Help the poor by destroying the rich; create food security by increasing farm insecurity; increase supplies by reducing incentives; help farmers get better prices by banning their right to use middlemen; improve crops by banning crop-improving science; help consumers by reducing their right to vote with their rands; and stabilise markets by criminalising the deals that stabilise markets.
Contradictory? Economically illiterate? Illogical? Plain crazy? Not according to many comments in the media.
I was on SABCs After Eight Debate one morning this week. The people behind all thirty calls and SMSs suggested one or more of these absurd responses to the food crisis and food insecurity. No, they werent the supposedly ignorant masses, unaware of basic facts and economics. They were trusting conduits for what theyd learnt as politically aware people from leading commentators. They said in plain language what experts obfuscate with jargon.
World leaders met in Rome last month in search of food security and an end to the food crisis. India, China and Vietnam banned rice exports supposedly to prevent shortages and force prices down. Many other countries have adopted or are considering adopting such long-discredited policies.
So far, our government hasnt joined the policy madness sweeping the world. The Cabinet is considering the matter and is expected to make an announcement soon.
Instead of succumbing to the temptation to do something, it should build on the spectacular success of its post-transition agricultural liberalisation and privatisation when, at the stroke of the statutory pen, SA switched from decades of chaos and daily news headlines about recurring surpluses, shortages, subsidies, levies, corruption and instability, to a decade in which agriculture virtually vanished from the media no more destabilising and wasteful surpluses or shortages; no more subsidies for wealth-consuming farmers funded by levies imposed on wealth-producing ones
If youre a typical person, you dont produce your own clothes, medication, furniture or housing. Your transport wasnt produced by you or by your transport-provider. Yet youre not suffering from clothing insecurity, medicine insecurity or transport insecurity.
It is extremely probable that you produced little or nothing of what you have or consume, including food. You buy what you need. That the same is true for cities, provinces and countries should be as obvious as it is for individuals.
Paradoxically, food self-sufficiency guarantees food insecurity, because it subjects us to the exigencies of agriculture: droughts, floods, pests, crop and stock diseases, energy prices and other causes of crop failure. Farmers in the new South Africa are free to choose stability and security by selling into futures markets and buying crop insurance. Consumers enjoy stability and security by being free to buy locally or internationally.
Rich mini-states and desert countries, like rich individuals, enjoy total food security without producing a single carrot, mielie cob or cow. Gibraltar, Hong Kong, Singapore and Monaco never have food crises despite never producing food. Instead they buy the worlds best food at its lowest prices. They benefit twice over from the fact that there are always countries with (a) surpluses and (b) crazy governments subsidising exports.
People have dependable forgetteries. Until the recent rise in food prices, consumers enjoyed and producers endured decades of surpluses. Popular, powerful and self-serving alarmists are always around to assure us that things are getting worse when, in fact, nearly everything gets better nearly everywhere.
The trendy 1970s population explosion alarm was popularised by the eminent Club of Rome which predicted, with the customary assurance of scientific consensus, that horrific scarcity was imminent. The world progressed immediately into prolonged abundance for all countries sensible enough to have market economies.
Economic theory predicts that prices fall when there are surpluses, and rise when there are shortages inducing producers to produce. That surpluses, with falling inflation-adjusted prices, should be followed by shortages, with rising prices, needs neither explanation nor solution. The natural self-correcting market mechanism works in both directions. In other words, if governments resist misguided pressure to correct what is wrongly construed as market failure, the spontaneous tendency towards equilibrium will prevail.
Just as the Intergovernmental Panel on Climate Change (IPCC) didnt know when it released its Report on global warming that the planet had started cooling, the Rome food crisis meeting hadnt realised that food prices were already falling thanks to self-correcting market forces.
If governments keep prices down artificially, they reduce incentives to increase production. In other words, their intervention does precisely the opposite of whats needed.
It does not take rocket science to predict the inevitable consequence of Indias and Chinas policies: producers will be penalised if they produce more of whats wanted and less of everything else. Not even the Devil could have devised a more diabolical stratagem to harm intended beneficiaries the starving masses!
We are also fortunate to be one of the countries that has resisted anti-GMO hysteria. Genetic modification isnt new. Humans created dogs by genetically modifying wolves. Most crops and livestock were modified by hybridisation. Evolution is natures way of modifying plants and animals. Modern science, which scares emotionally vulnerable lay people, speeds up and extends natural modification.
Obviously there are dangers. For centuries animals and plants have been modified and transplanted successfully around the planet to everyones satisfaction. There have been the occasional disasters, such as killer bees imported from Africa to South America. All innovation entails risk, so GM should be implemented cautiously without being sacrificed on the altar of archaic alarmists.
Principal beneficiaries of modernised modification are third world peasants because drought-, pest- and disease-resistant crops and livestock empower them to compete against hi-tech first world counterparts. GM crops are environmentally friendly as they reduce dependence on costly irrigation schemes and toxic pesticides.
Production and supply necessarily entail insecurity because the future is uncertain. One of the most important things for governments not to do is exacerbate uncertainty and generate disincentives, such as excess regulation, taxation and nationalisation. South Africa has escaped much of the worlds wave of food madness, but not all.
More serious but less obvious disincentives are property rights insecurity and policy uncertainty. When governments keep changing policies and threatening rights, they drive societys most enterprising people from productive efficiency to what economists call rent-seeking instead of increasing productivity, people concentrate on minimising regulatory harm to themselves, and lobbying government for benefits at the expense of others.
Solutions that work in the real world
Theres no mystery about what the government must do to promote liberty, prosperity and justice for all. The evidence is now so overwhelming that the irrational policies adopted in so many countries are baffling.
Our government should not only resist the pressure and temptation to reverse its proven agricultural policies, but take them to the next level by discontinuing the notion that there should be distinctive agricultural polices.
The contrived divergence of policies governing food and non-food production is perpetuated by habit rather than logic. Lets become logical to make sure the people dont go hungry!
Author: Leon Louw is the Executive Director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the authors and are not necessarily shared by the members of the Foundation.
FMF Feature Article/1 July 2008 - Policy Bulletin/ 08 December 2009
Publish date: 17 December 2009
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.