Policy Approaches to Undernutrition

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Policy Approaches to Undernutrition

• Text extracted from
• The World Food Problem
• Leathers and Foster, 2004

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Ethics Pope John Paul II

• Contrasts between poverty and wealth are
  intolerable for humanity
• It is the task of nations, their leaders, their
  economic powers and all people of goodwill to
  seek every opportunity for a more equitable
  sharing of resources
• Example of Beneficence
• Personal moral duty to help the poor

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Ethics Right to Food?

• Right to Food
• Included in International Covenant on Economic,
  Social and Cultural Rights
• Adopted by UN
• Signed by 85 countries
• Now must address hunger issue
• to protect fundamental rights of society
• Dont need to feel personal moral duty to help
  the poor

United Nations
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Ethics Right to Food?

• Rights taken very seriously
• Absolute entitlement
• Non-negotiable
• Would require government to act to prevent hunger
• Conflict with property rights?

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Economists Questions

• What is the appropriate policy for society as a
  whole?
• How can government best manipulate human greed to
  achieve its policy objectives?

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Economics Policy Decisions

• Every action has costs and benefits
• Marginal costs and benefits
• For 1 increase in cost, what is the increase in
  benefits?
• Ideal decision where marginal costs marginal
  benefits
• Free market will allocate resources optimally,
  but
• Without concern for
• Social costs
• Environmental costs
• Can everything be put in dollar terms?

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Externalities

• Costs and benefits sometimes go to people outside
  the market transaction
• Should poor benefit from costs borne by wealthy?
• Should wealthy benefit from costs borne
• By the poor?
• By the environment?

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How much would you pay for

• A human life?
• Airbags in every car?
• Speed limit 10 MPH?
• Nutrition for every man, woman, and child?
• Food without pesticide residue?
• No pollution?
• Freedom?
• Fair trade?

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Harnessing greed in policy

• Economic incentives
• More expensive to have children
• More expensive to degrade environment
• Need property rights
• Production increases with reward
• If we eat less, other countries wont benefit
• Farmers will produce less
• As demand increases, efficiency increases
• Products made available more cheaply
• Alternatives found

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Policy to reduce undernutrition?

• On average, 250 Calories/day would erase Calorie
  deficit of hungry
• Cost 35 cents/day/person
• 6,400 invested at 2 interest
• Value of Human Life?
• But for 800 million people, this policy would
• Increase food prices
• Increase environmental costs of food production

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Policies to raise incomes of poor

• Redistribute income from rich to poor
• Rationale declining marginal utility of income
• Rich dont benefit from a dollar spent as much as
  poor do
• But should incomes be equalized?
• Improve rate of economic growth
• Is Globalization beneficial to developing nations?

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Policies to reduce price of food

• Population reduction
• Demand will rise slower
• Food prices will rise slower
• Increasing supply
• Research investment
• Loans to farmers

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Policies to reduce cost of food

• Price supports
• Sell food to consumers
• Subsidies to farmers
• Both reduce economic efficiency
• Therefore distortionary
• Corrective price policies
• Example correcting distortions that reduce food
  output
• Example To feed hungry has indirect benefit to
  wealthy
• We feel better externality
• No market for this

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Aid Policies

• Aid can hurt poor
• wealthy elites profit from it
• makes the problem worse
• Often designed to further our national and trade
  interests
• Directed mainly at political allies, not hungry
  nations

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Aid Policies

• Have been used as a lever to impose structural
  adjustment on foreign trade policies
• If foreign countries do not open up markets or
  reduce subsidies as directed by U.S., aid may
  stop
• Designed to create new markets by fostering
  dependency on U.S. grain
• Korea

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Aid Policies

• When aid is given as free grain, undermines
  prices farmers can get, driving them out of
  business
• Military aid can lead to armed conflicts that
  generates hungry people
• Well-off divert aid to help themselves, further
  widening gap between haves and have-nots

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U.S.Agency for International Development (USAID)

• Started with Marshall Plan after WWII
• Principal U.S. foreign aid agency to help
  countries
• Recover from disaster
• Escape poverty
• Democratic reforms
• Partnership with
• 3,500 U.S. businesses
• 3,000 Organizations
• 8.8 Billion

USAID in Uganda
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U.S. Foreign Aid

• U.S. gave 15 billion (2002)
• Largest Donor in world
• Least generous based on capacity to give (GNP)
• lt 1 Federal Budget
• Majority think U.S. Aid is 20X more
• 2004 U.S. allocated 1billion to Millennium
  Challenge Grant
• 2004 U.S. allocated 2.4 billion to combat
  AIDS/HIV

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U.S. Generosity

• 2004 Government Aid
• 15 cents/day/person (54/yr)
• 2004 Private giving
• 5 cents/day/person (19/yr)

Center for Global Development
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Third World Debt

• If we forgave third-world debt, would help
  countries become self-sufficient
• Honduras annual debt payments exceeds amount
  spent on health and education combined
• Total debt payments are greater than foreign aid
  and foreign investment combined