Will economists save more from hunger than scientists?

Published 20150331

Periodically, articles emerge casting aspersions on long term global food security in the face of a rising population. A revisit of the fundamental economic realities underpinning global food production is perhaps long overdue. At the risk of ruining the ending; Yes, we can produce more than enough food for a rising global population easily, and, Yes plenty may go hungry anyway.

Let’s begin with agriculture’s portrayal as the thin calorific line holding back societal collapse which is at once both true and misleading. 
Agriculture’s role in feeding the masses has little to do with food produced directly and a lot more with its position as industry of last resort in pre-industrialised economies. Too much emphasis on the former and unawareness of the latter has been toxic to African development. However well-meaning artists like Bob Geldof and others were drumming up developing country aid, most economists found themselves sympathising with Morrissey’s nausea. Agriculture is almost always the first step to a self-sufficient economy whereby the poor become self-dependent. That incomes of the poor are necessarily spent mostly on food is largely irrelevant. This is why terrible conditions in a sweatshop can and do outcompete terrible conditions in a field.
Agriculture fulfils this role largely because of two basic reasons. Firstly, with a few nascent exceptions, it relies on land and proximate resources that can’t be transported. Secondly, it exhibits long term inelastic demand and a steep utility curve. Or to put it another way, people have got to eat and then crucially, stop eating and start moving up Maslow’s hierarchy. 
This facilitates the well-worn path of industrialisation, from agrarian societies, to industrialising and eventually post-industrial. The socio-economic environment, inequality etc. vary between countries in which this evolution occurs, however what is universally consistent is agricultures’ diminishing share of gross domestic product as a greater portion of capital and labour are allocated to manufacturing sectors. See Figure 1 below. 
  
Figure 1: Agriculture Value Added (% of GDP) versus GDP per capita for national economies as of 2013 (source: World Bank).

So where is the agriculture sector now? Figure 2 shows world and Australian shares of agriculture Gross Value Added (GVA) as a percentage of the total Gross Value Produced (GVP). Both are still trending downward and are now in the 2.5% to 3% range. As a wealthy nation, Australia’s share of agriculture GVA to the national GVP would normally be much lower than the global average; however Australia’s comparative advantage in agriculture offsets this. 
The world currently producers all the calories it consumes with only 3% of the worlds’ goods and services produced (excluding post farmgate production). As recently as the late 1990s, it had to spend double this proportion – see figure 2. 
  
Figure 2: World & Australian agriculture Gross Value Added as a percentage of GDP (source: UNstat)

The steady reduction in the requirement of capital and labour has been a defining feature of agriculture globally. Several implications arise in regard to agriculture’s role in preventing future hunger and malnutrition. The most immediate, is that it can’t do much from this point. At least not from a resource science perspective.

Even if the global share of GDP required to produce enough calories was halved again over the coming decade, the increase of available resources would be at most 1.5% of per capita GDP ceteris paribus. 
Concerns arise over the confluence of resource degradation and population growth potentially causing price rises for agricultural products which would suck back inputs to work the ever diminishing natural resources available to agriculture. A cursory examination reveals why this isn’t likely to be significant. Free-market capitalism, for all its systemic vulnerabilities does some things extraordinarily well, even after political corruption sets in. Responding to effective demand is one those things. Profits tend to be competed down – perhaps not to theoretical perfection, but to a reasonable extent. 
Agricultural product price rises based on future resource degradation implies that alternative production is economical only with a premium. For this premium to hold, the economic effects of the depletion of resources and population growth would have to overcome long term productivity increases to conventional farming, hydroponic technologies, aquaculture, automation, and water and energy reclamation. In the short term, yield gaps, particularly in developing nations could be closed and price induced shifts away from high value proteins (meat) would lower demand for land to be put under feed crops. An effective premium on today’s prices could only rise to the point where sustainable farming systems became economical.
Already, the saltwater greenhouse technologies are sufficient to lure investors. Removal of the current lowest cost option won’t stop the race to the bottom. Even if the opening up of new farmland could be banned globally, long term deflationary pressures on cost of production are still high. 
It should be noted that cost of agricultural production is only a narrow section of the wider public good. Environmental degradation still harbours risk to other sectors of the economy. The point from a policy perspective is that the agricultural sector as a whole is geared toward meeting demand of a growing population regardless of environmental change, farm sizes or optimal input combinations. A persistent rise in the percent of world GDP required to meet future demand would be relatively minor if extant. 
Ultimately, the solution or failure to feed a growing global population will be political-economic, rather than a question of resources per se. From an Australian agriculture perspective, exporters are far better placed to supply the boutique end of the market rather than attempt to supply bulk product to a growing population that will, pending income, feed itself or stay hungry. 

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