Martin Wolf is right, in his generous review of my book (“Sustaining Growth is the Century’s Big Challenge,” June 11), that the biggest question in economics is whether there is room enough on the planet for 7 – 10 billion human beings, the tens of millions of other species, and economic convergence, that is the continued, reliable, and fairly rapid narrowing of income gaps between rich and poor due to technological catching up by the poor.  The tendencies for convergence are powerful.  Rapid economic growth in China and India reflect the powerful capacity of today’s poorer countries to close technology gaps.  The results are impressive: income doubling periods of 7 to 10 years.  The results are also harrowing: profound threats to the Earth itself, and therefore to continued economic development and even survival of vast numbers of people and vast parts of the biosphere. 

Martin calls me both optimistic and pessimistic at the same time.  My point is that either the positive trajectory or negative trajectory is possible, indeed both are plausible.  I believe that physical resource limits alone will not do us in, or end economic convergence.  On the other hand, the market economy by itself will not solve a now world-threatening crisis of sustainable development.  The market system fails to solve four fundamental classes of problems: ecosystem functions (the bio-geophysical commons); population; extreme poverty (because of the very real dynamics of poverty traps); and technological pathways needed for sustainability. These are solvable problems.  They require collective action, as they are fundamentally in the character of public goods.  Yet for the same reason they are not solved.  Part of the barrier is the ideology of market economics itself, which often denies these problems and therefore is short on producing practical tools and solutions.

The biosphere does not come packaged according to the assumptions of neoclassical economics.  What we call externalities are the norms, not the exception.  In ecosystems, the nutrients, carbon, water, nitrogen, energy, and species (including ours) are in flux.  There are spatial migrations and temporal flows and interactions which make a lie of the underlying assumptions of “private” property.  A farmer that encloses his farm, or drains groundwater, or introduces an invasive species, or puts on chemical pesticides, or replaces high biodiversity with a commercial monoculture, has pervasive effects on a whole ecosystem.  These are, by nature, not fenced in his enclosure.  None of this mattered in the extreme perhaps when the Earth was still populated by 1 billion of us, or perhaps even 2 or 3 billion.  When local systems failed, there were new ecological niches to conquer.  Yet in the past 250 years, the population has risen nearly tenfold.  There are no more places to flee.  And ecosystems everywhere are under profound threat.

It is often said that we have beaten Malthus, but that is also not quite right. We have had two main solutions to Malthus.  The first is voluntary fertility reduction, especially in the past half century.  Malthus really couldn’t imagine this.  But the global demographic transition is still incomplete, and the human population is still rising by around 75 million per year.  The second is massive mining of resources.  We haven’t simply figured out how to get more for less, as we usually assume; we have just as often figured out how to get more for more . . . more groundwater depletion, more habitat destruction, more fossil fuel use, more use of chemical pollutants, etc.  Our “solutions” have been really only half solutions.  We are clever indeed, but less clever than we pretend, by counting as income what is in fact pervasive depletion of natural capital.

The answer then to the question of whether we’ve beaten Malthus, is “Yes, no, maybe.”  Yes, we have enjoyed a pervasive rise in living standards ahead of the population curve, and have set in motion the powerful global dynamics for more.  No, we have not done this yet in a sustainable manner.  Populations are growing too fast, we are running out of some resources, such as conventional oil and fossil groundwater, and we will lose others, such as glacier melt.  And maybe we can overcome these constraints as well, but with technologies which do not (quite) yet exist, or which exist but are still very costly, or which exist but for various reasons are not deployed (e.g. because the poorest of the poor can not afford them or because of market neglect of the commons).    

Standard neoclassical economics makes four kinds of mistakes regarding sustainable development.  First, it literally writes natural resources out of the baseline growth analysis.  This is how we are taught on the first day, with the Solow and Ramsey growth models.  This assumption is correct only if the neglected natural inputs are indeed available at constant cost relative to the outputs, in which case we can assume their effects away through aggregation.  This is not the case. The recent rises of oil and food prices are real signals to the contrary.  And there is even more output-threatening depletion and environmental destruction not yet registered in market prices.  By the way, our international agencies until very recently operated with the same blithe assumptions.  The energy sector forecasts of the International Energy Agency, for example, have been “demand-side” forecasts only, as they have implicitly assumed that the supply would be forthcoming, on the margin, at constant relative costs. In the same vein, mainstream economics vastly downplays the ecological costs of human activity, by treating the massive anthropogenic pressures as mere exceptional “externalities,” rather than the pervasive rule.  Again, this did not matter as much on a global scale until recently. 

