In today's Wall Street Journal Nancy Birdsall and Arvind Subramanian provide some good insights into the causes of rising food prices. In addition to touching on the important issue of biofuels, as I posted about earlier today, they point out some of the significant trade barriers for food:
Meanwhile in the developing world, tightened restrictions on exports of foodstuffs are obstructing a long-term solution, even as import barriers come tumbling down. Each country is trying to keep domestic supplies high on the justifiable grounds of food security. But by holding prices artificially low, export bans keep the market from sending accurate demand signals to domestic farmers. This penalizes farmers, who can't get the full, world price for their produce. That impairs efficiency, and undermines the incentives for investments that can increase long-term supply. Topping it all off, such measures subsidize high-income households, not just the poor.
Moreover, as more countries implement export controls, global supply contracts even further, pushing prices up by at least 10% and possibly much more. A vicious spiral lurks here, as panic- and policy-induced speculative hoarding drives world prices even higher.
More here.
1 Comment
Frank Burchardt | April 30, 2008, 11:02am | #
Hello Allison, The spiral you refer to is just starting of course. This is a normal progression of events in the human community. Given this to be true and on a more basic observation, as an example, more and more people in this country who rely on vehicle transport will be driving on bald tires! Everthing we do affects everything we do. Have a great day. Frank