It’s a simple enough proposition: Food prices spike, and the poor suffer.
The World Bank, for example, routinely links the two. “Near Record High Food Prices Keep Poorest People on the Edge,” said the headline of the press release issued with its latest Food Price Watch, which showed global food prices were 33 per cent higher in July than a year earlier.
But what if the link between higher food prices and poverty isn’t so simple? What if surging food prices actually lift more people from poverty than they condemn to it?
James Mirrlees, a Scottish economist based at the Chinese University of Hong Kong, put these questions to a group of more than 300 young researchers at the Lindau Meeting on Economic Sciences Thursday. It wasn’t a thought experiment.
China’s development miracle is well known. The poverty rate, as measured by the percentage of the population living on less than $1.25 (U.S.) a day, is approaching 10 per cent compared with about 40 per cent a couple of decades ago.
The sharp decline in China’s poverty rate is generally understood to be a product of the country’s export-driven growth strategy, which resulted in a mass exodus of peasants to factory jobs in urban areas.
Sir Mirrlees sees it differently. Rather than a story of urbanization, he believes China’s rise from the depths of poverty is a rural phenomenon.
One reason might have to do with land ownership. China’s government distributes land relatively equally, which spreads the benefit of rising property values broadly, rather than concentrating the gains in the hands of a relatively small number of private landowners, which tends to be the case in other emerging market countries.
But the bigger reason, according Sir Mirrlees, is simply the growth of China’s agriculture industry. Valued-added in the country’s farm sector quadrupled between 1978 and 2008, underpinning growth in the rural services. Labour input prices have held constant, while the acreage of irrigated land has increased 50 per cent and the use of fertilizer has skyrocketed. It’s China’s version of the Green Revolution.
Considered this way, do higher food prices help or hurt China’s countryside?
“If you have a very small farm and you have to sell food to pay for other necessities of life, then higher prices for food grains are just what you want,” Sir Mirrlees said. “There is no question that in China that was very important.”
Sir Mirrlees cautioned against applying China’s experience to other regions. Conditions are different in Africa and Latin America. But he was unequivocal on how you should evaluate those headlines that equate higher food prices with increased poverty. “Be skeptical,” he said.