Second, market economics neglects the importance of population policy, especially to help promote a demographic transition in the poorest countries through a rapid, voluntary reduction of fertility rates.  The rapid population growth in the poorest countries is to nobody’s benefit: the poor themselves (especially the children’s generation), the world, and the environment.  It results from a combination of factors, including the pervasive lack of access of the poorest of the poor to family planning services and contraception, high child mortality rates (which discourage voluntary fertility reduction), and lack of public financing of education of girls through at least secondary level.  The demographic trap, in short, is part of the poverty trap, and it is threatening to the poor, global stability, and long-term environmental sustainability.  

Third, and closely related, mainstream economics assumes that production functions and financial markets are such as to ensure market-based economic growth even in conditions of extreme deprivation and lack of infrastructure. Technically, the baseline growth theory blithely assumes away poverty traps (for example, in the famous Inada condition of the first day of growth theory, which posits nearly infinite returns to incremental private-sector investments in capital-scarce economies such as Mali, Niger, Chad, and Somalia!). 

Fourth, the implicit assumption of market economics is that if a technology is vitally needed, it will be found by market forces, perhaps augmented by (non-market) patent rights.  Necessity will be the mother of invention, rather automatically.  Yet economics teaches that knowledge -- both science and the technology embodying scientific and practical know how -- is not just another commodity, but a public good par excellence.  It will be produced and diffused in insufficient amounts by market forces alone.  Market-based technological pathways may sidestep entirely the technological needs of the poorest of the poor, and of the global commons, unless guided by public policies and action.  The massive technological change, of the kind needed urgently in this century, requires a mobilization of public and private institutions and actions, new public-private partnerships (PPP), and a rich institutional environment for technological change.  Massive technological innovations will require public financing at least an order of magnitude greater than today directed at technological innovations in sustainable energy, food production, water use, biodiversity conservation, and more.

My optimism is indeed that our technological prowess can be good enough to address the harrowing challenges, and that physical resource availability (energy, land, water, biodiversity) can suffice with the invention and diffusion of resource-saving technologies.  I put great stock in renewable energies (especially solar power, which I believe will likely be the most important of all energy technologies by the end of this century, perhaps together with safe nuclear power), high-mileage automobiles, drought-resistant crop varieties, carbon capture and sequestration, anti-malaria bed nets and medicines, and much more. 

My pessimism is that there is nothing automatic (in market terms) about the development and application of such solutions.  They require a new kind of economic analysis; vastly greater public awareness and consensus; and global cooperation on a scale not yet achieved.  We can end poverty with existing technologies for less than 1 percent of rich-world income, yet we think it’s much more important to argue about that proposition than to try it (despite our endless promises at the highest political levels to try it), while in the meantime around 10 million children die each year of their poverty, and vast regions of the world are inflame in their hunger, disease, and desperation. 

Are the vitally needed sustainable technologies within reach?  Probably at modest cost. Many are already on the horizon, a “future that is already present.” Are we making such investments?  Plainly no. We have yet to master the full “value chain” of research, development, demonstration, and diffusion (RDD&D) to mobilize sustainable technologies at anything close to the necessary global scale and speed.  Incidentally, a recent study by the International Energy Agency, Energy Technology Perspectives 2008, takes a similar technological perspective, and finds that around 1 percent of GNP invested per year in sustainable energy systems (mainly in close-to-market technologies) would be sufficient to cut global emissions by half by 2050 consistent with resource availabilities and continued rapid global economic growth.  It’s almost exactly the same conclusion and point estimate that I give, and is consistent with similar conclusions of Sir Nicholas Stern and others as well.  It just won’t happen by itself.  Indeed, small tweaks to the market, such as carbon trading, are also insufficient, because those tweaks only modestly change the game along the entire RDD&D trajectory.       

