A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Najib Akesbi
Personal accounts

Prices, Food dependency and social stability

by Professor Najib Akesbi,
Agronomy and Veterinary Medicine Institute, Hassan II University, Rabat

Agricultural price volatility generates increasingly difficult situations in developing countries and, more generally, undermines all agricultural activities worldwide. Published below is the contribution of Najib Akesbi, Professor at the Hassan II University Agronomy and Veterinary Medicine Institute in Rabat, who was one of the speakers at the recent Dakar Agricole Forum co-sponsored by momagri.

momagri Editorial Board

Ever since the summer of 2010, global prices for most food products started to drastically rise again, at such a rate that the 2007/08 records were beaten and that, as a result, the return of the specter of “bread riots”––which are recurrent events in such situations––is reappearing in many developing countries. What is new this time is that it is happening in a specific political environment marked by people’s uprisings that, from Morocco to Yemen in addition to Algeria, Tunisia and Egypt, may be sparked by reactions against high prices and the poverty they generate, and then quickly change to demands for democracy and social justice…

How did we get there? To understand the current situation, let us consider the case of Morocco, which is quite typical in this regard. We must recognize that the current deadlock is the product of a number of choices made in agricultural policy, public finance and governance levels, all choices that once combined proved to be quite calamitous.

A system to accommodate conflicting interests

At the root of the situation, we find agricultural and food policies that played the extraversion card, thus opting to specialize in “fruit and vegetable” exports and neglect livelihood farming and staple crops intended to meet people’s needs (grains, legumes, meats, dairy products, sugar and oil). Consequently, a split between domestic output and local consumption patterns occurred, so that food dependency took hold and resorting to international markets increased. The consequence was greater vulnerability and dependency concerning global prices of products involved.

How were we to manage such dependency? First, we must remember that in the 1970’s, when global agricultural prices rose sharply in the wake of the first 1973 “oil crisis”, domestic output prices were regularly increased, since at the time the prevailing belief was that “lucrative” prices were the best way to spur farmers to modernize and improve productivity. The problem was that, once passed on downstream, upstream, these increases ran up against consumers’ limited purchasing power, especially that of urban consumers. The risk was not only a social one but also an economic one, because––at least since Ricardo (the labor theory of value)––we were aware of the ratio between rising food prices and wage levels (the first inevitably leading to increases of the second) and consequently rising labor costs. Yet, for a nation that was already pinning its hopes on “promoting export” strategies, such outlook could not but severely hamper its competitiveness, which, besides, was widely based on distinctively low labor costs.

Under these conditions, how to reconcile such conflicting interests and objectives? How to support high prices upstream from the value chain, and avoid passing on the costs to the consumers? This is where the government had to react through “consumer subsidies” to absorb the “difference”… A government-financed regulatory system was thus implemented, through which the nation was trying to assume the cost of a certain social balance suitable to the pressure of international openness and competition.

After the 1980’s structural adjustment policies and the government’s disinvestment that followed, such pattern was partly questioned. In various speeches, one trusted nothing else but the superiority of markets and the necessary “truth of prices”, but in fact one observed the lingering inability of agriculture to meet the food needs of the population. In addition, one realized that subsidies for staple products generated negative side effects and produced annuity situations for a small number of middlemen, from then on grouped in lobbies powerful enough to control the defense of their interests. In addition, studies showed that the system is really beneficiary to wealthy consumers, rather than to those who are actually in need… An already complex situation that became even more so, when a few attempts to raise prices for said products inevitably led to serious social unrest and memorable “hunger riots.” Now labeled as ultra-sensitive, the issue has not stopped from fueling the utmost distrust and extreme caution by all successive governments.

In the end, the “compromises” reached with much effort focused on containing the system within limits that were financially acceptable for public finances, but without ever totally ending it or fully reforming it (abolition of subsidies for butter, milk and oil; Dh2/kg cap on sugar subsidy and a 1-million-ton quota for domestic bread flour). It should be noted that the lower global prices sustained until the mid-2000’s “eased” the situation by allowing leaders to show both delusion and irresponsibility, whose consequences are now obvious and whose price is now for us to assume.

From a “food annuity” to the exorbitant cost of dependency…

The first aspect relates to the financial illusion caused by lower global prices. While the implementation of the 1994 Marrakech Agreement (GATT/WTO) resulted in the import liberalization through lifting all non-tariff protection, it nevertheless allowed keeping adequate tariff protection thanks to the introduction of significant tariff equivalents. Yet, in an environment of global prices notably lower than domestic prices and of increasing food imports, these tariff equivalents became a sizeable source of income for the nation, thus being a factor in massively shrinking the cost of subsidies for the products in question for the public finances (often reducing their net cost below one percent of GDP). By playing down the significance of the financial scope of subsidies, this “food dependency annuity” did counterbalance any vague attempt to reform. Why take risks on such a sensitive issue when it is no longer costly to the nation’s budget?

The other delusion lies somewhat halfway between such financial cynicism and the least advanced free-trade dogmatism. It is indeed in that very context that we observed the most short-term views on “food security.” Various international learned experts explained that food sovereignty was an obsolete idea and that, on the contrary, food security could be reached on global markets at any time––and an adequate “foreign currency nest egg” was the sole requirement to that end! Everyone concerned was a winner, large global exporters were well endowed with “comparative advantages”, consumers in importing countries were thus fed at low costs, and their governments gratified by tariff receipts that were all the more valuable that they allowed pursuing an inexpensive financial aid system… In short, “global wellbeing” and “integral win-win”!

Today, the situation has been totally altered and we are in a better position to assess the consequences of such choices. While dependency concerning food imports is stronger than ever, we have global prices soaring, leading to a genuine descent into hell. Not only the government did not drop tariff receipts but it also had to pay for “compensation” charges that rose to heights that heralded difficult days for public finances. As far as consumers were concerned, the few still subsidized products did not in any way prevent price increases for most food products, thus heavily clouding their cost of living and dangerously deteriorating their purchasing power. Again, the social climate becomes tense and protest movements are on the rise…

Between external constraints, against which it is powerless, and evident internal destabilizing risks, the Government dilemma is complete. How can it keep “buying” social peace when its cost is becoming exorbitant? How to both fight poverty and terminate the only system that could, up to now, allow the needy to get food staples at costs more or less in agreement with their purchasing power? How to keep betting on globalization while at the same time running the risk of perilous price spikes for economic competitiveness? Will we be able to dispense from regulation procedures financed by the government without being able to replace it by another driven by markets?

What can be done?

While everybody now recognizes that the subsidy system for basic food staples has generally been diverted from its initial objectives––benefitting less to those who really need it than to those who can do without it––leaders still have some difficulties to come up with a more effective and fair alternative. Yet, today we know that the constituent elements of the current deadlock are with us for the duration, starting with the country’s food dependency on one hand, and the relatively high international prices for food products on the other. The situation in itself is rather unusual and the solutions to be designed to resolve it should also be unusual. We believe these responses should adhere to three directions. The first should rehabilitate the concept of food sovereignty. The second should allow rethinking all distributive systems, in order to guarantee, through active solidarity, a decent livelihood to those who need it. Lastly, who can continue ignoring people who are also “starving” for dignity, and thus for democracy, since we know––as so adequately shown by Amarty Sen––it is an effective defense to prevent a food crisis from turning into a famine, and the latter from breeding a revolution?

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Paris, 19 June 2019