Original URL: http://www.theregister.co.uk/2011/06/06/oxfam_report_2011/

Oxfam's 'Grow' world hunger plan: More peasants

Hippie-crats correct on axing farm subsidies, tho

By Tim Worstall

Posted in Government, 6th June 2011 10:06 GMT

Comment Oxfam's latest campaign, "Grow", seems so lovely and cuddly that to criticise it is almost like torturing puppies. What could be wrong with trying to feed the hungry and thus make the world a better place? Alas, if wishes were kings we could all be monarchs for the day and what's wrong with the campaign is not the initial wish but the list of damn fool things it intends to do.

Praise first: Oxfam is quite right that there are several entirely stupid things that are being done about food currently. The first and most obvious is the biofuels nonsense: food should go into people, or at least animals we can eat, not into cars. But the European Union has insisted that 10 per cent (to rise to 15 per cent) of all petrol/diesel must be made from plants instead. Oxfam seems to think that this will reduce emissions: despite every scientist worthy of his slide rule pointing out that growing and processing the plants emits more than the oil being replaced.

Another policy we should stop yesterday is the subsidy of the rich world's farmers. Can't make a profit growing what people want to eat? Then stop and do something else. We say this to car makers, to buggy whip makers and there's nothing about wading in cow shit that makes farming any different. New Zealand did it and farming profits went up.

After those two pieces of piercing analytical logic, the report unfortunately goes downhill. There are the usual factual quibbles: Oxfam says that 90 per cent of food commodity trading is in the hands of just three companies, something that just isn't true. It seems to have been bamboozled by some very bad research into ignoring large numbers of companies that engage in such. Similarly, it give us the factoid that fossil fuels are subsidised to the tune of $330bn-ish while renewables to only $50bn-odd: entirely ignoring that the subsidies are in different parts of the world and for different things. The renewables subsidies are all being paid out by the likes of the UK, Germany and Spain, in order (however ineffectually) to give the new technologies a leg up. The fossil fuel subsidies are all being paid out by more or less repressive regimes like China, Russia, Iran and Saudi Arabia, to subsidise the consumption of petrol and the like. They're simply not comparable: it really isn't the UK subsidising both at all, which is the impression they give.

A third is that Oxfam says the price of food is going to rise. Well, yeeesss, except that its analysis deliberately excludes anything people might do in terms of research, breeding or changing farming (or even consumption) habits as a result of changing prices. Excluding everything that we know people do when prices change when looking at what will happen when prices change is a tad odd.

Further, despite what some commentators seem to be taking as the lesson from the report, Oxfam doesn't say that household spending on food is going to rise. The organisation actually expects it, as a portion of such incomes, to fall in most countries. For its real argument that food prices will rise is that the poor are getting richer. Demand for food will rise as diets change, as everyone gets the taste for three squares a day: this might indeed be a problem but it's a nice problem to have. One of affluence, not of poverty.

However, these are quibbles: what horrifies is the ghastly error at the heart of Oxfam's argument. The aim, the intention, is to both feed the world and to do so more equitably. Excellent: it is a harsh man who is happy with the fact that we currently grow enough calories to feed everyone yet there are still people who are going hungry.

The organisation is also able to identify the basic things that need to be changed in order to sort these things out. The farmers who don't currently have access to the best seeds, and to the best inputs, need to gain such access. Transport networks and storage and processing facilities need to be developed in areas that don't have them, so that less of the crop rots on the way to market.

Get rid of Big Agriculture, increase impoverished subsistence farmers

As has been remarked upon by all sorts of people before, if the low-productivity farmlands of the world became as productive as the high productivity ones, then we'd all be swimming in food. In short, if the the nether reaches of the Congo had the same farming infrastructure as the nether reaches of the Dakotas then the problem would be solved. So far so good... but then Oxfam's analysis turns to shit. For it has managed to get itself infected with the lefty mantra that any and everything done by big companies must be awful, and that anything done with money in offices is positively evil. For having pointed out that what, say, the African farmer needs is the same infrastructure that the American one has, it then decides to demonise those companies which provide that American infrastructure. Those commodity trading companies become the evil ones.

For who is it that gets the new soya seeds to the Argentine or Brazilian farmer? Ships the fertiliser? Runs the warehouses and processing plants after the harvest? Operates the ports that ship the food to the hungry and pays the farmers so that they can do it all again next season? Quite, it's those very commodity companies, the Bunge, ADM, Cargill types that do all of this. The same companies which could, if allowed, bring exactly that infrastructure and supply chain to the places that don't currently have it.

No, really, they've managed to build exactly that in only 20 years in Argentina as the place has moved from beef to soy production. But Oxfam for some reason wants them out of the supply chain and governments taking over such duties.

And then the report goes entirely doolally over commodities speculation, over futures and options. One of the points the report makes (in one of the good bits) is that price volatility is damaging both to producers and consumers. So we'd like to have some method of dampening such volatility. At which point it insists that this means we must lessen speculation in foodstuffs. But, umm, speculation in foodstuffs is what dampens price volatility in foodstuffs.

If any Oxfam type happens to read this by mischance, here's why. To make money in commodities you have to buy low and sell high. When you buy low you prevent prices from falling further, in fact you raise them: maybe only a little depending on how much of the market you're buying, but raise them you do. Good, so we've just reduced the slumping of prices which do so much damage to farmers. When you sell high you're increasing the supply onto the market at a time of shortage. This reduces the price volatility at the high end which does such damage to consumers. So, our speculator making money reduces price volatility: it's only the speculator who buys high and sells low who increases it and as he goes bust very quickly we don't need to worry about him.

And yes, we do have the example of the American onion market where price volatility has been greater since the 1950s (and the banning of futures trading in onions) than was the case before the ban.

Another tax to pay for it all

Finally, to pay for all of their grand plans, to get those seeds to farmers, to build transport networks, they want to have a financial transactions tax. As we saw when Sweden brought in one of those, where the bond futures market shrank by 90 per cent or so and the options market closed entirely, an FTT would entirely destroy the very system which currently reduces price volatility. And it would probably bankrupt all those companies which currently build and operate the farming infrastructure which Oxfam insists should be extended to all.

So far so appalling, but my real venom – as I would suggest yours should be – is reserved for what they want to do to the people of Africa. When they consider how to boost farming there they consider the sort of farming that rich people do. Couple of percent of the people on the land, earning well, the rest of us able to go off and build health care systems, education, houses, libraries, all the things that make a civilisation. In Africa they decide that this would not be appropriate. No, in Africa we should insist upon smallholder farming: and for smallholder read peasant. Instead of fields of waving grain planted and cut by vast machines, we should rely on Mbutu and his kids trying to do it all with a hoe and machete.

The problem with this is that the amount that Mbutu can earn – the living standard for him and his kids – is determined by the productivity of their labour. If they're going to be stuck in low labour productivity peasant farming then they'll only ever be able to live like peasants. Forever. For this is the problem with peasant farming: the farmers have to be and live like peasants. Quite why Oxfam insists that 500 million Africans have to be condemned to this lifestyle, one that 500 million Europeans (the odd hippy excepted) have quite happily abandoned I'm not sure. It can't be racism, for Oxfam is on the left and lefties are against racism. But there it is, it is really condemning hundreds of millions for all eternity to what Marx called the idiocy of rural life.

And for that I'll not forgive it, and for that I suggest you too condemn Oxfam, its report and its campaign. ®