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Entitlements, availability and famine
Entitlements, availability and famine A revisionist view of Wollo, 1972-74
Stephen Devereux
This article reviews two stylized theories of famine causation, ‘food availability decline’ (FAD) and ‘food entitlement decline’ (FED), as competing explanations of the famine of 197274 in Wollo province, Ethiopia. A. Sen’s ‘market entitlement failure’ argument is challenged by J. Seaman and J. Holt’s ‘price ripple’ hypothesis. A consideration of the role of transactions costs and wealth inequalities suggests a synthesized approach: Wollo 1972-74 was a FAD (supply slump) famine for the relatively wealthy, and an ‘entitlements collapse’ (demand slump) famine for the absolutely poor. Stephen Devereux is a Doctoral Student in Economics, Balliol College, and Research Associate, Food Studies Group, University of Oxford, Oxford, UK. This article was presented at a workshop on ‘The Causes of Famine’ co-sponsored by the Refugee Studies Programme and the Food Studies Group, at Queen Elizabeth House, University of Oxford, 9 May 1987. I wish to thank the following for their stimulating critiques of earlier drafts, without implicating them in the final product: Jane Corbett, Lucia Da Corta, Jean Dreze, Roger Hay, Judith Heyer, Alex de Waal, members of the Food Studies Group and an anonymous referee. ‘This has been demonstrated by Sen for the Bengal 1943 and Bangladesh 1974 famlnes (Amartya Sen, Poverty and FarnInes, Clarendon Press, Oxford, 1981, chapters 6 and 9). But see the ‘Bowbrickcontinued on page 271
270
Since the publication in 1981 of Amartya Sen’s Poverty arid Funzitze.s. academic opinion has been divided about the relative merits of two alternative explanations of contemporary famines in the Third World. The older theory - that people starve because of insufficient supplies of food - Sen has labelled ‘food availability decline’. or FAD. Sen’s ‘entitlements’ approach. which argues that people starve when their command over available food supplies falls below their subsistence needs, is here labelled with a comparable acronym - ‘food entitlement decline’. or FED. FAD In its simplest incarnation. FAD argues that anything which disrupts food production (such as drought, flood or war) can cause famine. the logic being that a drought. flood or war causes crop failure and cattle death, reducing the availability of food in the affected region, and that such a ‘food availability decline’ to below the subsistence needs of a significantly large number of people for an extended period by definition constitutes ii famine. This argument has several limitations. The main problem is that a FAD is neither necessary nor sufficient for a famine to occur. It is not .sllfficipnt because food production is only one source of food. A local food shortage can be redressed by purchases from surplus regions. or by transfers of food aid from the state or voluntary agencies. For ;I local or regional decline in food availability to become a famine. trade and aid transfers to the affected population must fail as well. FAD is not /Icw.s.sur)’ because, as Scn has shown. ;I famine can occur with no obvious fall in national or regional food availability.’ A third wcnkness of FAD and related approaches is that they fail to distinguish between the victims and the survivors of a famine. FAD suggests that a regional food availability decline becomes a regional famine. with no recognition of the fact that some people will starve
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& Co (Publishers)
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Er~tikwwnt.~, uvuiluhility
und fumirw
while others will not, in the same region during the same food crisis, and that there are clearly identifiable reasons for this differential impact. A modified version of FAD acknowledges the first of these flaws (that FAD is not a sufficient condition for famine), and can be expressed simply as ‘FAD + isolation = famine’. The logic here is that a food production disruption causes a FAD, while poor infrastructure links (transport, communication and markets) makes compensating trade and aid flows impossible. The obvious conclusion is that the FAD approach requires ‘closed economy’ assumptions. A local FAD becomes a local famine if the region is effectively isolated, and so cannot call on food supplies from elsewhere. FED
continued from page 270 Sen debate’ in this journal for a challenqe to Sen’s analysis bf food availabillty -in Bengal in 1943: Peter Bowbrick, ‘The causes of famine: a refutation of Professor Sen’s theory’, Food Policy, May 1986, pp 105-124; Amartya Sen, ‘The causes of iamIne: a reply’, Fbod Policy, May 1986, pp 125-132; George Allen, ‘Famines: the Bowbrick-Sen dispute and some related Food Policy, August 1986, issues’, pp 25%263.
