If our critical analysis is correct, one powerful mechanism to reduce the huge occurrence of rural and urban poverty, under-consumption and undernutrition that is slowing development of the world economy lies in a gradual, significant and prolonged rise in agricultural commodity prices in developing countries. This would serve to increase the earnings of under-equipped small farming communities and give them the means to survive, invest and develop; it would eliminate the source of extreme rural poverty and undernutrition; it would curb agricultural migration and curb urban unemployment and poverty; it would raise the general level of wages and other earnings; it would increase tax revenues and foreign currency earnings in the poorest developing countries, providing the means to invest in modernization and industrialization; finally, it would hugely expand effective global demand and broadly revive world growth.
Naturally, such a hike in prices should not be too sudden, as its positive impact on food production, poor farmer income and wages and other forms of earnings will not be very rapid, while the negative consequences of increased food prices for poor consumers and purchasers will be immediate. Any increase in staple food commodity price should therefore be sufficiently gradual for the positive impact on producers to always outweigh the negative impact on purchasers, and, if necessary, targeted food aid should be provided to the poorest consumer and purchaser groups.
Food aid cannot be in the form of low-cost food distribution, as this would only lower agricultural prices and therefore indirectly place the burden of such aid on agricultural producers and discourage production. However, it could be in the form of food stamps for the needy to enable them to buy food at normal prices, which should increase effective demand and encourage production. Such food stamps could be subsidized by government budgets, as in the United States, and/or by international aid.
If such a scenario is to be pursued, international trade in agricultural commodities needs to be reorganized and regulated along the following major lines that, once accepted in principle, will need to be defined in detail:
Establish vast agricultural free trade zones grouping countries with relatively similar agricultural productivity (intertropical Africa, Europe, South Asia, etc.) and protect these “large agricultural markets” against cut-price surplus production imports by applying adjustable custom tariffs to obtain stable domestic prices that are sufficiently high for the less productive small farming communities of the less privileged regions to live off from their activity and even invest and develop.
In order to avoid the accumulation of agricultural surpluses that are difficult to sell, negotiate commodity by commodity and periodically renegotiate international agreements fixing, as fairly as possible, an average export price, with export quotas and export prices assigned to each of these large markets and, if necessary, each country. Although setting remunerative agricultural prices might lead to exportable surpluses, as it happened in certain countries with an agricultural or green revolution, the advantage would be that reorganizing international trade would also curb rural migration, reduce unemployment, raise very low wages, increase food consumption of hundreds of millions of people and thus significantly increase effective demand for agricultural commodities.
Establish a differential land tax that would be relatively high in the advantaged regions, but nil or negative in the disadvantaged regions, thus mitigating the inevitable differences in agricultural income that will occur among regions in each large market. The income differences that will nevertheless persist between well-equipped and less well-equipped farm holdings can be reduced by introducing graduated taxation on agricultural income, similar to that for other socio-professional categories, and by enacting legislation against the accumulation of land whereby size of holding is limited to the area workable by two or three operatives, according to country and specialization.
In most developing countries, this new organizational and regulatory framework for international trade in agriculture should put a stop to the extreme poverty and undernutrition of the poorest small farmers.
In most countries, including developed countries, this new organizational and regulatory framework should help reduce the crisis of poorly productive small farming communities, curb rural migration and absorb unemployment. Once all small farmers can enjoy viable commodity prices, this new organization of international trade should withdraw the subsidies that high-income countries grant their farmers when these find themselves in difficulty from declining agricultural prices.
However, this reorganization of agricultural trade will clearly not be sufficient in countries where the extreme poverty and undernutrition of vast numbers of small farmers and agricultural labourers are also the result of land scarcity and low wages imposed by the land-owning minority. Land reform will also be needed in these cases, as will legislation guaranteeing broad access to land and security of land tenure.
Finally, restoration of national agricultural research and development services, which suffered from excessive austerity measures, and priority focus of national and international research on the needs of poorer regions and farms will be all the more justified by the fact that the new agricultural trade regime will guarantee success.
We need to add that the proposed organization and regulatory framework aim to safeguard the existence, independence and development possibilities of small farming communities and cannot be interpreted as a form of controlled economy intent on its elimination. We also need to note that while it might be difficult to establish and administer these large regional markets and commodity agreements, this will not be any more difficult than implementing the multiple subsidy systems that exist in the United States and European Union and that have become colossal headaches for farmers, their organizations and the administration, or any more complex than national protection systems such as those of Japan and Switzerland.
