The World Food Crisis; E. C. Pasour, Jr.

Dr. Pasonr is Professor of Economics at North Carolina State University at Raleigh. The U.S. delegation to the 1974 World Food Conference in Rome proposed a resolution to restrict the non-agricultural use of fertil izer to alleviate the world food problem. Many churches are spon·· soring World Hunger Appeals to provide food relief. Individuals are encouraged to change their life style - to eat less food, to eat less meat, to use less energy, and so on. Is the world hunger problem becoming more acute? If so, why? How effective will measures such as those indicated above be in alleviating world hunger? The concern about the relation ship between population and the food supply is not new. Sir Thomas Malthus predicted in 1798 that population would continually in crease faster than the food supply, causing chronic food shortages, '71'7 718 THE FREEMAN December Today, in much of Asia, Africa and Latin America the Malthusian specter still stalks the land. The prospect of world famine is held before us with hundreds of mil lions of people starving. Yet, it was not always so. A decade ago food production was increasing in many .of these areas which today appear hopeless.

Why has the hunger problem sud denly become more acute? Conven tional wisdom holds that the world food crisis is caused by a popula tion explosion. But this is not the case. World food production 'has increased twice as fast as world population during the past 25 years. Why, then, has the hunger problem suddenly become more acute? Numerous reasons have been cited - war, droughts, floods, earthquakes, and the like. Exam ples probably can be found to sup..: port each of these reasons. Yet, there is a more fundamental rea son for the recent worsening of the food problem. Much of the cause for the cur rent world food crisis can be at tributed to the destruction or re duction of private property rights of food producers in countries where the hunger problem is most acute. Numerous example can be cited where governments have weakened or destroyed economic incen tives by confiscating pri vate land, forcing farmers to work on collectivized farms, instituting price controls on food, and other such measures.

India provides a good example. India has a serious hunger prob lem which gets worse each day. Only a few years ago, the food situation appeared fairly bright. There was an agricultural boom, with food production doubling from 1950 to 1970. Yields in creased, stocks of food were built up, and India produced more food than it consumed as weather and technology contributed to bumper yields in a Green Revolution. To day, however, the 'hunger problem in India commands the world's attention. Government Interference Why has the situation changed? Although other factors (such as the Bangladesh refugees) have contributed to the worsened situa tion, much of the food crisis in India can be attributed to actions taken by the Indian government affecting incentives of food pro ducers. After her big electoral victory in 1972, Mrs. Gandhi's party reduced the amount of land that could be held by an adult male from 30 irrigated acres to 18 acres.

The confiscated acres went to the landless. In addition to the direct effect of land confiscation on in centives, the policy also affected the profitability of tractors and 1975 THE WORLD FOOD CRISIS 719 implements. The reduced acreage was not large enough to support the machinery. The government also nationalized the wholesale grain trade, forcing farmers to sell their crops at fixed prices be low the market level, whereas pre viously farmers were permitted to sell half of their grain to whole salers at the higher market price. The impact of such actions' on the quantity of food produced and mar keted is predictable. (Black mar kets and corruption forced the gov ernment to rescind this action.) The adverse effect of price controls on output has been confirmed in scores of cases on every continent. Quantitative estimates are not available of the effect of these government actions in India af fecting producer incentives. How ever, the effects of these actions are undoubtedly important in the food crisis in India today. (The actions described were all taken well before Mrs. Gandhi suspended civil liberties and increased police powers in June 1975 in order to preserve democracy in India.) The situation in India is not unique. A reduction (or the threat of a reduction) in private property rights of food producers (and the accompanying reduction in eco nomic incenti ves) has also re sulted in decreased food produc tion in Chile, Mexico, Peru, Argen tina and Tanzania in recent years.

Irving Kristol concludes that Ii every country, e.g., Chile, Peru, Mexico, which has launched ex periments in collectivized agri culture has quickly witnessed a decline in agricultural productiv ity." The experience in Russia when peasants were forced to join the government-operated collec tive farms in the early 1930's is also consistent with this conclu sion. Russia, which had a huge surplus of grain before the Com munist Revolution, has had to import grain since abolishing private farms. The Best Response? This poses an interesting ques tion. What is the appropriate re sponse by people in highly devel oped countries in cases where food shortages are due to conscious government policies which restrict food production? Providing aid in such cases may only exacerbate the problem. That is, relief of hunger in countries which have confiscated private property, insti tuted price controls and otherwise reduced food production can help to perpetuate the system (whether the statism is despotic or benign) that is to blame for much of the suffering to begin with. Providing food aid which is used as a crutch to institute land reforms, price controIs and the like whiCh stifle initiative and reduce food pro720 THE FREEMAN December duction is analogous· to the gift of money to an alcoholic with no strings attached.

