From the Economist comes this examination of the problem and some warnings of what to avoid.
It may be too late to avoid another bout of price rises. Despite a global recession and the largest grain harvest on record in 2008, food prices are heading up again. Still, countries have a brief window of opportunity in which to set long-term policy goals without being distracted by panic measures. They need to do two things: invest in the productive capacity of agriculture and improve the operation of food markets.
Governments have done one but not the other. Over the past year investment has risen faster than anyone expected. But distrust of markets and a reaction against farm trade are growing. Unless governments restrain those impulses, they will undermine the gains from rising investment.
For most of the past 25 years, investment in agriculture has declined relentlessly. In 2005 most developing countries were investing only around 5% of public revenues in farming. The share of Western aid going to agriculture fell by around three-quarters between 1980 and 2006. This disinvestment laid waste to productivity. During the Green Revolution of the 1960s, staple-crop yields were rising by 3-6% a year. Now they are rising by only 1-2% a year; in poor countries, yields are flat.
Fortunately, the food-price spike of 2007-08 shocked governments out of their quarter-century of neglect. The World Bank and many rich countries have doubled the money they put into poor countries’ farming. In the poor countries themselves, agriculture has gone from being a sideshow for the government—something the minister of agriculture does—into its main event, which everyone needs to worry about. This is as it should be: farming is far and away the single most important economic activity in most poor places.
There is, however, a danger inherent in all this government activity: the temptation of self-reliance. The food-price rise of 2007-08 made all countries worry about “food security”—quite rightly. But over the past year “food security” (ensuring everyone has enough to eat) has shaded into “food self-sufficiency” (growing it all yourself). Self-sufficiency has become a common policy goal in many countries (see article).
In itself, self-sufficiency is not bad. If poor countries have a comparative advantage in producing their own food, they should do so (and that will often be the case). The problem is that the new rhetoric of self-sufficiency coincides with a growing distrust of markets and trade. Grain importers no longer trust world markets to supply their needs. “Land grabbers” are snapping up land abroad to use for food production. Everywhere, governments are more involved in farming through input subsidies. In these conditions self-sufficiency could easily sprout protective walls.