Despite the decrease in food prices since last year's peak, "we are wrong to turn our heads away from the food crisis so quickly," argued Paul Krugman, professor of economics at Princeton University and holder the 2008 Nobel prize for economics, at the second Forum for the Future of Agriculture.
Krugman argued that the recent hike was no "false alarm" caused by a mere speculative bubble, and must not become overshadowed by the global macroeconomic cand financial crises.
He warned that once the current economic slowdown is over, "we will realise that we have a food crisis" sparked by resource constraints, triggered by a growing world population and rising demand for resource intensive foods, such as meat.
Markets cannot be relied upon
Krugman also argued that last year's crisis proved wrong many governments which had assumed that large food stocks are not necessary, because the "markets and global trade will take care of the eventual food shortages".
Last year's events showed that in a crisis situation, countries impose export bans on their agricultural commodities to protect the poorest members of their populations. While it makes political and social sense to protect these people, "the markets cannot be relied upon" to do so, because "the global market for foodstuffs breaks down exactly when it is the most needed," Krugman warned.
"It looks as if we went too far from the policy of keeping food stocks in a country as protection against a crisis," he added.
Need for investment, R&D and institutional remedies
To tackle the looming crisis, "we first need to invest in future food production, both the physical infrastructure and R&D," Krugman said, highlighting the importance of public goods and investment in agricultural productivity.
Furthermore, "policies need to address the overall resource crisis" as agriculture is more restrained by resources than other production. In this regard, the debate surrounding biofuels, for example, is not over yet and "will come back as an issue," he predicted.
He also called for a better system for providing financial aid for and increasing attention on environmental issues, which present a "strong case for an international effort".
Asked whether the current blockage of the Doha round of trade negotiations in the WTO can be overcome, Krugman said he had "given up" on Doha years ago and cannot see anything happening for a long time, "as agriculture is not a trade like others".
Nevertheless, there are still some "real issues" to be addressed in the negotiations, he insisted. "Let's end subsidies that are unfair for producers and consumers in developing world," he suggested.
