Much nonsense has been written about the food crisis, much of it by people using it to build support for their personal causes. It is a multi-faceted problem. Some aspects have been discussed on this blog, such as decades of underinvestment, rising demand, and inflation. Another key factor is government policy, the subject of this post. Today’s instructor is Dennis Gartman; this is an excerpt from his always interesting newsletter, The Gartman Letter, of 19 May 2008.
Teach a man to fish
The wisdom of the old saying that the world is best served by teaching a man to fish rather than giving him a fish to eat rings true down through the ages. If an aid society, wishing to do the right thing, simply chooses to give food to starving people rather than teaching that same group of starving people how to fish or farm, damage is done that can take generations to fix.
The damage wrought upon the native Indian population in the US as the Department of Indian Affairs has chosen to subsidise the indigenous Indian populations is all to well documented and ever more well publicised. It is the failure of government of the good intentions of ill-advised “do-gooders” at its most evident. Now food riots are taking place in a large number of Third World nations, with the blame put upon the 1st world nations that supposedly have not done enough to keep the people of Mali, or Chad, or Haiti from starving.
This morning we look at Haiti, for it is closest to us here in the US.
Food riots have been breaking out across Haiti in the past six months, with the media blaming those riots upon the Bush Administration for not getting food supplies to the Haitians quickly enough. We, however, shall pin the blame upon any number of Administrations, going back three or more decades, where food aid, in the form of rice, at subsidised prices were so cheap and so good, that the Haitians gave up producing their own indigenous foods that had served Haiti well through the centuries. Production of corn, sweet potatoes, cassava and domestic Haitian rice were made to appear so expensive compared to the cheap, subsidised American rice that poured into the country that rice farmers did the proper, economic thing: they stopped producing their crops that could not compete with massive sums of cheap, high-quality imported rice.
In thirty years, American rice has become the dominant staple of the Haitian diet. And why should it not be? Why would a Haitian cassava farmer continue to produce a crop that was more expensive and less nutritious than cheap, quality American Rice? It would be illogical for him or her to do so? It would make no economic sense, and they responded properly. Production of the other crops so necessary in the past has fallen consistently and dramatically.
So when the food riots broke out as rice prices began to rise, what then did the Haitian and US government’s do? Rather than bring in food from abroad to stem the rioting along with very clear signals that these new subsidised food stuff imports would be highly temporary, and rather than also make it clear that new agricultural, free market policies would be necessary to stop the long term import of American rice and to spur the production of domestic food, the government in Haiti imposed a price reduction on domestically grown rice by nearly 16%. The signal being sent to Haiti’s farmers is that producing rice in the future will be unprofitable, and that if it ever becomes profitable, the government will almost certainly intercede to stop that trend. Hence, only an idiot farmer would begin to plant rice, when rice is so clearly demanded by the public.
Haiti is now the US’ 4th most important market for rice exports. It should not be ranked in the top 20 if population and per capita incomes are taken properly into consideration; however, subsidies trump economic reality in the short run. Further, we surmise that the rice lobby in the US will not allow for an end to the subsidies for export, and will wage a public relations war to try to prove that US exports of rice are the only thing that shall stand between Haiti and starvation, and that only a cruel nation, and free market theorists would support and end to the subsidy program.
We state, instead, that it is these subsidies that are the problem. Haiti was once self-sufficient in food, and exported much abroad. Now it has turned into a nation of dependants, incapable of feeding themselves… the result of those trying to do-good who in the end do untold damage. Give the man some rice and you feed him for a day; teach a man to grow rice — profitably — and you feed him, his children, those around him, and perhaps some others in other nations who are hungry too.
Please share your comments by posting below (brief and relevant, please), or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For more information about this subject
- Important news about the global food crisis! (1 April 2008)
- A view from Indonesia of the food crisis (3 April 2008)
- Stratfor warns about the global food crisis (18 April 2008)
- What you probably do not know about China’s food crisis (21 April 2008)
- Higher food prices, riots, shortages – what is going on? (29 April 2008)
- A modest proposal for solving the global food crisis (30 April 2008)
- Weekend reading about the Food Crisis (17 May 2008)
This archive shows all posts about the food crisis, plus reports from from major international agencies.