How about eating less, using less fertilizer, and similar conser vation measures to provide more food for the hungry? Such actions may be effective in assuaging guilt but provide no solution to the world food problem. Indeed, eat ing less by U.S. citizens may well be counter-productive since, if ef fective,it would decrease demand, resulting in a lower price and con sequently decreased production. Temporary relief can and often should be provided when food problems are worsened by droughts, floods, and other disasters. Long run food aid, however, is almost certain to have a disincentive ef fect· on agricultural production in recipient countries. Thus, the long run solution to world food prob lems must lie within the countries facing food problems rather than in food aid programs. Does the population explosion in the developing countries mean that these countries must inevitably face chronic food shortages? Pop ulation is animportaIit factor in the demand for food. Yet, popula tion increases are now being used as a scapegoat in connection with the food crisis. Lifeboat ethics which involves saving a limited number of lives while· deliberately ~etting others die is now being seriously discussed. In recent years, however, there has been a dramatic decrease in the birth rate in the U.S. and throughout the temperate zone.

The population problem in de veloping countries is closely re lated to the income problem. As per capita incomes increase, the birth rate decreases. Thus, the food problem in developing coun tries cannot be separated from the problem of economic development. Both income and hunger are closely related to the kind of eco nomic incentives facing producers of food and fiber (and other goods and services) . Incentives to Produce There is little doubt about the relationship between economic in centives and food production. A recent USDA-study supports this view: "Among the major impedi ments to increasing food produc tion in both the developing and the planned economies are policies designed to maintain low and sta ble food prices to consumers." Thus it seems paradoxical that population control (including Draconian controls such as com pulsory sterilization· of population in India and other countries) has received more attention than mea sures affecting economic incentives and food production in developing countries.

1975 THE WORLD FOOD CRISIS 721 There is a great deal of evi dence that farmers are most pro ductive when individual incentives prevail and the market is relied on to provide signals to consumers, middlemen, and producers. Yet, this evidence appears to be largely ignored in discussions of. world hunger problems. The November, 1974 World Food Conference held in Rome recommended a number of programs to increase food pro duction, including water manage ment, increased production and use of fertilizers, pesticides, im proved seeds and other inputs and extension efforts to adapt agri cultural technology to developing countries. Nowhere in the recommenda tions of the Rome Conference is recognition given to the widely demonstrated relationship between food production and ~roducer in centives. The recommended pro grams are likely to have Iittle impact on food production in de veloping countries if this relation~ ship is ignored. As a recent Forbes article on the hunger problem in India concludes: "There is, after all, more social justice in a loaf of bread than in schemes for a fairer distribution of wealth. Put ting it another way, . . . Adam Smi th, however unfashionable, can feed more people than Karl Marx can." , IDEAS ON LIBERTY Of Rights - Natural and Arbitrary IF GOVERNMEN'r can create rights, it can withhold and destroy rights. The practical consequence of this fact is that if rights are de.rivedfrom governments, there are no rights. Governmental fa vors may masquerade as rights. They may even assume a sem blance of constitutionality. But such favors are instruments of power; they are arbitrary "rights" g.ranted under the circum stances, subject to recall and change. When rights are arbitrarily created, there are no rights, only privileges. The extent to which we have accepted the belief that children have a right to education, that farmers have a right to a parity of income, that all have a right to the latest medicine, and so on, is the measure of the extent to which we have yielded up our natural rights.

CLARENCE B. CARSON A Perfect JAMES E. McADOO FROM TIME T'O TIME, usually in some large city, counterfeit money rears its ugly head. As quickly as possible, warnings are issued to banks, businessmen, and residents. Everyone is cautioned to examine all bills of a certain denomination, and to look for certain flaws by which the counterfeit may be dis tinguished from lawful money. With some trepidation, people look through their wallets, purses, and cash drawers. Counterfeit money, while it might be interest ing to see, is the last thing they want to find in their possession. Before long, however, the scare blows over . No further warnings are issued, and it is assumed that the counterfeit bills have been de tected and withdrawn from cir culation. People are able to relax again. Mr. McAdoo is an investment advisor residing in Nevada. 722 Everyone fears counterfeit mon ey. Not only does the law prohibit spending or keeping it, but coun terfeit money represents an im mediate loss to the person who finds it in his possession. What he thought was money turns out to be worthless paper that must be sur rendered to the authorities with out compensation. The loss is both obvious and personal.