Rule #7

Foreign Affairs has an article (linked to by Chris Blattmann) on how the real issue for poor consumers is not food price volatility but high food prices and that politicians mainly talk about and try to address the former and rarely think about tackling the latter (Remember Rule # 7 of the Guidebook for Interpreting Populist Politics: If something helps the poor, it will inevitably be blamed for hurting the poor, and vice versa):

…But high food price levels and high food price volatility are not the same things. Food price levels are at historic highs, but food price volatility, although high these past few years, is not out of line with historical experience and is generally lower than it was in the 1970s. This means that the world does not necessarily face a price volatility problem. It faces a high food price problem.

The effects of each phenomenon on the well-being of the poor differ. Throughout the world but especially in low-income countries, the poor are overwhelmingly net food consumers, while farmers are generally better-off net sellers. Rising prices hurt consumers by reducing their purchasing power but benefit producers by increasing their profits. By contrast, volatility does not necessarily hurt consumers, because different food staples are often substitutable.

…The way in which leaders cast the food price problem matters because it shapes policy responses. Policies aimed at curbing food price volatility, such as export bans, price stabilization schemes, and subsidies for farmers are misguided if policymakers aim to increase the welfare of the poor, or avert political unrest in developing countries. Instead, policymakers should consider measures that prevent increases in food prices, such as removing barriers to international agricultural trade and increasing investment in scientific research on crop productivity improvement, soil and water conservation, and renewable energy that does not compete with food for land. Policymakers should also focus on innovative ways to reduce post-harvest losses, which run to nearly 50 percent in many low-income countries, often due to insufficient or sub-standard storage, refrigeration, and processing facilities. 

To summarize this in practical terms, what the poor need is more Walmart (efficient processsing, refrigeration and supply chains), more free trade and more research into things like genetically modified seeds – these are the things that would make their lives better. At the same time, there are many allegedly compassionate organizations and politicains campaigning against all of these things and blaming them for hurting the poor. No surprise there.

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