The Economics of World Hunger
By Brian G. Long, Ph.D., C.P.M.

Sad to say, but throughout this world of 7 billion people, about 21,000 people starve to death every day.  According to the UN, 1.3 billion people live on incomes of less than a dollar a day, most of which goes for food.  In the United States, we literally sit fat, dumb, and happy most of the time.  Happy because our starvation rate is very low.  Fat because we annually spend more on weight loss programs than the GDP of many of the third world’s smaller countries.  Dumb because we often don’t consider the impact of decisions we make in Washington may have on the world food supply.

Few people took much notice of the food riots in Cairo a few months ago, largely brought on by how the current political/economic system distributes food.  In third world countries like Egypt, food is expensive because of the antiquated production, storage, and harvesting systems still being used.   In the former Soviet Union, we heard stories of “non-party” people standing in line for a loaf of bread, largely because the Soviet political/economic system could never develop a modern food supply chain.  In the Stalinist era, MILLIONS of people starved to death.

Today, the world grows plenty of food to feed the entire population of the world without anyone starving to death.  So why not gather up all of the excess food production from countries like the United States and simply deliver it to the starving countries of the world?  There have been numerous attempts to do this in the past, and with a few exceptions, they have all failed and resulted in making the situation worse.

Simply shipping food to these countries doesn’t work.  Here’s why:  First, the cartons of food are often grabbed by the government of the country, and then disbursed as form of political favoritism. In other instances, the government has sold the food on the open market, and pocketed the money for use by the government officials.  Even if the government itself doesn’t get in the way, food convoys may be raided by local war lords who in turn use it for political gain.  In short, the food seldom gets to the people.

Even when the gifts of food do get to the intended people, it may do more harm than good.  First, free food says that the people no longer need to buy food, and the local farmers are summarily put out of business.  Unless the supply of free food in continuous, the end of the temporary charity program results in mass starvation because the farmers that once supplied the food are now gone.

Turning back to the 21,000 people who starve to death every day, what are the causes?

Lack of Good Government

In altogether too many countries of the world, the government can’t “govern.”  It can’t provide infrastructure.  It can’t ensure the basic safety of the citizenry from robbery and harm.  It can’t create and enforce laws.  It can’t provide basic education.  Even worse, it can’t even provide safe drinking water.

Poor governments plague the world.  In some instances, a core of a few dozen families control the politics—and the military—and maintain the status quo of inequity.  This is the basic criticism of the so-called Banana Republics.  In some socialist and communist counties, the government itself becomes the elite ruling class that enjoys a lavish life style.  By far the biggest collection of BILLIONAIRE politicians can be found in China, where the net worth of the ruling party congress outweighs the net worth of all the other politicians of the entire world combined.

Granted, some countries have improved.  One story comes for South Africa, where a decades long battle to eliminate apartheid finally resulted in free elections in 1994.  However, as the African National Congress took power, they discovered that winning the freedom and governing were two different things.  The GDP has grown significantly, and at least a third of the citizenry has benefited economically from the end of apartheid.  But another third are no better off economically than they were 40 years ago.   Why?  It may be an oversimplification, but the new government so far has not figured out how to govern.

Bad Government Policy

In the Stalinist era, the government under Stalin decided to let their people starve to death rather than purchase grain from outside the Iron Curtain.  By some estimates, six million people starved to death so that the purity of the communist system could be maintained by not giving money to the evil capitalists in exchange for food to feed the people.

About three years ago, a limited failure of some of the Asian rice crop resulted in the worldwide price beginning to rise.  The Indonesian government responded with an export ban in order to keep grain from leaving the country.  The price of rice doubled in a couple of months.  Since about 40% of the world’s population subsists on rice, the resulted was that thousands (if not millions) of people starving to death.  What’s worse, the boycott didn’t even keep the price in Indonesian rice down like the government had hoped.

In the past few months, the Indian government has moved to keep the prices of rice and wheat artificially high.  In fact, India now has more grain in storage than at any time in history.  The reason?  It’s political.  The farm lobby wants to prices to be high.  Fine.  But India pretty much lead the world in starvation, so it seems very difficult to support this position from a humanitarian standpoint.

