Policy Approaches to Undernutrition

Text extracted from

The World Food Problem

Leathers and Foster, 2004

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Ethics: Pope John Paul II

• “Contrasts between poverty and wealth are intolerable for humanity”

• “It is the task of nations, their leaders, their economic powers and all people of goodwill

• to seek every opportunity for a more equitable sharing of resources”– Example of Beneficence

• Personal moral duty to help the poor

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Ethics: Right to Food?

• Right to Food – Included in International

Covenant on Economic, Social and Cultural Rights

– Adopted by UN– Signed by 85 countries

• Now must address hunger issue– to protect fundamental rights

of society– Don’t need to feel personal

moral duty to help the poorUnited Nations

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Ethics: Right to Food?

• Rights taken very seriously

• Absolute entitlement• Non-negotiable• Would require

government to act to prevent hunger

• Conflict with property rights?Feeding orphans, Yemen

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Economist’s Questions

• What is the appropriate policy for society as a whole?

• How can government best manipulate human greed to achieve its policy objectives?

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Government

IdeologyEconomy

How to Move Society Forward

Self-interest

Manipulate self-interest to achieve policy goals

Capitalism

Economics Policy Decisions

• Every action has costs and benefits• Marginal costs and benefits

– For 1% increase in cost, what is the increase in benefits?

• Ideal decision: where marginal costs = marginal benefits

• Free market will allocate resources optimally, but– Without concern for

• Social costs• Environmental costs

– Can everything be put in dollar terms?Three Gorges Dam, China

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Externalities

• Costs and benefits sometimes go to people outside the market transaction– Should wealthy benefit from costs

borne• By the poor?

– Exploitation = externality

• By the environment?– Exploitation = externality

– To feed hungry has indirect benefit to wealthy

• We feel better = externality• No market for this

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Every action has costs and benefits

• How much would you pay for… – A human life?

• Speed limit 10 MPH?

• Nutrition for every man, woman, and child?

– Food without pesticide residue?

– No pollution?

– Freedom?

– Fair trade?

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Harnessing greed in policy

• Economic incentives– Can make it more expensive

• To have children• To degrade the environment

– Need property rights

• Production increases with reward– If we eat less:

• other countries won’t benefit• Farmers will produce less

• As demand increases– efficiency increases

• Products made available more cheaply• Alternatives found

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Policy to reduce undernutrition?

• 250 Calories/day would erase Calorie deficit of hungry– Cost 35 cents/day/person– = $6,400 invested at 2%

interest– Value of Human Life?

• For 800 million people, this policy would – Increase food prices– Increase environmental

costs of food production

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Policies to raise incomes of poor

• Redistribute income from rich to poor– Rationale: declining

marginal utility of income• Rich don’t benefit from a

dollar spent as much as poor do

– But should incomes be equalized?

• Improve rate of economic growth– Is Globalization beneficial

to developing nations?

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Policies to reduce price of food

• Population reduction– Demand will rise

slower

– Food prices will rise slower

• Increasing supply– Research investment

– Loans to farmers

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Policies to reduce cost of food

• Price supports• Sell food to consumers• Subsidies to farmers

– Both reduce economic efficiency

– Therefore distortionary

• Corrective price policies – Example: correcting

distortions that reduce food output

Aid Policies

• Aid can help– If targeted to poor

• Example: School feeding

– In emergencies

• Aid can hurt – If wealthy elites profit from it

• makes the problem worse

• Often designed to further our national and trade interests

• Directed mainly at political allies– not hungry nations

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Aid Policies

• Have been used as a lever– to impose “structural adjustment”

on foreign trade policies

• If foreign countries do not open up markets – or reduce subsidies as directed by

U.S.• Aid may stop

• Designed to create new markets– foster dependence on U.S. grain

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Aid Policies

• When aid is given as free grain– undermines prices for farmers

– driving them out of business

• Military aid can lead to armed conflicts – that generate hungry people

• Well-off divert aid to help themselves– further widening gap between

haves and have-notshttp://www.wfp.org/img/newsroom/afghanistan/310/dscn0678.jpg

U.S.Agency for International Development (USAID)

• Started with Marshall Plan after WWII

• Principal U.S. foreign aid agency to help countries:– Recover from disaster– Escape poverty– Democratic reforms

• Partnership with – 3,500 U.S. businesses– 3,000 Organizations

• $8.8 Billion

                                           

USAID in Uganda

U.S. Foreign Aid

• U.S. gave $28 billion (2007)

• Largest Donor in world

• Less generous based on capacity to give (GNP)

• < 0.22% Federal Budget– Majority think U.S.

Aid is 20X more

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U.S. Foreign Aid Budget

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U.S. Generosity

• 2007 Government Aid:– $28 billion

• 2007 Private giving – $93 billion

• $61 billion: private payments to family members

• 2007 Private Lending, Investment– $69 billion

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Third World Debt

• Forgiving third-world debt– would help countries become

self-sufficient

• Honduras annual debt payments – exceed amount spent on health

and education combined

• Total debt payments – greater than foreign aid and

foreign investment combined

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