My point, in the end, is that our traditional debate – Should we be optimistic or pessimistic? – is not really the right framing of the question.  The right issue is how to achieve the achievable sustainable development trajectory through an appropriate mix of public-sector and private-sector investment, backed up by a mix of public and private institutions at all scales. Good answers, I believe, will require a far more serious approach than our profession currently gives to these problems.  We need to take very seriously indeed the role of natural resources and ecosystems in economic production (e.g. in food and energy); the pervasive and unprecedented anthropogenic forcings on natural systems; the multiple and deep failures of “private” property in crowded, stressed, and non-linear ecosystems; the existence of demographic and poverty traps which kill millions each year and which hold entire regions (e.g. the Horn of Africa and much of Central Asia) in a trap of political and social crisis; and the complexity of the processes of innovation and diffusion, which require a subtle and changing mix of public and private institutions operating locally, regionally, and globally.

Source: Financial Times Comment & Analysis

The key to heading off devastating climate change--and to sidestepping out-of-sight oil prices along the way--is to improve technology. We need good alternatives to fossil fuels, not the ersatz variety in which we convert corn to ethanol and then face soaring food prices. We need to harness vast amounts of solar power and start storing the carbon dioxide emitted by coal-fired power plants underground. We need green buildings that demand less energy for heating and cooling, and automobiles that get vastly more miles per gallon.

These are all achievable goals. The technologies are within reach. Yet to take them from the research phase into widespread use will require major investments, both public and private. When it comes to climate change, President George W. Bush's greatest failure is that he dithered for eight years instead of investing in new technologies for a sustainable planet.

Bush will have been in the Oval Office for almost as long as it took NASA to answer John F. Kennedy's call to send a man to the moon and back. In Bush's first term, he announced plans for a new type of coal-fired power plant that captures its carbon dioxide exhaust and pumps it safely underground, where it cannot affect the climate. Yet not only will he leave the White House without having broken ground on a zero-emissions power plant, but his Administration once again put off the initiative in January. Why? Persistent failure to think through the project.

The government has been equally deficient when it comes to bringing energy-efficient automobiles into the mainstream. In his 2003 State of the Union address, Bush praised the concept of hydrogen-powered cars that emit no carbon dioxide. Yet there has been little follow-through on hydrogen or other long-mileage technologies. And the government has done little to help advance existing technologies like hybrids. One sign of Washington's torpor was the decision in December 2007 to raise fuel-economy standards to 35 m.p.g. by 2020. Not too impressive a goal, considering that today's hybrids already exceed 40 m.p.g. And new plug-in hybrids, like the Chevrolet Volt prototype that GM had up and running in April, should get 100 m.p.g. by 2010--and they could get even better mileage as electric batteries improve.

An important measure of the government's technology commitment is the federal budget for energy research and development. According to the International Energy Agency, U.S. spending for all energy research--nuclear, wind, coal, solar, biofuels, etc.--was a meager $3.2 billion in 2006. The Pentagon spends that much in about 40 hours. Spending on carbon capture and sequestration was a mere $67 million.

At the start of the next Administration, it will be high time to increase our annual energy-research budget to $30 billion, which would make it at least comparable to what we spend on medical research each year at the National Institutes of Health (NIH). And I propose, with the same sense of mission that gave rise to NASA and NIH, that we create a National Institutes of Sustainable Technology. A return to America's can-do attitude of the 1960s would help make the U.S. a winner in countless ways. We would help put a brake on our contribution to climate change, lower America's dependence on the tumultuous Middle East and reclaim our competitive edge in science, technology and the global economy.

So, what can we do besides drive less and use fluorescent bulbs? For starters, we should keep the presidential candidates focused not on the merits of temporary tax cuts on gasoline but on how the U.S. can marshal its resources to tackle our biggest environmental and geopolitical problems. Which candidate will successfully guide our generation's "moon shot" to achieve sustainable energy, food and water for the planet?

Source: Time

(Fortune Magazine) -- Three decades ago, in a bleak stretch of the 1970s, an economic phenomenon emerged that was as ugly as its name: stagflation. It was the sound of the world hitting a wall, a combination of no growth and inflation. It created an existential crisis for the global economy, leading many to argue that the world had reached its limits of growth and prosperity. That day of reckoning was postponed, but now, after a 30-year hiatus, at least a mild bout of stagflation has returned, and matters could get much worse. We are back to the future, with the question we asked 30 years ago: How can we combine robust economic growth with tight global supplies of such critical commodities as energy, food, and water? It's worth comparing the earlier episode of stagflation with our current travails to help us find our way. In fact, this time the resource constraints will prove even harder to overcome than in the last round, since the world economy is much larger and the constraints are much tighter than before.