Few people of the world are aware of the World Trade Organization’s attempt to reduce agricultural trade barriers through an on-going multi-national discussion known as the Doha Round.  Through a series of meetings beginning in 2001, a major goal was to eliminate all forms of all forms of export subsidies and substantially reduce artificial farm subsidies in countries around the world.  Despite record prices for grain in the U.S. and Western Europe, the politicians were unwilling to offer significant reductions it farm subsidies for fear of backlash from the farm voters.  Again, bad government policy can keep grain prices artificially high, and people in far corners of the world starve.

Drought

Periods of drought in certain sections of the world have led to starvation for thousands of years.  One of the oldest documented migrations occurs in Genesis, where the people of Israel migrated to Egypt to avoid starvation.  They survived, but the Egyptian Pharos quickly relegated them to several centuries of brutal slavery.  About 3,500 years ago, Moses led them out of slavery and back to the land of “milk and honey.”  Anyone who has ever been there knows that this is an exaggeration.  However, in the last thousand years, there has been no history of drought in Israel lasting more than a year or two.

Today, certain sections of the world are periodically impacted more by drought than others.  The Australian continent experiences extremely wide swings in rainfall, but these extremes are so sever and unpredictable that no one depends on central Australia for food production.  Many inland sections of Sub-Saharan Africa experience periodic drought, which has resulted millions of deaths from starvation since the beginning of history.  Although the consequences are not as sever, Eastern Europe generally anticipates a drought about every six years.

Lack of Adequate Storage

Even today, it is estimated that a third of all food in the world spoils before it is consumed. In the Bible, the Egyptians were subjected to the well-known trauma of “…seven good years, followed by seven lean years.”  The problem of the leaders was to convince the people of Egypt that at least part of the bounty of the seven good years needed to be properly stored to bridge the gap of the impending seven lean years.

For hundreds of years, food has been preserved by drying, such as beef jerky, fermenting, such as cheese, smoking, such a ham, sugaring, such as strawberry preserves, pickling, salting, and sometimes adding lye.  Ancient refrigeration was only accomplished by burying food in the ground or around cold running water.   In modern times, we can also preserve food by canning, freezing, drying, bottling, vacuum packing, irradiating, or adding a host of chemicals, such as potassium sorbate.

It sounds simple, but about 70% of the households of the world have no form of refrigeration whatsoever.  Likewise, many of the modern forms of storage are not available.  Of course, in the case of most grains and dry beans, storage is simpler if the grain can be kept dry and away from vermins.  Hence, the need for adequate dry storage is a major problem in the underdeveloped world.

Speculation

As a result of the historically low interest rates we have experienced for the past six years, almost all of the major agricultural and industrial commodities have been subject to periodic outbreaks of speculation fueled by the search for higher returns on money. When speculators artificially inflate the prices of corn, wheat, and especially rice, somewhere people starve.

Crop Disease and Pestilence

Following 1492, the population of Europe double in about 100 years because of the introduction of newly discovered sources of food, primarily corn and potatoes.  In Ireland, about 30% of the poorest citizenry were dependent on the potato in order to live at a subsistence level.  In the mid-1800s, a potato blight swept the Emerald Isle and parts of Europe, resulting massive crop failures for about a six year period.  Over a million of Ireland’s poorest people died.

And then there are the locusts.  Historians note that swarms of locusts have plagued humanity for centuries, and so far, there is no practical means of stopping them completely.  Throughout Africa, entire crops are periodically stripped by massive swarms.  Because of their wide-ranging mobility, desert locusts are said to have the potential to impact the livelihood of one in ten people on the planet, although most of the cases of starvation occur in Africa and Asia.

Misuse of Resources

In the United States, approximately 40% of the entire corn crop is expended to make alcohol to enhance gasoline.  Because of a powerful farm lobby, about 10% of all gasoline sold in the U.S. must be composed of alcohol.  In addition to being a burnable fuel, the alcohol tests at about 105 octane and can be used to bring gasoline up to a higher octane level.

This policy has been great for the price of corn and the corn farmers, but it has been bad for the world’s food supply.  It is in South and Central America where corn is the subsistence crop for a large percentage of the population.  Again, putting corn in our gas tanks has resulted in people starving to death. Furthermore, the rising price of corn has resulted in many more acres being relegated to corn.  This reduces the plantings of most other grains, such as wheat, oats, and soy beans.  The laws of economics take effect, and the reduced production results in rising prices for all of these commodities.  Hence, the price of groceries is now about 20% higher because of our policy of converting food to fuel.  It’s no problem for affluent countries like the United States.  But in other quarters of the world, people starve.

