James Surowiecki looks at The Perils of Efficiency:
Four decades after the Green Revolution, and after waves of market reforms intended to transform agricultural production, we’re still having a hard time insuring that people simply get enough to eat, and we seem to be more vulnerable to supply shocks than ever.It wasn’t supposed to be this way. Over the past two decades, countries around the world have moved away from their focus on “food security” and handed market forces a greater role in shaping agricultural policy. Before the nineteen-eighties, developing countries had so-called “agricultural marketing boards,” which would buy commodities from farmers at fixed prices (prices high enough to keep farmers farming), and then store them in strategic reserves that could be used in the event of bad harvests or soaring import prices. But in the eighties and nineties, often as part of structural-adjustment programs imposed by the I.M.F. or the World Bank, many marketing boards were eliminated or cut back, and grain reserves, deemed inefficient and unnecessary, were sold off. In the same way, structural-adjustment programs often did away with government investment in and subsidies to agriculture—most notably, subsidies for things like fertilizers and high-yield seeds.
The logic behind these reforms was simple: the market would allocate resources more efficiently than government, leading to greater productivity. Farmers, instead of growing subsidized maize and wheat at high cost, could concentrate on cash crops, like cashews and chocolate, and use the money they made to buy staple foods. If a country couldn’t compete in the global economy, production would migrate to countries that could. It was also assumed that, once governments stepped out of the way, private investment would flood into agriculture, boosting performance. And international aid seemed a more efficient way of relieving food crises than relying on countries to maintain surpluses and food-security programs, which are wasteful and costly.
This “marketization” of agriculture has not, to be sure, been fully carried through. Subsidies are still endemic in rich countries and poor, while developing countries often place tariffs on imported food, which benefit their farmers but drive up prices for consumers. And in extreme circumstances countries restrict exports, hoarding food for their own citizens. Nonetheless, we clearly have a leaner, more market-friendly agricultural system than before. It looks, in fact, a bit like global manufacturing, with low inventories (wheat stocks are at their lowest since 1977), concentrated production (three countries provide ninety per cent of corn exports, and five countries provide eighty per cent of rice exports), and fewer redundancies. Governments have a much smaller role, and public spending on agriculture has been cut sharply.
The problem is that, while this system is undeniably more efficient, it’s also much more fragile. Bad weather in just a few countries can wreak havoc across the entire system. When prices spike as they did this spring (for reasons that now seem not entirely obvious), the result is food shortages and malnutrition in poorer countries, since they are far more dependent on imports and have few food reserves to draw on.
Of course, the market has answers to these problems, but why would you pay a premium to protect yourself when some government agency or NGO will step in to help those most in need?