In 2008, and again in 2011, global food prices reached unprecedented levels, posing serious threats to the food security of vulnerable people around the world. Such spikes in food prices are caused by harvest shortfalls, demand shocks, and global catastrophes. From September 18-19, the World Bank hosted the Food Price Volatility, Food Security and Trade Policy Conference, a far-ranging discussion of the policy challenges of mitigating the threats that these price shocks pose to the poor. Leading policy experts, practitioners and representatives of international organizations including Will Martin and Kaushik Basu (World Bank), Peter Timmer, (Harvard University), Ashok Gulati, (Indian Council for Research on International Economic Relations), and David Hallam (Food and Agriculture Organization) gathered to discuss the tradeoffs that policy makers face in trying to ensure food security for their populations, and to identify the policies that can increase livelihood security and food security.
Kaushik Basu, Senior Vice President and Chief Economist at the World Bank, drew on his own experiences as Chief Economic Advisor to the Government of India at the Ministry of Finance to illustrate the impact of the 2007 crisis in food prices. “For people who live on the brink, [food prices] can, in a matter of days, become a matter of life or death.” Highlighting the challenges that governments face in addressing food prices through trade policy measures, Basu cited research that Will Martin, Research Manager at the World Bank, has conducted on the effect that trade policy measures have on food prices. If countries respond individually there is a serious collective action problem, and “in the end you may achieve nothing but a slight worsening.”
Maros Ivanic (World Bank) discussed the complex impact of food prices on the poor, who can be both consumers and producers of staple crops. Ivanic coauthored a study with Will Martin, “Short- and Long-Run Impacts of Food Price Changes on Poverty,” that uses household models based on data from expenditure and agricultural producers to understand the effect of volatility in food prices on poverty in individual countries and globally. They found that in the short-term, increases in food prices exacerbate poverty because the poor spend such a large portion of their income on food. Over the longer run, however, the poor benefit from increases in wages and smallholder farmers benefit from higher profits. Ivanic concluded that “while the initial jump in food prices was a threat to the poor, their sustained high level appears to be poverty reducing.” Brian Wright (University of California at Berkeley) cautioned, however, that jumps in food prices of the type seen on several occasions in the past few years tend to be much more intense than price declines, with these food price spikes posing serious risks to the poor.
The challenge, then, is to determine the best policy, or combination of policies, to alleviate the shorter-run impacts of increased food prices on the poor, and to prevent the negative long-term health effects of malnutrition. Ruslan Yemtsov and Ugo Gentilini (World Bank) have analyzed data concerning the degree to which social safety nets support the poorest people, as well as evidence comparing cash to food transfers. They have concluded that the costs associated with cash and voucher transfers tend to be substantially lower and are an efficient way to provide help that targets the poor.