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The links between poverty and hunger have been recognized for centuries. During the 1970s. commentators increasingly focused on the relationship between poverty and fumine, noting that typically it is the poor who starve during food crises - not the rich, who invariably survive. Sen’s monograph, Poverty urld Fumirzes: An Essuy on Entitlernwt and Deprivution, published in 1981, was the first attempt to formalize this empirically observed relationship in theoretical terms. The ‘entitlements approach’ to famine analysis, as developed in Poverty und Famines, recognizes that people have several possible ways of gaining access to sufficient food. Sen categorizes four general sources of food entitlements - production. trade, own labour, and transfers. While not denying that famine can follow a decline in food availability in a region, Sen sees this explanation as focusing too narrowly on the local production of food, and as being a partial explanation at best - since it fails to explain who suffers during a famine. Instead, he argues that famine affects specific groups of people following a collapse of the ‘food entitlements’ (what is here labelled as ‘food entitlement decline’, or FED) of those identifiable groups. The mechanism whereby a food entitlement decline becomes a famine varies depending on the people concerned. Small-scale food producers and their families starve because they derive most of their entitlements directly. from the production of food. This ‘direct entitlement decline’ explains the irony of food producers being among those most vulnerable to famine. Other groups who depend indirectly on agricultural incomes suffer ‘derived destitution’. either through unemployment (agricultural labourers) or through loss of markets for their goods and services (agricultural processors and traders, rural barbers). A ‘pincer movement’ in food and asset prices adds to the problems of market-dependent households. As food production falls, the market demand for food rises, so prices rise. Livestock, land, and other asset markets will be flooded by ‘distress sales’, so the market value of these assets falls. Moreover, the quality of certain assets such as livestock will fall as a consequence of, say, drought. In economic terms, an excess demand for food, combined with excess supply of assets, leads to rising terms of trade for food relative to non-food goods, So a ‘direct entitlement decline’ for some people results in ‘derived destitution’ for others and ‘exchange entitlement decline’ for still others. FADv
The
FED
main
feature
distinguishing
FAD
from
FED
is
that
FAD
concentrates
‘Sen, op tit, Fief 1, 1981, p 162. 3Ashok Mitra, ‘The meaning of meaning’, Economic and Political Weekly, 27 March 1982, p 488. 4For example, Mohiuddin Alamgw notes that, during the Bengal famine of 1943: ‘There were locational and seasonal shortfalls in foodarain availabilitv’, and he coneludes that Ben ‘downplaied the importante of foodgrain availability decline, although his point about aggregate annual per capita availability is correct’. M. Alamgir, Famine in South Asia, Oelgeschlager, Gunn & Haln, Cambridge, MA, 1980, p 385. 5As Sen emphasizes, “Pull failure” is not, strtictly speaking, a “market failure” at all, since the market has no preassigned role of giving everyone “pull” to get what they need. In contrast, “response failure” is a failure of the market in its institutional role.’ (Amartya Sen, ‘Points on food, cash mimeo, University of and entitlements’, Oxford, Oxford, 1985.) In effect, Sen’s analysis of the Wollo famine attempts to prove that ‘pull failure’ predominated, whereas this article argues that ‘response failure’ was at least equally important.