The similarities with the first half of the 1970s are eerie. Then as now, the world economy was growing rapidly, around 5% per year, in the lead-up to surging commodities prices. Then as now, the United States was engaged in a costly, unpopular, and unsuccessful war (Vietnam), financed by large budget deficits and foreign borrowing. The Middle East, as now, was racked by turmoil and war, notably the 1973 Arab-Israeli war. The dollar was in free fall, pushed off its strong-currency pedestal by overly expansionary U.S. monetary policy. And then as now, the surge in commodity prices was dramatic. Oil markets turned extremely tight in the early 1970s, not mainly because of the Arab oil boycott following the 1973 war, but because mounting global demand hit a limited supply. Oil prices quadrupled. Food prices also soared, fueled by strong world demand, surging fertilizer prices, and massive climate shocks, especially a powerful El Niño in 1972.

Here we go again. Oil prices have roughly quintupled since 2002, once again the result of strong global demand running into limited global supply. World grain prices have doubled in the past year. Just as in 1972, the recent run-up in food prices is aggravated by climate shocks. Australia's drought and Europe's heat waves put a lid on grain production in 2005-06. Even the politics are strangely similar. In both 1974 and 2008, an unpopular Republican President, battling historically low approval ratings, was distracted from serious macroeconomic policymaking. The country was adrift.

Then as now, Dick Cheney was close to the helm. What's more, the erroneous lessons he took away from the 1970s contribute to the problems that haunt us today. Cheney was Gerald Ford's chief of staff in 1976, when soaring oil prices helped doom Ford's reelection campaign. Cheney became obsessed with the fight to control the flow of Middle Eastern oil. That obsession, which by many accounts contributed to Cheney's urge to launch the Iraq war, has made the United States much more vulnerable in terms of energy, not only by tying the United States down in a disastrous military effort but also by diverting attention from a more coherent energy strategy.

The first stagflation was overcome at very high cost, including 15 years of slower global growth. While the world economy expanded by about 5.1% during the period 1960-73, it grew by a much slower 3.2% during the period 1973-89. A lot of the slowdown had to do with the worldwide profit squeeze and restraint on investments, jobs, and growth caused by tight energy supplies. A side effect of rising oil prices was to heighten financial turmoil, since central banks around the world, including the Federal Reserve, initially tried to use monetary expansion to overcome the supply-side constraints. The result was inflation rather than a restoration of economic growth. That is a key lesson for today, at a time when the Fed seems intent on lowering interest rates despite fast-rising commodity prices. There are limits to what a central bank can do in the face of a severe resource squeeze.

The first episode of stagflation opened a great debate about the global adequacy of primary commodities, especially energy and food. In 1972 the Club of Rome published its manifesto, "Limits to Growth," which predicted that the global economy would "overshoot" the earth's natural-resource limits and subsequently collapse. Yet once the world economy surmounted the extreme stagflation and returned to lower inflation and stronger growth from the mid-1980s onward, it became fashionable to dismiss the earlier fears of resource pessimism. Critics mocked "neo-Malthusians," who, inspired by the warnings of the late-18th-century thinker Thomas Malthus, predicted that society would outstrip the earth's carrying capacity. Didn't the Malthusians know that scarcity would generate new resource discoveries, new substitutes for scarce commodities, and new technologies?

Now the debate has returned with a vengeance, and a careful look back to the first stagflation is a sobering one. Yes, the world economy surmounted the stagflation, but not easily and not robustly. To an important extent, the workarounds on resource constraints were themselves limited and are showing decided strains today. We are not exactly running out of resources, but we are once again running up against serious resource and ecological limits that can hold back global economic progress. We will need to put a much greater priority on easing those constraints.

Conventional oil supplies will remain tight in the years ahead. New discoveries will not suffice. World crude-oil production nearly tripled in 1960-73 (from 21 million barrels a day to 56 million), but has grown a mere 30% since then, to around 73 million barrels per day in 2006. In fact, Persian Gulf crude-oil production stopped growing entirely after 1974, peaking at around 21 million barrels per day. Discoveries and production increases outside the Middle East rose only modestly and now in many cases are in decline in such fields as Britain's North Sea and Alaska's North Slope.

