The pros and cons of rising food prices

Brookings’ Homi Kharas says that rising food prices are a symptom of demand outstripping supply and the price system is working – today’s high prices are triggering a new wave of investment that will increase future supply and may also cause reform in some countries. He’s optimistic:

[F]or the majority of the world’s poor, to be found among the 1.7 billion rural residents of India, China and Indonesia, the dream of a “chicken in every pot” is becoming more attainable because world food supply is rising again. That is the upside for humanity from today’s high food prices.

IFPRI’s Joachim von Braun is less sanguine:

[M]arket failures and new misguided policies are likely to keep food prices high and volatile for years to come… [M]ost small farmers in developing countries are actually net buyers of food, so they feel the pinch from rising food prices.

John Parker, moderating this debate for the Economist, interprets this as:

For Mr von Braun, it is the speed, rather than the fact of the price increase that matters. Prices have risen so quickly—the food index of the Food and Agriculture Organisation (FAO) rose by 50% in the year to May 2008, he says—that people have not been able to adjust. Or rather, “adjustment” has taken the form of the poor eating less and going hungry…

The very phrase “food crisis” may predispose participants against a proposition that there is an upside to rising prices. On the other hand, it’s an ill wind that blows absolutely nobody any good; there is always some sort of upside. The question for the audience is how big, and whether it is big enough to be meaningful.

The Economist has a roster of guests that will also be participating in the debate over the next week.