on the totnl
a famine than as an explanation of how or why famine occurs. Even so, some critics have dismissed entitlements (rather unfairly) as merely an elaborate tautology. Ashok Mitra argues that Powrt_v urzci Furrzirws says nothing more than: ‘The poor starve because. given their small earnings. they are short of purchasing power with which to buy food.‘3 Moreover, in his efforts to discredit FAD as the dominant cxplanatory framework. Sen can be accused of ignoring or at least underestimating problems related to food output and availability.’ Sen’s approach does incorporate ‘direct entitlement failure’ as one possible cause of famine, but entitlement is usually seen as ;I theory which focuses on demand failure. as contrasted with FAD. which emphasizes food supply failure. Indeed, the acronym FED might equally . _ be read as ‘failure’cif effective demand’. _ Both FAD and FED effectively divide the world into two - the region or groups of people experiencing food crisis, and ‘the rest of the world’. The crucial difference is that FAD dichotomizes according to gcoraphical areas, while FED differentiates according to the categories of people involved. One implication is that FED assumes (notional) free && of food between surplus and deficit households, with effective demand being the binding constraint; whereas FAD assumes ;I failure of both production and transfers of food. so that available food supplies are the binding constraint which leads to famine. This distinction, ;IS sketched in Figure 1. corresponds to Scn’s discussion of ‘pull failure’ :rnd ‘response failure’ in the context of markets and famines.’ This discussion also addresses the unresolved debate about whether the entitlements framework incorporates FAD-type approaches or stands in theoretical opposition to them. Sen seems to believe that entitlements is ;I holistic framework, one which subsumes all possible explanations, but if the above argument is accepted, it is clear that FED and FAD (at le:ist as they :irc popularly understood) directly contradict each other. Starkly put, either people starve because they luck adequate entitlements to food. or they st:lrve tlrspite having adequate cntitlements in theory. which they cannot :~ctually convert into food because
FED Figure 1.
FAD
(Demand
v FED. Food deflclt
Source: Adapted from Stephen Devereux and Roger Hay, Origins of FarnIne: A Review of the Literature, FAO, Rome, 1986, p 63.
I
failure) , I
Food surplus
reg,ons or
reg,ons or households
-
house holds
/
FAD (Supply fallwe)
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of, say, a failure of markets to respond theoretical contradiction will be explored specific famine.
to demand signals. below, for the case
This of a
Case study: Wollo, 1972-74 The famine of 1972-74 in Wollo province, Ethiopia. has been explained in terms of both FAD and FED. Proponents of FAD argue that drought caused crop failure and direct food shortages, and that transport links were so poor that trade and aid transfers were restricted, and FAD became famine.” Sen argues instead that ‘the fall in food output in Wollo resulted in a direct erztitlemetztfuilure on the part of Wollo farmers and a trude entitlementfailure for other classes in Wollo, e.g. labourers and providers of services’.7 The ‘market entitlement’
view
Sen makes four assertions in support of his ‘market entitlement failure’ explanation (a FED view) of the Wollo 1972-74 famine, against what he calls the ‘transport limitation view’ (a FAD view). Each of these assertions is critically discussed below.
‘This view is summarized by Gopalakrishna Kumar, in ‘Ethiopian famines 19731985: a case study’, paper presented to the WIDER conference, Helsinki, July 1986, p 12. 7Sen, op tit, Ref 1, 1981, pp 93-94. ‘Sen, op tit, Ref 1, 1981, p 92. An Ethiopian government official at the time was even more optimistic. He appeared on television in February 1973 to denounce reports of famine as ‘exaggerated rumour’, claiming that ‘according to experts there is surplus food production. .’ Quoted in Mesfin Wolde Mariam, Rural Vulnerability to Famine in Ethiopia 1958-1977, Vikas, Addis Ababa University, 1984, p 44. The important point underlying the arguments over gross production figures has been described elsewhere by Sen as ‘Malthusian optimism’. By this Sen means the logical fallacy of gross output or availability figures being invoked which imply no aggregate food problem, but which obscure significant distributional shifts in command over available food supplies. Amartya Sen, ‘The food problem: theory and policy’, Third World Quarterly, Vol 4, No 3, July 1982. ‘Sen, op cif, Ref 1, 1981, pp 94 and 96. “John Seaman and Julius Holt (‘Markets and famines in the Third World’, Disasters, Vol 4, No 3, 1980, p 289) note that if 90% of food productton is consumed by producers themselves, a 5% fall in production will result in a 50% fall in the marketed surplus.
