As we enter the holiday season, it is worth reflecting on one of the most pernicious slow-moving crises of our time: the continued presence of hunger in a world of plenty. Ending hunger by 2030 and protecting the right of everyone to have access to sufficient, safe, affordable and nutritious food is one of the targets proposed for the post-2015 agenda by the High-Level Panel on the Post-2015 Development Agenda, and many others are also promoting the same message. Pope Francis is the latest entrant into this debate with his announcement of a global campaign of prayer and action to end to hunger and malnutrition, “One Human Family, Food For All”. The campaign includes encouragement for local, national or global level action against food waste and the promotion of food access and security worldwide. The Pope prompts us all to ask ourselves, what will it take to end hunger?
Agriculture and Rural Development
Economist and Nobel Prize laureate James M. Buchanan remarked to the Wall Street Journal in 1996 that "Just as no physicist would claim that "water runs uphill”, no self-respecting economist would claim that increases in the minimum wage increase employment." Of course this statement remains broadly true today, but the advent of better data, improved statistal techniques and the proliferation of country studies – have made economists far more careful about pre-judging the impact of minimum wages on employment and wages. Indeed, in a now famous study of fast food restaurants in New Jersey and Pennsylvania, David Card and Alan Krueger showed how the imposition of a minimum wage had no significant disemployment effects, and in some cases increased employment, arising out of a large enough increase in demand for the firms’ products.
The evidence for South Africa, some twenty years after the demise of apartheid, is equally compelling. In a two-part study, my co-authors and I find an intriguing set of contrasting economic outcomes, from the imposition of a series of sectoral minimum wage laws. In South Africa, the minimum wage setting body, known as the Employment Conditions Commission (ECC), advises the Minister of Labour on appropriate and feasible minimum wages for different sectors or sub-sectors in the economy. Currently, the economy has in place 11 such sectoral minimum wage laws in sectors ranging from Agriculture and Domestic Work, to Retail and Private Security.
Some observers caution that the reforms proposed by the Chinese Communist Party (CCP) after the Third Plenary meeting of its Central Committee may fall short of promise because of resistance from vested interests or a lack of political will. My view is that it will bring about fundamental changes in China for one simple reason - politics. First, the CCP leadership fully understands that the party has lost the trust of the people because of rising corruption and cronyism, increasingly offensive income inequality, huge question marks over food safety, and worsening pollution. Second, they realize that the current economic model cannot sustainably deliver the economic progress that citizens expect in return for their allegiance to the CCP. The CCP leaders know that fundamental changes are needed to this economic model to regain the trust of the people. Since survival demands big changes, the leadership will pull out all the stops.
Absentee teachers, negligent doctors, high transport costs, missing fertilizers, and elite-captured industrial policy all stand in the way of poor people’s escaping poverty. While the proximate reason for these obstacles may be a lack of resources or an erroneous policy, the underlying reason is politics.
- In many developing countries, teachers run the political campaigns of local politicians, in return for which they are given jobs from which they can be absent. The situation can be described as an equilibrium, where the candidate gets elected and re-elected, and teachers continue to be absent. The losers are the poor children who aren’t getting an education. The equilibrium has no intrinsic force for change, especially if, as in Uttar Pradesh, India, 17 percent of the legislature are teachers.
- High transport costs in Africa are due not to poor-quality roads (vehicle operating costs are comparable to those in France) but to high prices charged by trucking companies, who enjoy monopoly power thanks to regulations that prohibit entry into the trucking industry. High transport prices and monopoly trucking profits are an equilibrium. In one country, the President’s brother owns the trucking company, so prospects for deregulation there are grim.
- Several countries subsidize fertilizer, sometimes to the tune of several percentage points of GDP, only to find that it fails to reach poor farmers. Thinking that the problem is the public distribution system, some governments have tried to use the market to allocate fertilizer, by giving farmers vouchers that they can redeem with private sellers. A scheme in Tanzania found that 60 percent of the vouchers went to households of elected officials. When subsidies are captured to this extent by political elites, their reform will be resisted—another equilibrium.