Last week, Pope Benedict XVI addressed the annual conference of the UN Food and Agriculture Organization, and expressed particular concern over rising food prices and the instability of the global food market. In his 2009 encyclical Caritas in Veritate, the pope issued this challenge: “The problem of food insecurity needs to be addressed within a long-term perspective, eliminating the structural causes that give rise to it and promoting the agricultural development of poorer countries.”

Acton’s Director of Research Samuel Gregg has done much to illuminate those structural causes and their effects on the agricultural capacity of developing countries. In an interview with EWTN two months ago, he talked about two of the most important drivers of high food prices: farm subsidies and energy costs.

“All the subsidies that go into agriculture—through things like import taxes and tariffs, as well as direct subsidies—have the paradoxical effect of reducing the incentive for investment in agriculture in developing countries,” said Dr. Gregg. African farmers cannot compete with their counterparts in the first world who are able to sell their produce at artificially low prices, and so developing countries end up turning away from food production. In the long run, this decrease in supply causes prices to rise.

Energy prices also affect the cost of food: the more a farmer pays for gasoline, the more he has to recoup from the sale of his crops. Again, market imbalances are causing prices to rise—OPEC, the cartel that controls a substantial amount of the world’s crude oil, determines its supply, and so “there’s a disparity between supply and demand,” Dr. Gregg explained. “OPEC and other oil-producing countries introduce a whole range of price distortions into the energy sector, resulting in higher prices”

U.S. energy policy is also to blame: from drilling moratoriums to ethanol subsidies, the federal government has effectively introduced inefficiency to energy markets.

Developing countries must be allowed to produce food without being undercut by Western protectionism and too-costly energy. When free markets are hindered, the poor suffer most.


  • Tom

    First of all, I think the food problem is a natural result
    of the growing population on the earth and the decreasing amount of energy resources. If the population grow further
    insomuch as the last decades, and we do not find cheap alternative energy sources, this problem will be worst and worst in the
    future.

    It is true, that the OPEC cause some price distortions in
    the energy sector, but the oil price is still cheaper than anybody else could
    produce oil profitably. It is not an optimal situation (lots of short term anomalies), but as long as they are the cheapest,
    the market forces are working. If any other country could produce oil cheaper
    than the OPEC, why they do not do that? I am not sure that we could blame the
    OPEC, because they sell their oil on a high price, as long as the market accept
    this price. And what is the high price? Is $ 100 per a barrel expensive? As the
    oil reserves running out, it will be $ 200 one day.

     

    The agricultural industry is more special than we could easily say that the subsidies are bad. Whiteout the subsidies it would not
    profitable to produce agricultural commodities in the modern world. (Or the price
    would be even higher than now.) There would be a really serious side effect. The agricultural industry uses a huge amount of low educated people. If the
    agricultural subsidies was stopped, this low educated people would be fired and
    they could not find another job, because there is not another industry which
    could use so much unskilled people. This way the unemployment rate would rise
    drastically on short term and it would take long time to get the situation balanced again. Otherwise you could not stop the subsidies until every other countries do that.

    • Anonymous

      Tom, you seem to be saying that food prices are at their natural level, and there’s not room for the market to bring them lower–OPEC doesn’t cause much inefficiency and that farm subsidies are necessary–in other words, you don’t think these things drive food prices artificially higher. If that’s what you think, then you disagree with the Pope’s premise, and so there’s really nothing to be said on the subject.

  • Steve Mynhier

    I really do not see a quick fix in the near future. Rising gas prices, government spending. So many other avenues we could take. We as a country will see much worse I fear. My family and I are getting prepared. Food Storage now stevemynhier fb

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