FOOD POLICY August
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I. There was no FAD in Ethiopia it1 1973. Sen provides Ministry of Agriculture figures to show that staple crop production in Ethiopia as a whole fell by no more than 7% below ‘normal’ levels in 1972-73. He concludes: ‘There is, thus, very little evidence of a dramatic decline in food availability in Ethiopia coinciding with the famine. . A 7 per cent decline in the output of food crops is hardly a devastating food availability decline.‘” Although Sen accepts that there was a ‘disastrous failure of food output’ in Wollo itself, his argument is that: ‘In so far as the starving people in Wollo could draw on food from the rest of Ethiopia i’they had the market power to pull food into Wollo, the appropriate unit for a FAD analysis has to be Ethiopia rather than Wollo.‘” Since the effects of the 1972-73 crop failures fell disproportionately on Wollo province, this attempt to discredit FAD explanations by adopting a national level of aggregation is not persuasive. Sen might equally have produced figures showing that global food availability did not decline significantly during the famine period. The fact that people starved in Wollo following a crop failure in Wollo has still to be explained. In any event, the 7% decline in national foodcrop production may well have been ‘devastating’, coming as it did as the ‘final straw’ in a sequence of poor harvests going back six or seven years. Finally, an important fact about fragmented markets, especially where food production is typically close to subsistence, is that the marketed surplus available for redistribution in times of crisis will be strictly limited. I” If markets were spatially integrated, traders would purchase food in low-price surplus regions and transport it to high-price deficit regions. driving prices down to the levels prevailing in the surplus markets, plus a margin reflecting transport and transaction costs. In the case of Wollo, as will be seen, some observers argue that the reverse effect occurred. with local shortages leading to rising food prices being transmitted to neighbouring village markets. This evidence provides some support for an explanation of the famine based on localized food shortage exacerbated by market failure.
2. Rorrds lirrking Wollo to Addis Ahuhu ure udequute for moving food. Sen argues against the ‘transport limitation view’ by stating: ‘While roads are few and bad in much of Wollo, two highways run through it, and the main north-south Ethiopian highway linking Addis Ababa and Asmera runs right through the area most affected by the famine.“’ While major roads do exist which link most districts of the country to Addis Ababa, the network of secondary and minor roads is. for the most part, extremely undeveloped. According to Oxfam: ‘Only 2% of Wollo province is accessible by motor road and. indeed, much of the highland country cannot be reached at all by foot or by helicopter.‘” This makes the bulk movement of food to remote areas extremely problematic at the best of times, while the rapid movement of sufficient quantities of food in response to a local emergency may well be logistically impossible. This poor transport system is reflected in poorly integrated markets which, if anything, tend to become even more fragmented in times of crisis. An example from Wollo in 1973 is provided by J. Seaman and J. Holt. Prices in Alamata and Korem. markets separated by only 18km. were very different at the same time. This is not so unexpected as Korem is 70Om higher than Alamata, the journey between the two on foot is difficult, and the highland area does not produce tef. Tef prices in Korem market would be expected to fall only with the physical
“Sen, op tit, Ref 1, 1981, p 94. “Oxfam, to Learned: Drought and Famine in UK, 1984, P 8. ‘%eaman and Holt. OD cit. Ref 10. D 293. Writing on Ethiopian food markets generalIv. K. Griffin and FL Hav note that: ‘the relative prices of the different crops alter frequently and the price structure varies remarkably even between contiguous, well-connected districts of the same region. The evidence thus points to a highly fragmented market with very imperfect flows of grain and information. The most obvious reason for the limited movement of grain is the nature of the roads and the limited access they provide to rural areas. Grain may have to be packed by mule for days to reach a market where merchants are buying’. Keith Griffin and Roger Hay, ‘Problems of agricultural development in socialist Ethiopia: an overview and a suggested survey’, Journal of Peasant Studies, Vol 13, No 1, October 1985, pp 46 and 48. ‘%en, op tit, Ref 1, 1981, p 94. “Alex de Waal, personal communication, January 1988. ‘The economics of 16Martin Ravallion, famine: an overview of recent research’, Working Papers in Trade and Development, No 87/13, The Australian National University Research School of Pacific Studies, Canberra, Australia, June 1987, p 13.
arrival of the crop.‘.’