The simultaneous food scarcity of the 1970s proved to be shorter-lived than the energy scarcity, since the 1970s ushered in a nearly worldwide "green revolution" of higher grain yields, based on the adoption of improved seed varieties, intensive inputs of fertilizer, and vast increases of irrigation. The achievement was stunning but also not without its limits. Many areas of increased food production, such as in India and China, have relied on massive pumping of ground water for irrigation, and that ground water is being depleted. Heavy use of fertilizer, often inappropriately applied, has also proved to be an environmental threat in some parts of the world, as runoff creates dead zones in places like the Gulf of Mexico.

To make matters worse, human-made climate change is now adding enormous risks to global food production. Today's dry land regions, as varied as the U.S. Southwest, the Sahel of Africa, the Mediterranean, and Australia, are facing the increased frequency and severity of droughts, with hugely adverse consequences for global food security. A host of other global environmental problems also threaten the global food supply: disappearing glaciers (which feed rivers and irrigation), temperature stress, soil erosion, destruction of fragile habitats, and the loss of biodiversity, including the dramatic decline of birds and insects that pollinate food crops.

The climate-change challenge is incomparably greater than in the 1970s. In 1973 the world emitted roughly 17 billion tons of carbon dioxide from fossil-fuel use. Today the world emits roughly 30 billion tons from those sources. The atmospheric CO2 concentration, which stood at 325 parts per million (ppm) and was rising at roughly one ppm each year in 1973, has risen dangerously, to 385 ppm and now increases by 2.4 ppm each year.
Global resource constraints

The implications are clear and sobering. Our global resource binds are much tighter now than in the 1970s, because the world economy is that much larger, the resource constraints are tighter, and quick fixes are harder to find. In 1974 the world population was four billion, and total world income was around $23 trillion (in today's dollars adjusted for purchasing power). Now the world population is 6.7 billion, and the economy is around $65 trillion. The same annual growth rate of the world economy, say 4% per annum, requires vastly more natural resources - energy, water, and arable land - than in the 1970s and poses much larger risks for the world's climate and ecosystems.

We are therefore facing a prolonged period in which global economic growth will be constrained not by broad macroeconomic policies or market institutions, nor by limits of global trade, nor by the general ability of today's emerging markets to invest in new industries. The more pressing limits will be in resources and a safe climate. It took 15 tumultuous years to overcome the limits on energy and food after 1973. Unless we act more cleverly today, we could face an even more harrowing and prolonged adjustment ahead.

Fortunately, there is a better way forward than we took after 1974. We need to adopt coherent national and global technology policies to address critical needs in energy, food, water, and climate change. Just as we invest $30 billion of public funds each year in the National Institutes of Health, we should invest at least as much each year in a new National Institutes of Sustainable Technologies. Just as private biomedical firms live in a kind of symbiosis with NIH, the energy and food sectors should be backstopped by a major public effort to promote sustainable technologies.

There is certainly no shortage of promising ideas, merely a lack of federal commitment to support their timely development, demonstration, and diffusion. Solar power, for example, has the potential to meet the world's energy needs many times over, and engineers are closer than ever to cutting costs and solving the problems of intermittency (cloudy days), nighttime storage, and long-distance transmission from sunny deserts to population centers. High-mileage automobiles (like plug-in hybrids with advanced batteries), green buildings, carbon capture, cellulose-based ethanol, safe nuclear power, and countless other technologies on the horizon can reconcile a world of growing energy demands with increasingly scarce fossil fuels and rising threats of human-made climate change. As for food supplies, new drought-resistant crop varieties have the potential to bolster global food security in the face of an already changing climate. New irrigation technologies can help impoverished farmers move from one subsistence crop to several high-value crops year round.

Yet as promising as these alternatives are, we have not been investing enough to bring them to fruition. While we squander hundreds of billions of dollars in Iraq, the U.S. government spends a mere $3 billion or so per year on all its energy research - around 36 hours of Pentagon spending! Yet it will be the new technologies, deployed quickly and on a global scale, that offer the real keys to energy and food security, and the chances for sustained economic development globally. In the years ahead, technological development, with both public and private funding, must become a core part of our national economic and security arsenal.

Jeffrey D. Sachs, director of the Earth Institute at Columbia University, is the author of "Common Wealth: Economics for a Crowded Planet." His first book on resource constraints and economic growth was "Economics of Worldwide Stagflation" (1985), co-written with Michael Bruno.

