Statue of LibertyThe U. S. President George Bush’s statement that prosperity of Indian middle class has led to spiraling of global food prices have attracted strong criticism in India. The communists in Kerala were the most vociferous.

However, the critics of Bush’s statement have reacted somewhat superficially, ignoring some hard facts. The first point is that there is some truth in what Bush is saying. Second is that it is not just diversion of good grains for fuel production that is harming the world most, but subsidies for bio fuels.

It would be very difficult to stop a shift from food crops to bio fuel crops if bio fuel is cheaper (and not less efficient) than other fuels. Laws or policy prescriptions would have very little effect on such a shift worldwide. Ultimately, markets would determine the balance. What governments should do is not to subsidize bio fuel crops and subsidize food crops. Subsidy for food is important as survival of many depend on it. The Western nations are doing a grave crime against humanity by subsidizing production of fuel from grains.

However, it is to be noted that countries outside the US and Europe also offer subsidies that harm food production. Let us look at Kerala State for instance. What Bush says had happened here much before. People had gone for tapioca at times of poverty and scarcity. With prosperity and increased availability of rice, they switched back to rice. The State could have retained some of the area under tapioca and gone for fuel production (alcohol) without much effect on rice production. But that did not happen for want of viable technologies and investment.

On the other hand, rice paddies were steadily being converted from the seventies to garden lands with coconut, banana, areacanut, rubber or other crops. The Rubber Board subsidized replanting of rubber. There were subsidies for other crops also. But sufficient subsidies and work culture was not there to ensure the retention of paddy cultivation in many areas. So, the food deficit of the State kept on worsening. Higher prices for rice could make paddy cultivation increasingly profitable and stem the tide of conversion of the paddies. But the poor ought to get rice at affordable prices. So, targeted subsidies are justified. At the same time, there should be mechanisms to check price rise resulting from shortages and prevent the budget of the middle class from going haywire.

All subsidies, whether it is to the farmer or others, ultimately go to the consumer. Subsidy for rubber benefits the tyre manufacturer. Subsidy for biofuel benefits large consumers the most. Subsidy for food benefits all (and somewhat equitably since you cannot eat more than a stomach’s full), but the poor would benefit most.

Americans and most of the Westerners are heavy users of energy. They waste a lot of resources, ranging from energy to toilet papers. So, they are basically responsible for all the shortages in the world. To be more precise, all those who waste resources across the world are responsible.

Incidentally, Keralites have achieved quality of life on par with many Western nations by using comparatively lesser resources. (See Wikipedia article)

For further reading:

US eats 5 times more than India per capita

Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices (U. S. Economic Research Service; 05/01/08 )

Matters of scale: into the toilet
Toilet paper consumption in US and elsewhere

Food crisis payback for ’20 years of mistakes’: UN expert

UN Says US, EU Biofuel Production Irresponsible

Political parties criticize Bush’s remarks

Kerala Model

Why blame India
Interesting facts about projected increase in food consumption

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