Opinion The quest for food security
Crises precipitate summits and summits usually spew a bunch of banalities. 2009 witnessed several summits the G-8,a few G-20s with...
Crises precipitate summits and summits usually spew a bunch of banalities. 2009 witnessed several summits the G-8,a few G-20s with different levels of government representation,and a just-concluded World Summit on Food Security,convened by the Food and Agriculture Organisation of the United Nations (FAO) in Rome. The motivation for it stems from the devastation caused by the financial crisis. While estimates of hunger and poverty attributable to the global slowdown vary,with the World Bank and FAO competing with each other in producing inflated estimates,there is legitimate concern that the progress achieved so far in MDG-1 of halving poverty by 2015 has suffered a serious setback. A document prepared by FAO for the World Summit,for example,asserts that the number of poor and hungry is likely to go up by 105 million in 2009.
Even if this is an exaggerated estimate,few would dispute the continuing neglect of agriculture,reflected in a rapid decline in its share of ODA and national budgets. World Development Report on Agriculture in 2008 proposed a strategy that centred around: (i) promotion of high-value activities to diversify smallholder farming away from land-intensive staples to cater to rising urban incomes and dietary changes; (ii) extension and adaptation of technologies to enhance land productivity in less-favoured areas with a large concentration of extreme poor; (iii) provision of infrastructural support to facilitate diversification of agriculture and of rural economies; and (iv) expansion of rural non-farm activities to absorb a rapidly growing labour force.
Some of these strategic concerns were largely ignored in a preoccupation with the repair of the financial sector,and exhortations to stimulate domestic demand in emerging Asian economies (notably China and India,among others). The US Treasury,International Monetary Fund (IMF),and Asian Development Bank (ADB) joined the chorus of rebalancing growth in Asia. Emphatic assertions were made about the saving glut and the imperative of diverting demand from exports to boosting domestic demand. Accusations of currency manipulation by China flew thick and fast with vehement demands for revaluation of the renminbi as the ultimate test of Chinas intent to correct global imbalances.
If there are huge imbalances between saving and investment reflected in current account surplus of emerging economies as in the case of China and to a much lesser extent in Indias case it is far from self-evident that the solution is to cut the saving glut. As argued by Jeffrey Sachs of Columbia University,Dani Rodrik of Harvard University and others,there could just as well be under-investment. Since private investment is likely to be weak given the uncertain economic prospects banks are reluctant to lend while investors are pessimistic fiscal stimulus through government spending has a key role in turning a feeble recovery into robust growth. Since emerging Asia is now a major driver of global recovery,a careful examination of growth acceleration through fiscal stimulus especially through public investment is necessary.
A recent study (R. Gaiha,K. Imai,G. Thapa and W. Kang (2009) Fiscal
Stimulus,Agricultural Growth and Poverty in Asia and the Pacific Region: Evidence from Panel Data,Economics Discussion Paper Series EDP-0919,
University of Manchester) throws new light on the effects of public spending and its two components infrastructure,and net of infrastructure on agricultural and overall growth,and,consequently,poverty.
This analysis confirms that,despite the decline in the share of agriculture in GDP,it has a pivotal role in growth acceleration. But,more importantly,in the context of the global slowdown and faltering signs of recovery,the case for a bold stimulus is corroborated. Although impacts of public expenditure as well as of its components especially infrastructure vary depending on the specification of macro-relationships and the sample used,their growth impacts are positive and mostly large and robust. Relative to the base scenario for a sample of Asian countries,for example,a 10 per cent higher public expenditure accelerates agricultural growth rate by 1.23 percentage points; the overall GDP growth by 1.13 percentage points; and,consequently,the absolute number of poor is lower by 10.30 million. Agricultural growth acceleration by itself reduces the number of poor by well over 4 million. The dire predictions of more than 100 million getting trapped in poverty due to the global slowdown are thus not just exaggerated but avoidable in substantial measure. Besides,if mechanisms are evolved to direct the fiscal stimulus to the rural areas where both physical and social infrastructure are far from adequate to sustain the growth impulse,the payoff in terms of poverty reduction may surpass seemingly optimistic predictions. Talks of early withdrawal of fiscal stimulus in India and elsewhere fuelled by mild symptoms of inflation and a rising burden of public debt are not just ill-informed but risk stifling a rapid recovery.
Raghav Gaiha is a professor of public policy,Faculty of Management Studies,University of Delhi; Vani S. Kulkarni is a senior lecturer in South Asian Studies,Yale University
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