Overpopulation

As a result of the earthquake in Haiti, we discovered that the island nation along with the Dominican Republic are among the poorest countries in the world.  By contrast, these countries were regarded as among the wealthiest in the Americas about 150 years ago.  Tobacco and coffee were sold all over the world for high prices.  The population boomed.  But as tobacco and coffee production shifted to Brazil and other countries, the population still boomed, but no new crops or other productive capability came to replace the lost revenue.

Improvements: Overcoming World Hunger

With all of these causes of world hunger, it is obvious that the first thing that has to be done is to TRY to convince our own government and well as governments around the world to quit doing stupid things.  Misuse of resource, such a putting food in our gas tanks, export quotas, and misuse of farm subsidies are just a few of the practices that need to be curtailed.

Otherwise, with this pessimistic list of problems, it goes almost unnoticed that world hunger has declined considerably in just the past few years.  About ten years ago, 25,000 people starved to death every day, and now it’s down to 21,000.  Still not good, but improving.  According to the World Bank, the number of people living in extreme poverty has declined by a whopping 42% of the past twenty years.  Here are some of the reasons for the improvement:

Governmental Reform

As noted earlier, by far the biggest barrier to reversing world hunger is the governments of the respective nations. Many nations of the world have plenty of resources, but the people of the country lacks a government that can “govern” properly.   Fortunately, many governments of the world are finally getting their act together, albeit slowly.  Many countries have had peaceful land reform so that many people can now grow their own food.  For centuries, the South American countries as a group have been dominated by wealthy landowners that virtually enslave the local population to work for subsistence wages.  Although success has been limited, some countries have been convinced or coerced into dividing up some of the land.

Mass communication

While traveling in a remote area of Pakistan on business in 2005, I came across a crossroads village of about eight houses made of mud and thatched roofs.  On the edge of town, one of the houses had a satellite dish protruding from the roof.   After countless generations of living a life of subsistence, a significant number of people in that village probably now knows what the rest of the world looks like, and are probably now more open to change than they ever would have been in the past.  Innovation may now be embraced for the first time in hundreds of years.  Because of satellite TV, the internet, cell phone, and other innovations of just the past few years, the rest of the world now seems to be in reach.  Many of them now know just how poor they really are, and some are declaring that they will change.  With Bill Gates offering free computers to poor kids in Batswana, an educational opportunity is now available to millions of people who never dreamed of becoming educated.

Education

Granted, education has been around for thousands of years, and recent incremental improvements have been made in availability to the world’s poor.  However, it is the aforementioned mass communication technologies that are the future.  With Bill Gates giving computers to poor kids in Batswana, they turn their hand cranked generators and power their computers and find the world now open to them.  With the success of on-line education, it is conceivable that some of the poorest kids in the world may be able to earn some form of a college degree.

Industrialization

Although some people grit their teeth when the look at all the foreign labels displayed at Walmart, the fact remains that some people in Bangladesh are now earning enough income to buy food every day for the first time in their lives.  With mass communications and efficient mass transportation, products can be manufactured in many underdeveloped countries and sold all over the world.

New Seed and Agricultural Methodology

The United Nations Food and Agriculture Organization, UNICEF, and even our own USDA have been circling the globe with new farming techniques, new hybrid seeds, new forms of fertilizer, and new ways of preserving and storing food.  With hybrid seeds, some of the crop yield have been doubled over a few years by the introduction of better seed from other parts of the world.

A whole host of private organizations have gotten into the act of improving the standard of living for millions of people.  A recent magazine article depicted a group building and aqueduct in Batswana to deliver fresh water to a village.  It’s not glitzy, but about 2,000 people are now better off than they ever dreamed a few years ago.   Many of these programs have been overwhelmingly successful, but they get little of the publicity they deserve.  And they are incremental.

Again, there has been a 42% improvement in extreme poverty in the past 20 years.  Have you seen that in the news lately?   Probably not.  But these are the real programs that can help to solve the problem of world hunger, and they deserve our support.  Some programs are more effective than others, but this is the debate we should be having.