Increasing food prices: what solutions to increase gains for rural poor and decrease risks for urban poor and developing countries?

Dani Rodrik comment in a very insightful post a statement made by Mr Zoellick that show how many decision-makers does not understand neither what is going on in agricultural markets nor what will be the impacts on development and poverty of high prices. In fact, they merge the old discourse (high agricultural prices = gains for developing countries) with a new one (high prices = problems for urban poor). Either discourse it is true but we need an analysis that take into account both and that provide some solutions.

To start, we should remember three elements:

• High food prices are caused by biofuels and emerging countries growing demand but also by speculation on commodities markets.

• 2/3 of the poor lives in rural areas and depends on agriculture and many of the urban poor are former peasants.

• Many developing countries, even if they are net importing countries, have still an important potential in expanding their agricultural production.
  

These elements mean that high agricultural prices are positive for most poor in developing countries but the risks are very high because urban poor uprising (caused by high food prices) can destabilize several developing countries.

This mean that we need to find solutions to reduce these risks and the adjustment costs. Developing countries need neither more food aid (which often create many problems) nor laissez-faire.

Developing countries need active rural development policies (founded also through Aid), which will increase their agricultural production (also by helping urban poor to come back to rural areas that they leaved) and some policies to decrease food prices in urban areas (notably by creating food stocks filled by national production). These policies need important resources that should be provided by bilateral and multilateral donors. The problem is that, even after the last World Development Report, I do not see an upward trend in Aid dealing with rural development and food policies in developing countries.

agriculture sustainable development WTO food prices