When food markets don’t work

It remains a source of astonishment to me that otherwise highly intelligent people can wave away some heroic assumptions that end up having enormous effects (on other people, usually). One of the biggest is the assumption that everyone with access to a market is automatically made better off, which of course ignores the reality that needing something sold in a market is not the same thing as being able to afford it. Especially if you used to rely on growing or making that same good for your own living.

The UN Special Rapporteur on the Right to Food, Professor Olivier De Schutter, gets this exactly right in a 2009 report on the corrosive effects of WTO-forced market liberalization in food vulnerable countries:

However, the presumption that trade permits the efficient transfer of food supplies from surplus to deficit regions fails to take into account the wide differences in purchasing power of different regions, and the fact that hunger and malnutrition are generally not the result of the lack of food availability, but rather of the inability for the poorest segments of the population to have access to food at an affordable price. Under a hypothetical fully liberalized trade regime, in the absence of transaction costs, food commodities would flow not from surplus to deficit regions, but from regions where food is produced at the most competitive prices to regions where there is a solvent demand…

He goes on to note that simply increasing exports imports is not the answer either:

Just like increases in production in any one country are not sufficient to combat hunger if, in that country, a group of the population lacks the purchasing power to buy the food which is available on the markets, the expansion of volumes of traded goods is not an answer to hunger if it leads, not to poverty reduction and decreasing inequalities, but to the further marginalization of those who are not benefiting from trade and, instead, may be made more vulnerable by trade liberalization.

The latter point is quite obvious on its face but leads to some more interesting analysis when it comes to the tradeoffs of supermarkets and other innovations.

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