Policy Approaches to Undernutrition Text extracted from The World Food Problem Leathers and Foster,

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

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 poor United Nations

Ethics: Right to Food? Rights taken very seriously Absolute entitlement Non-negotiable Would require government to act to prevent hunger Conflict with property rights?

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?

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?

Externalities Costs and benefits sometimes go to people outside the market transaction –Should poor benefit from costs borne by wealthy? –Should wealthy benefit from costs borne By the poor? By the environment?

How much would you pay for… A human life? –Airbags in every car? –Speed limit 10 MPH? –Nutrition for every man, woman, and child? Food without pesticide residue? No pollution? Freedom? Fair trade?

Harnessing greed in policy Economic incentives –More expensive to have children –More expensive to degrade 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

Policy to reduce undernutrition? On average, 250 Calories/day would erase Calorie deficit of hungry –Cost 35 cents/day/person –= $6,400 invested at 2% interest –Value of Human Life? But for 800 million people, this policy would –Increase food prices –Increase environmental costs of food production

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?

Policies to reduce price of food Population reduction –Demand will rise slower –Food prices will rise slower Increasing supply –Research investment –Loans to farmers

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 –Example: To feed hungry has indirect benefit to wealthy We feel better = externality No market for this

Aid Policies Aid can hurt poor –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

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 by fostering dependency on U.S. grain –Korea

Aid Policies When aid is given as free grain, undermines prices farmers can get, driving them out of business Military aid can lead to armed conflicts that generates hungry people Well-off divert aid to help themselves, further widening gap between haves and have-nots

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 $15 billion (2002) Largest Donor in world Least generous based on capacity to give (GNP) < 1% Federal Budget –Majority think U.S. Aid is 20X more 2004: U.S. allocated $1billion to Millennium Challenge Grant 2004: U.S. allocated $2.4 billion to combat AIDS/HIV

U.S. Generosity 2004 Government Aid: –15 cents/day/person ($54/yr) 2004 Private giving –5 cents/day/person ($19/yr) Center for Global Development

Third World Debt If we forgave third-world debt, would help countries become self-sufficient –Honduras annual debt payments exceeds amount spent on health and education combined –Total debt payments are greater than foreign aid and foreign investment combined