To fight hunger, we need to fix food subsidies

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If you want a picture of subsidized food around the world, you might think of Egypt, where the price of flatbread is fixed and more than half the population lives on breads that cost just 0.05 Egyptian pounds. (0.25 cents) thanks to significant government support.

Almsgiving to the needy is one of the oldest forms of charity. The tradition persists to this day, in the form of food stamps in the United States, food banks in the United Kingdom, free school meals in Japan, direct subsidy programs like Egypt’s, and price controls on agricultural products in India. In addition to this, there are sales tax exemptions for essential ingredients in many countries. With almost 800 million people – about a tenth of the world’s population – unable to eat properly last year, you might expect this form of wellbeing to grow in size and importance.

In fact, it’s almost the opposite. Subsidizing food is largely not an activity that involves the world’s poorest people who are most at risk of starvation, but the wealthiest and best nourished. The spending that goes out overwhelmingly goes to farmers rather than the hungry – and while much of this helps increase the supply of edibles, hundreds of billions of dollars do the opposite, reducing the amount of nutrition available to feed the world.

A recent report from the Food and Agriculture Organization of the United Nations breaks it down. While direct-to-consumer subsidies – especially if they target those most in need – are one of the most effective ways to fight hunger, they represent only a small part of total global aid. , just $72 billion of the $630 billion spent on food and agriculture. sector worldwide. Plus, they’re geared toward people in high-income countries who are least likely to miss out. In the richest countries, 4.6% of the value of agricultural production is made up of consumer subsidies. In the poorest, the figure is 0.6%.

What is given to farmers is much more important. Some $92 billion is used to subsidize inputs such as seeds and fertilizers. Another $152 billion is being spent on broader support calculated based on farm size, general production levels or environmental factors. Again, much of this money goes to wealthy countries, which offer producers incentives equivalent to 24% of production, falling to 16% in upper-middle-income countries like China and Brazil. In less affluent countries, export bans, tariffs and other market interventions aimed at reducing costs for local consumers often have the opposite effect, acting as a tax on production and discouraging farmers from growing enough crops. of products. These measures increase the cost of production by 4% in lower-middle-income countries like India, rising to 9% in low-income countries like those in sub-Saharan Africa.

Undoing this mess will be difficult. As anyone who has watched the politics of the US Farm Bills and the EU Common Agricultural Policy knows, once support for agriculture is established, it can be difficult to dismantle. Changes to such a heavily subsidized sector inevitably lead to huge revenue losses in rural areas, which are often overrepresented in legislatures. Path addiction is hard to break.

In many developing countries it is not even clear that the main objective is always cheaper food. When the poorest people in your country are farm workers, any drive to reduce the cost of nutrition is likely to drive down incomes at the bottom. The political risks of harming the rural lower middle class are even greater, given their propensity for political action. Indian Prime Minister Narendra Modi’s attempt to dismantle his country’s mandi system – whereby the government would buy goods at fixed prices through its own marketing yards – sparked more than a year of protests before be abandoned. Farmers feared that the benefits of a free food market would accrue primarily to traders and preferred to stick to the status quo.

The world faces multiple challenges to feeding itself as its population reaches 11.2 billion in 2100 and climate change degrades and reduces the area available for harvest. Along with the growing burden of hunger, a wave of obesity is sweeping through poor countries. This is partly because calories from fat and sugar are cheaper to produce than those from healthy grains or vegetables, a situation that is itself linked to the way food subsidies favor certain crops over others. ‘others.

Something has to change. If governments facing fiscal strains in the wake of the Covid-19 pandemic want to do something about the ensuing food crisis, they could do worse than look at how their own spending is exacerbating the problem.

More from Bloomberg Opinion:

• Food is just as vital as oil for national security: Amanda Little

• Obesity stalks poor countries where hunger once reigned: David Fickling

• Rising food prices don’t make farmers richer: Adam Minter

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.

More stories like this are available at bloomberg.com/opinion

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