“The World Should Hedge Against High Food Prices,” Says Economist
Rising food prices present a serious dilemma for aid agencies like WFP, whose ability to help people with food aid is weakened just when that help is needed most. But renowned economist Paul Collier says the world could hedge against that risk by agreeing beforehand to boost support for WFP when prices pass a certain threshold.
ROME—When food prices rise and threaten to push more people into the ranks of the hungry poor, the world needs a better system for underwriting the costs of helping them, says Oxford University economist Paul Collier.
“This new form of shock is something that we have to be able to confront,” says Collier, arguing that WFP’s ability to do its job is vulnerable to the same high food prices that can drive people into hunger.
“Right when you need WFP to be able to supply a lot of food, [its] ability to buy food goes down because the global price of food has gone up,” said Collier. “That’s why WFP—which is the world’s insurance policy against hunger—itself now needs an insurance policy against rising food prices.”
Professor Paul Collier
Paul Collier is the director of the Centre for the Study of African Economies at Oxford University and former director of the World's Bank Development Research Group. He has written several books including The Bottom Billion: Why The Poorest Countries Are Failing and What Can Be Done About it (2007) and The Plundered Planet (2010).
Collier said that with more and more of the world’s population dependent on global markets for food, a more flexible mode of funding food aid was necessary to “programme in the risk” of prices rising unexpectedly.
“Donors could underwrite these situations so that their own contributions to WFP became contingent on global price shocks,” he said.
The former World Bank economist pointed to ballooning pfrices of corn, wheat, rice and other food staples to their highest levels since the food price crisis of 2008 as a prime example of the kind of situations WFP and its donors should be prepared for in the future.
“Food prices have risen, some of the biggest food exporting countries have banned exports and we’re facing a relatively thin market on which a lot of poor, urban, coastal populations are dependent,” he said. “They’re very exposed to this volatility in global market prices and that’s a relatively recent phenomenon.”
“It’s only in the last couple of decades that you have coastal megacities emerging, with lots of poor people in them who spend typically half of their income on food, and are dependent on global market prices, because they’re fed from the world market rather than from the hinterland of their own countries.”
Collier emphasized that the lesson to be drawn from 2008 was that, in addition to the localized emergencies of the past, aid agencies would increasingly have to respond to global crises as well.
Listen to the interview: