Monday, November 28, 2005

Destitution not dearth

Destitution not dearth
Aug 18th 2005
From The Economist print edition

Niger's harvest last year was not so terrible. Why is the country now so hungry?

“MUCH about poverty is obvious enough,” wrote Amartya Sen, one of the world's best-known and most respected economists, in his 1982 classic, “Poverty and Famines”. “One does not need elaborate criteria, cunning measurement, or probing analysis to recognise raw poverty and to understand its antecedents.” But the thesis Mr Sen propounded in that book was not obvious at all: some of the worst famines, he argued, have taken place without any significant fall in the supply of food.

One of the examples Mr Sen chose to illustrate his thesis was a famine that gathered force from 1968 to 1973 in the Sahel region of Africa. The Sahel, from the Arabic word for “shore”, typically refers to a group of six countries on the western fringes of the Sahara, where the desert sands lap up against the vegetation of Africa's semi-arid zones. The countries worst affected by this disaster 30 years ago were Mauritania, Mali, Upper Volta (now called Burkina Faso)—and Niger.

Niger is once again in the grip of a food crisis, if not a full-blown famine. The distress sales of livestock, the heavy migration and the deprivation the country suffered in the early 1970s have all revisited it again this year. How well does Mr Sen's thesis explain the country's latest encounter with mass hunger?

Much about Niger's current crisis appears obvious enough: the rains last year ended early; the locusts were rampant. Who can be surprised that the country is short of food? But Niger's harvest last November was merely mediocre, not disastrous. Although the rains ended early, the country's cereal production was only about 11% below its five-year average, according to the UN's Food and Agriculture Organisation (FAO). It was 22% greater than the harvest of 2000-01, a year that passed without alarm. The locusts did more damage to the region's fodder than to its food, prompting pastoralists and their herds to begin an early migration to greener pastures in Niger's coastal neighbours.

Purchasing powerlessness
Niger's distress shows up most clearly in prices, not quantities. A pastoralist's terms of trade depend on two prices in particular: the price of what he can sell (his livestock) and the price of what he must buy (food). In Niger this year, the latter has soared; the former has plummeted. According to one report, the price of millet and sorghum rose to 75-80% above its average for the last five years. By June, the sale of one goat bought half as much millet as it had six months earlier. It is precisely this kind of cruel twist in the terms of trade, Mr Sen argued, that can bring a community to its knees. These unfortunates will suffer a lack of power to purchase food, even if there is no lack of food to purchase. Why did prices move against Niger's pastoralists so far and so fast?

The spike in the food price may have reflected high foreign demand as much as low domestic supply. Traditionally, during the lean months before their harvest, Niger's farmers import cereals that are cheaper to grow in wetter, coastal neighbouring countries than in their own country. But according to CILSS, an intergovernmental body responsible for the region's food security, significant amounts of grain have this year been flowing in the opposite direction. Ghana, Benin, Côte d'Ivoire and Nigeria have all been buying up grain in the region.

This is partly because these countries' own harvests were disappointing. But in Nigeria's case, the FAO thinks that government policies were also to blame. Nigeria has imposed controls on imports of rice and wheat products; it has also taken steps to protect and promote its millers and poultry farmers. Both of these policies have raised demand in the country for millet and sorghum, which provide alternative sources of flour as well as chicken-feed. As a result, Nigerian cereals that might have found their way to Niger are instead being consumed at home. Nigeria has twice Niger's income per head and more than ten times its population. Its powerful market pull may have helped to undermine the purchasing power of Niger's pastoralists. “In the fight for market command over food,” Mr Sen noted in his book, “one group can suffer precisely from another group's prosperity, with the Devil taking the hindmost.”

Nigeria, with Burkina Faso and Mali, has also restricted grain exports to Niger this year, violating its trade treaties with the country. Such restrictions have often played an ignoble, supporting role in the history of famine. A ban on cereal exports between India's provinces, for example, condemned Bengal to ruinously high prices in its great famine of 1943.

What of the other term in the terms of trade? Livestock prices have fallen in the past year, partly because northern pastures were damaged and animals were emaciated as a result. But the deterioration in the terms of trade can also generate its own momentum. Higher cereals prices prompt herdsmen to sell more of their livestock. These distress sales drive the price of animals down further, forcing pastoralists to sell still more of their herd. In his book, Mr Sen raised the theoretical possibility that a pastoralist's supply curve might actually bend back on itself: as the relative price of livestock falls, a hungry pastoralist might supply more animals to the market, not fewer as elementary economic principles would imply.

If mass hunger were simply the result of there not being enough to eat, the remedy would be obvious: more food. The emergency rations now being shipped, flown and trucked into the Sahel are indeed necessary and urgent by the time hunger and destitution are acute and widespread. But if mass hunger begins with a collapse in purchasing power, rather than a shortage of food, it does not take an airlift to prevent it. What is needed is a way to restore lost purchasing power by, for example, offering employment, at a suitable wage, on public works. The market respects demand, not need. But give the needy enough pull in the market, and the market will do most of the rest.


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