Source: Fortune Magazine

The recent surge in world food prices is already creating havoc in poor countries, and worse is to come. Food riots are spreading across Africa, though many are unreported in the international press. Moreover, the surge in wheat, maize and rice prices seen on commodities markets have not yet fully percolated into the shops and stalls of the poor countries or the budgets of relief organizations. Nor has the budget crunch facing relief organizations such as the World Food Program, which must buy food in world markets, been fully felt. The results could be calamitous unless offsetting policy actions are taken rapidly.

The facts are stark. A metric ton of wheat cost around $375 on the commodity exchanges in early 2006. In March 2008, it stood at over $900. Maize has gone from around $250 to $560 in the same period. Rice prices have also soared. The physical inventories of grain relative to demand are also down sharply in recent years.

Several factors are at play in the skyrocketing prices, reflecting both rising global demand and falling supplies of food grains. World incomes have been rising at around 5 percent annually in recent years, and 4 percent in per capita terms, leading to an increased global demand for food and for meat as a share of the diet. China’s economic growth, of course, has been double the world’s average. The rising demand for meat exacerbates the pressures on grain and oil-seed prices since several kilograms of animal feed are required to produce each kilogram of meat.

Feed grains have risen from around 30 percent of total global grain production to around 40 percent today. Land that would otherwise be planted to the main grains is shifting to soya bean and other oil seeds used for animal feed. It is forecast, for example, that U.S. farmers will cut maize plantings by 8 million acres, while raising soya-bean production by about the same amount. The grain supply side has also been disrupted by climate shocks, such as Australia’s massive droughts.

An even bigger blow has been the U.S. decision to subsidize conversion of maize into ethanol to blend with gasoline. This wrong-headed policy, pushed by an aggressive farm lobby, gives a 51-cent tax credit for each gallon of ethanol blended into gasoline. The 2005 Energy Policy Act mandates a minimum of 7.5 billion gallons of domestic renewable-fuel production, which will overwhelmingly be corn-based ethanol, by 2012. Consequently, up to a third of the U.S. mid-Western maize crop this year will be converted to ethanol, causing a cascade of price increases across the food chain. (Worse, use of ethanol instead of gasoline does little to reduce net carbon emissions once the energy-intensive full cycle of ethanol production-- including the energy-intensive fertilizer and transport needs --is taken into account.)

The food price increases are pummeling poor food-importing regions, with Africa by far the hardest hit. Several countries, such as Egypt, India and Vietnam, have cut off their rice exports in response to soaring prices at home, thereby exacerbating the effects on rice-importing countries. Even small changes in food prices can push the poor into hunger and destitution: as famously expounded by Nobel laureate Amartya Sen, some of the greatest famines in history were caused not by massive declines in grain production but rather by losses in the purchasing power of the poor.   

At a time when hundreds of billions of dollars each year veer to war rather than peaceful development, and when media attention is riveted on the U.S. financial crises, it is hard to raise even a few billion dollars for desperately hungry people. Still, it is urgent to do so. At least four measures should be taken in response to soaring food prices.

First, the world should heed the call of U.N. Secretary-General Ban Ki-moon to fund a massive increase in Africa’s own food production. The needed technologies are available—high-yield seeds, fertilizer, small-scale irrigation—but the financing is not. The new African Green Revolution would initially subsidize peasant farmers’ access to high-yield technologies and thereby at least double grain yields. The funding would also help farm communities establish long-term micro-finance institutions to ensure continued access to improved agricultural inputs after the temporary subsidies are ended in a few years.

Second, the U.S. should end its misguided corn-to-ethanol subsidies. Farmers hardly need them given world demand for food and feed grains. There is certainly a case for re-doubling the scientific efforts to produce bio-fuels on lands which do not compete with food crops, for example from cellulosic ethanol, but this technology is still not ready for the market.

Third, the world should support longer-term research into higher agricultural production. Shockingly, the Bush administration is proposing to cut sharply the U.S. funding for tropical agriculture research in the Consultative Group for International Agriculture Research (CGIAR), just when that research is most urgently needed. This is an example of the Administration’s anti-scientific approach at its worst.

Finally, the world should follow through on the promised Climate Adaptation Fund announced last December in the Bali Climate Change conference, to help poor countries face the growing risks to food production from increasingly adverse climate conditions. Even as the world staunches the immediate crisis, there will be more wrenching dislocations as drought, heat stress, pest infestations and other climate-induced shocks occur increasingly often.

