Food Prices and Poverty: Martin Wolf v. Dani Rodrik

Martin Wolf:

Of the two crises disturbing the world economy – financial disarray and soaring food prices – the latter is the more disturbing. In many developing countries, the poorest quartile of consumers spends close to three-quarters of its income on food. Inevitably, high prices threaten unrest at best and mass starvation at worst.

Dani challenges the notion that the rise in poverty hurts the poorest the most:

The fact is that millions of very poor growers of rice and other food products are much better off as a result. The poor that are affected the worst are the urban poor, not the rural poor. I am puzzled more generally by how the commentary on the world food crisis misses this basic point. It’s all about how the price rise is an unmitigated disaster for the world’s poor, with nary a comment on the fact that some of the beneficiaries are also among the world’s poorest. (Some of you will say that all the price increase is absorbed by margins, with little of it showing at the farm gate–but I doubt that is true.) The panic on the part of governments is understandable. They are much more sensitive to the urban poor, who can create greater havoc than the rural poor.

Conversely, lower food prices may help the urban poor but that would represent a reduction in the incomes of the rural poor.