It has become popular to argue that First World subsidized food dumping harms Third World countries. Is this argument correct? Let me present a contrarian view. I'm not sure I believe it but it is presented for your consideration:
Urban workers (and some of them are self-employed) who can pay less for food can buy more food and that is a real benefit to them. If they have enough money after that they can buy other stuff as well and accumulate capital to start their own businesses. Accumulation of capital in non-farming economic activity is essential for the development of the poorest countries.
Agricultural workers: Some are subsistence farmers who eat everything they grow. Lower import prices do not hurt them if they are not even able to sell surplus food. Others are hurt if the imports drive down the price of local food. But they are only hurt for that portion of the food they grow that they sell.
Imagine responding to this argument by driving up world food prices to some high level. Think that thru. Why not, in the name of helping Third World farmers, triple the price of internationally traded food? What do you think the effect of doing that would be? My guess is that the total amount of hunger and poverty would rise. Third World countries would have to pay more to import food and therefore would have less money (or no money) to spend to import other things. Granted, local production might rise as a result. But the money available even to invest in local agriculture would be less.
Take the other extreme: imagine that the price of food dropped to zero. Well, everyone would have enough to eat and they'd have more time to engage in economic activity that produces other kinds of goods and services.
This focus on the Third World farmers and the prices they get for their crops seems misplaced. The way forward for the Third Worlders is for them to get work that is off the farm. The benefits of lower tariffs for textiles and other low tech manufacturing products are far more certain than the supposed benefits of having developed countries raise the prices of their agricultural exports. Low food prices help some while hurting others. But the ones that are helped are the very ones who are doing the kinds of work that will lift the Third World out of subsistence farming. Lower food prices will probably accelerate their accumulation of capital. If Third Worlders to spend less on food they will have more more money on other things such as, say, a sewing machine or a hand tool or a cart for transportation.
Plus, even low prices for some types of food are beneficial for some forms of agriculture. Consider that cattle and chicken farmers use grains to feed their cattle. Lower the price of corn and their costs go down.
In a nutshell: Human living standards rise because humans find ways to spend less time doing what they used to do so that they can spend more time creating new kinds of goods and services. The fact that so many people in less developed countries spend so much time working on farms is not an argument for protecting the farm economies of the Third World. It is an argument for reducing the need for Third Worlders to work on the farm so that they can spend more time creating other kinds of goods and services. The real problem is not that farmers can not get enough money for their crops. The problem is that people in poor countries have to spend so much time farming and hence do not have enough time to do other work.
Anything that frees the world's poor from having to farm should cause living standards to rise if the local economies allow those people to move into other work. If there is a problem in the Third World with the move off the farm then the problem must come in the form of obstacles to developing other kinds of work activities.
Update: A couple of arguments against the proposition above could be advanced.
First, a rapid collapse in food prices could be too disruptive to a society. Societies are made up of webs of relationships and if too many relationships are disrupted at once then the resulting chaos will unleash wars, crime waves, and other disruptions that cause net harm and destruction.
Another argument is that people in poor countries know how to farm. They don't know how to do other things. But think about that. They may plow fields but they also make their own clothing and implements for working the fields. They do have other skills. They also can be taught other skills by those who are already working in other industries. Plus, a lot of low-tech manufacturing is incredibly low skill work. One big barrier to engaging in other kinds of work is that so much time has to be spent farming. Free people up from having to farm and they will have more time to do other work.
|Share |||By Randall Parker at 2003 November 17 10:34 AM Economics Political|