Source: Scientific American

NEW YORK – Many poor, food-importing countries around the world have become desperate in recent months, as global prices of rice, wheat, and maize have doubled. Hundreds of millions of poor people, who already spend a large share of their daily budget on food, are being pushed to the edge. Food riots are mounting.

But many poor countries can grow more food themselves, because their farmers are producing far below what is technologically possible. In some cases, with appropriate government action, they could double or even triple food production in just a few years.

The idea is basic and well known. Traditional farming uses few inputs and gets poor yields. Poor peasants use their own seeds from the preceding season, lack fertilizer, depend on rain rather than irrigation, and have little if any mechanization beyond a traditional hoe. Their farms are small, perhaps one hectare (2.5 acres) or less.

Under traditional agricultural conditions, the yields of grain – rice, wheat, maize, sorghum, or millet – are usually around one ton per hectare, for one planting season per year. For a farm family of five or six living on one hectare, this means extreme poverty, and for their country, it means reliance on expensive food imports, including food aid.

The solution is to increase grain yields to at least two tons – and in some places to three or more tons – per hectare. If water can be managed through irrigation, this could be combined with multi-cropping (multiple harvests per year) to produce a crop during the dry season. Higher and more frequent yields mean less poverty in farm families, and lower food prices for cities.

The key to increasing yields is to ensure that even the poorest farmers have access to improved seed varieties (usually “hybrid” seeds created by scientific selection of seed varieties), chemical fertilizers, organic matter to replenish soil nutrients, and, where possible, small-scale irrigation methods, such as a pump to lift water from a nearby well. There is nothing magic about this combination of high-yield seeds, fertilizer, and small-scale irrigation. It is the key to the worldwide increase in food production since the 1960’s.

The problem is that these improved inputs have bypassed the poorest farmers and the poorest countries. When peasants lack their own saving accounts and collateral, they are unable to borrow from banks to buy seeds, fertilizer, and irrigation. As a result, they grow food the traditional way, often earning little or nothing from their harvest, because it’s not even enough to keep their families alive.

History has shown that government action is required to help the poorest farmers escape the low-yield poverty trap. If farmers can be helped to obtain simple technologies, income can rise, and they can accumulate bank balances and collateral. With a bit of temporary help, perhaps lasting around five years, farmers can build up enough wealth to obtain inputs on a market basis, either through direct purchases from savings or through bank loans.

Around the world, government-run agricultural banks in poor countries once not only financed inputs, but also provided agricultural advice and spread new seed technologies. Of course, there were abuses, such as the allocation of public credits to richer farmers rather than to needy ones, or the prolonged subsidization of inputs even after farmers became creditworthy. And in many cases, government agricultural banks went bankrupt. Still, the financing of inputs played a huge and positive role in helping the poorest farmers to escape poverty and dependency on food aid.

During the debt crisis of the 1980’s and 1990’s, the International Monetary Fund and World Bank forced dozens of poor food-importing countries to dismantle these state systems. Poor farmers were told to fend for themselves, to let “market forces” provide for inputs. This was a profound mistake: there were no such market forces.

Poor farmers lost access to fertilizers and improved seed varieties. They could not obtain bank financing. To its credit, the World Bank recognized this mistake in a scathing internal evaluation of its long-standing agricultural policies last year.

The time has come to reestablish public financing systems that enable small farmers in the poorest countries, notably those farming on two hectares or less, to gain access to needed inputs of high-yield seeds, fertilizer, and small-scale irrigation. Malawi has done this for the past three seasons, and has doubled its food production as a result. Other low-income countries should follow suit.

Importantly, the World Bank, under its new president, Robert Zoellick, has now stepped forward to help finance this new approach. If the Bank provides grants to poor countries to help small peasant farmers gain access to improved inputs, then it will be possible for those countries to increase their food production in a short period of time.

Donor governments, including the oil-rich countries of the Middle East, should help finance the World Bank’s new efforts. The world should set as a practical goal of doubling grain yields in low-income Africa and similar regions (such as Haiti) during the next five years. That’s achievable if the World Bank, donor governments, and poor countries direct their attention to the urgent needs of the world’s poorest farmers.

Source: Project Syndicate

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