An article in Thursday’s Washington Post by Craig Timberg claimed that “the rise of a market mentality” has contributed to the famine in Niger. As you would expect, this has provoked a strong reaction from free market bloggers, such as Don Boudreaux at Cafe Hayek, Melana Zyla Vickers at TechCentralStation, Craig Newmark at Newmark’s Door, and Anthony Batty at The Globalisation Institute, who claim that the problem has been caused by price controls, excessive government regulation and the unintended consequence of well-meaning donor intervention.
In this polarised debate, both ideological extremes are wrong. This is a reality-based blog, so here is the middle ground.
First, Timberg’s claim that market liberalization has led to this famine is painfully misguided. He says:
“In a country adopting free market policies, the suffering caused by a poor harvest has been dramatically compounded by a surge in food prices and, many people here suspect, profiteering by a burgeoning community of traders, who in recent years have been freed from government price controls and other mechanisms that once balanced market forces.”
This does not make sense. Surely he cannot believe that food production would be higher, and more food would be available in Niger, if food prices were lower, for example as a result of Government price controls. Rising food prices create incentives for higher production, marketing of stockpiled food, reduced exports and increased imports. If Niger has too little food, then an increase in food prices is exactly what is needed to increase the supply.
Timberg offered himself up as a free hit for the right wing commentators, which they duly took. But seeing the world through ideological blinkers, they headed off over the reality horizon in the opposite direction.
Notably, Melana Zyla Vickers misunderstands Amartya Sen’s Poverty and Famines, claiming that Sen finds that “command-controlled, totalitarian and authoritarian regimes have regularly bred famine”. Actually, this wasn’t Sen’s point. His analysis showed that some (but not all) famines are caused not by a lack of food production, but by a failure of entitlement, which occurs when some members of the population lack the resources to buy the food they need. It is true that Sen pointed out that excessive state interference might contribute to the failure of the market to ensure that food reaches people who need it. But his central conclusion, which Ms Vickers conveniently ignores, was that even in free markets with sufficient food production, it is possible that an imbalance in the distribution of economic resources might lead to hunger and famine. Sen pointed out that in these circumstances, the best approach might be for aid donors to make cash grants to those who need food, to enable them to buy it in markets and so feed themselves while increasing incentives for the production and distribution of food. So on Sen’s analysis, the conclusion is that rich countries should provide increased resources for Niger, provided in the form of unhypothecated cash grants to the poor (basically, dropping dollar bills out of a helicopter). But of course Ms Vickers (and the corporate interests that fund TechCentralStation) are ideologically opposed to government assistance, and would prefer any US aid that does sneak under the radar to be tied to US corporate interests such as agribusiness, so this wasn’t the conclusion that Ms Vickers reached. She prefers instead to blame the
“failure of the socialist-style economic players — within Niger and around it — to allow its people feed themselves.”
So to be clear: Timberg is wrong that a move to less regulated markets has reduced food production; but Ms Vickers is wrong that food shortages are the result of excessive government regulation and intervention. (Incidentally, Ms Vickers also makes the bizarre claim that most of the population in sub-Saharan African “lives under command-controlled economic conditions” – which is complete balderdash.)
Café Hayek also has a crack at the donors:
“Perhaps if the U.N. weren’t in Niger, traders would be selling food directly to starving people rather than waiting for well-meaning westerners to buy it.”
It would be right to criticize the UN and other donors to the extent that they are importing surplus food from western countries and dumping it in Africa, so driving Africa’s own food producers out of business. We don’t have the figures yet, but I have no doubt that some of this is going on, and it is a scandal. But using aid funds to buy food locally, which is what Café Hayek criticises, is exactly what the donor should be doing, as it supports local food producers and increases production. Café Hayek’s idea that increasing the demand for locally-produced food is likely to result in a restriction on the production and supply for food in Niger is just as absurd as Timberg’s converse ideological argument that lack of food production is caused by higher prices. (I am not saying that it is logically impossible; just that it is highly unlikely and an allegation made with no evidence whatsoever.)
Craig Newmark (the economist, not the geek who runs Craig’s List) is closer to the truth. He is right to dismss Timberg’s claim. But he too ignores the point that even in free, otherwise well-functioning markets, famines can occur when some people are too poor to buy the food they need.
Overall, this was dismal reporting by Timberg which should never have got through quality control at the Washington Post (why didn’t someone like Sebastian Mallaby spike this before it reached the paper?). But the ideologically-driven outpourings of the right wing bloggers were no closer to reality. The problem here is not market regulation or aid, but poverty, and that is something that we can and should do something about.