. ...

There is also a high-tech version of the tale of two peoples. Agricultural crops like corn and soybeans can be used for making ethanol for motor fuel. So the stomachs of the hungry must also compete with fuel tanks.

Misdirected government policy plays a part here... In 2005, the United States Congress began to require widespread use of ethanol in motor fuels. ... Ethanol use does little to prevent global warming and environmental deterioration, and clear-headed policy reforms could be urgently carried out, if American politics would permit it. ...

The global food problem is not being caused by a falling trend in world production, or for that matter in food output per person (this is often asserted without much evidence). It is the result of accelerating demand. However, a demand-induced problem also calls for rapid expansion in food production, which can be done through more global cooperation. ...

What is most challenging is to find effective policies to deal with the consequences of extremely asymmetric expansion of the global economy. Domestic economic reforms are badly needed in many slow-growth countries, but there is also a big need for more global cooperation and assistance. The first task is to understand the nature of the problem.

    Posted by on Wednesday, May 28, 2008 at 02:07 AM in Development, Economics | Permalink  TrackBack (0)  Comments (37)

    TrackBack

    TrackBack URL for this entry:
    https://www.typepad.com/services/trackback/6a00d83451b33869e200e55286186e8833

    Listed below are links to weblogs that reference "The Rich Get Hungrier":


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.