Again we are witnessing a hunger crisis
in Africa. We should give all the help we can, but we should also ask
ourselves one basic question: why does famine occur only in those countries
that are specialized in agriculture? It is indeed a paradox: to a nation
having a high percentage of population engaged in agriculture signifies
a high risk of famine. Why is it that countries where only a tiny percentage
of the population make their living producing food - like Europe and the
USA -in fact produce so much more than they consume that they dump excess
production on the world markets?
This is the nature of The Paradox of Famine, a phenomenon that has been
observed for a long time and for which the economics profession used to
have remedies. Diversification of the economy away from agriculture is,
paradoxically, a key to preventing hunger. By moving hands from agriculture
into other activities, into 'mechanic industry', as the author of an anonymous
1690 pamphlet puts it: 'That mechanics prevent famine in a nation; that
this at first sight will appear a paradox, that the multiplying of mouths
that eat corn, whose hands sow none, should yet increase food; which matter
of fact demonstrates the truth of, notwithstanding: For whoever saw a
famine in Holland? On the contrary, they who sow none, yet supply other
parts of the world with corn, which they effect by means of their arts
and trade, which drives the more profitable plough of the two, that of
the sea'.
Another question related to the Famine Paradox is this: why do the most
efficient farmers of the world - those in Europe and the US - need heavy
subsidies in order to have a decent income? Why is the annual subsidy
per cow in the US and EU higher than the annual income of many African
farmers? Are the politicians in the rich countries victims of extortion
from their own farmers, or is there an alternative explanation?
The basic answer to the Famine Paradox is that agricultural production
answers to different economic laws than the industrial and advanced service
sectors. Agriculture will, after a point, be subject to diminishing returns,
it produces very few synergies (linkages), and is generally subject to
perfect competition. The first economist who understood this well was
Antonio Serra who, in 1613, explained the wealth of Venice and the poverty
of Naples and whose Brief Treatise for the first time was published in
English this month (London, Anthem Press).
Since then European and later US industrialization was based on this same
understanding. Increasing returns, technological change, imperfect competition,
and synergies 'collude' to raise wages in industrialized nations, and
the high cost of labor induces technical change in their agricultural
sector. Although the US had an absolute advantage in agriculture over
Europe, the nation still wisely decided to industrialize. Sporadic famines
in Europe contributed to convincing nations of the need to industrialize.
The 1846 failure of the wheat and rye harvests across Europe no doubt
contributed - with the massive financial crisis of 1847 - both to the
revolutionary fervor building up to the revolutions of 1848 and to a better
understanding of the need to industrialize and to the postponing of free
trade until after industrialization.
The European reconstruction after WW II and classical development economics
were based on this very same principle: a nation specializing in agriculturewill
specialize according to its comparative advantage in being poor. This
does not mean that an industrialized country cannot live from exporting
agricultural products.
In synthesis: although famines also have political elements, history unanimously
shows that only countries with a manufacturing sector have managed to
free themselves from famines. Such a strategy requires active policies
that go against the present principles of the WTO. Famines can of course
also be avoided in countries with a huge petroleum-sector rent. But, feeding
the people from petroleum rents rather than from a diversified local production
is, in the long run, not a sustainable strategy.
Our 17th century anonymous author also dwells on Christian charity towards
the poor. He suggests, however, that the real solution to poverty and
famine does not lie in charity but in Christian compassion by preventing
this situation from happening in the first place. This is still true:
the only real solution to hunger is still to diversify the economies of
famine-stricken countries.
