Policy Approaches to Undernutrition Text adapted from The World Food Problem Leathers and Foster, Toward-Undernutrition/dp/ 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 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 Ethics: Right to Food? Rights taken very seriously Absolute entitlement Non-negotiable Would require government to act to prevent hunger Conflict with property rights? Feeding orphans, Yemen Economists Questions What is the appropriate policy for society as a whole? How can government best manipulate human greed to achieve its policy objectives? Government Ideology Economy How to Move Society Forward Self-interest Manipulate self-interest to achieve policy goals Capitalism Economists give advise on how to do this 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? Three Gorges Dam, China Externalities Costs and benefits sometimes go to people outside the market transaction Should wealthy benefit from costs borne By the poor? By the environment? Every action has costs and benefits How much would you pay for A human life? Speed limit 10 MPH? Nutrition for every man, woman, and child? Food without pesticide residue? No pollution? Freedom? Fair trade? Harnessing greed in policy Economic incentives Can make it more expensive To have children To degrade the 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 Policy to reduce undernutrition? 250 Calories/day would erase Calorie deficit of hungry Cost 35 cents/day/person = $6,400 invested at 2% interest Value of Human Life? For 800 million people, this policy would Increase food prices Increase environmental costs of food production 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?2-1-eng-GB/world_poverty_map.jpg Policies to reduce price of food Population reduction Demand will rise slower Food prices will rise slower Increasing supply Research investment Loans to farmers 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 Aid Policies Aid can help If targeted to poor Example: School feeding In emergencies Aid can hurt If 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 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 foster dependence on U.S. grain Korea Aid Policies When aid is given as free grain undermines prices for farmers driving them out of business Military aid can lead to armed conflicts that generate hungry people Well-off divert aid to help themselves further widening gap between haves and have-nots 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 U.S. Foreign Aid U.S. gave $28 billion (2007) Largest Donor in world Less generous based on capacity to give (GNP) < 0.22% Federal Budget Majority think U.S. Aid is 20X more 2009 U.S. Foreign Aid Spending U.S. Foreign Aid Budget Third World Debt Forgiving third-world debt would help countries become self-sufficient Honduras annual debt payments exceed amount spent on health and education combined Total debt payments greater than foreign aid and foreign investment combined