3. Food moved out of Wollo during the furnine. Sen cites evidence from Seaman and Holt (1976) that food was exported out of Wollo along the north-south highway to Addis Ababa, and to Asmera. in Eritrea, during the famine period itself. According to Sen: ‘This probably was not very large in volume. but it provides some support for the market entitlement view rather than the transport limitation view of food shortage in Wol10.“~ It is true that this suggests a demand slump within Wollo, but it does not prove that this was the case. An alternative explanation, based on ‘coercive extraction’, is suggested by Alex de Waal: There is evidence to suggest that one reason for the export of grain from Wollo in 1973 was that large landowners were continuing to receive rent in grain plus other grain payments from their tenants (amounting to a third of the crop or more) during the famine. The land tenure system in Wollo was extremely regressive and became more so during the early 1970s with distress sales of land. ” It is clear that traders responded sluggishly, if at all, to local food shortages in Wollo, but this could be due to purchasing power collapse (Sen’s view), market isolation (the FAD view), or both of these factors, exacerbated by the unequal distribution of wealth (the argument of this article). As M. Ravallion points out: ‘Food export during famine has often been viewed as an indication of the failure of markets as a means of relieving local famine by spatial arbitrage.“” However, whether such a market failure is primarily related to supply or to demand constraints is a matter for empirical verification.
4. Food prices did not rise in Wollo before or during the fumble. Although the entitlements approach explicitly allows for the case where famine results from price rises, Sen asserts repeatedly that food prices were not a significant factor in explaining this particular famine: ‘A
FOOD
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remarkable feature of the Wollo famine is that food prices in general rose very little, and people were dying of starvation even when food was selling at prices not very different from pre-drought levels.“’ This assertion is highly controversial. Firstly, Sen’s data came from a misleading market - Dessie - a major regional market on the north-south highway linking Wollo to Addis Ababa. Prices here would be expected to reflect conditions in food markets in the capital city more accurately than conditions in remote rural communities. As P. Cutler concludes: ‘It may be that Sen misread the situation in Wollo during the last crisis by relying on data from Dessie Market which was a provincial central market getting grain from a large highland non-famine area at that time.‘lx Secondly, Seaman and Holt did in fact find evidence of quite dramatic price rises in more isolated rural food markets in Wollo. prices rose rapidly in early 1973. But by September, before the much-recovered main harvest, they had fallen to approximately normal levels. Early in 1973, prices in Alamata, a roadside town in the north of the Grain
famine area, had risen to 100E$/lOOkg. approximately of sorghum and tef, the usual staple, fell dramatically, the government
distributed
grain.
Dessie, were reportedly the seasonal norm.‘”
capital,
five times normal; prices but briefly, at times when
At the same period,
lower (54E$/lOOkg)
prices in the provincial
but still much higher than
evidence points to a possible theoretical contradiction in Sen’s analysis. On the one hand, Sen argues that agriculturalists in Wollo suffered a ‘direct entitlement failure’ when their harvests failed. On the other hand, he argues: ‘The effective demand of the agriculturist was further restrained by three subsidiary factors in addition to the fall in agricultural output: (1) a fall in the market price of land, (2) loss of livestock, and (3) a fall in the market price of livestock.‘“’ However, this argument fails to separate out the tnarkct demand for food from the total demand for food. The fact that land and livestock prices fell clearly indicates an excess supply of these assets on the market. If self-provisioning farmers were transferring their access to food from own production to the market, this implies an increase in market demand for food, irrespective of whether non-food assets were being exchanged for food at their full value or at much lower ‘distress’ prices. Unlike Sen, Seaman and Holt see excessive food price rises as being a major factor contributing to the famine:
This empirical “Sen, op tit, Ref 1, 1981, p 111. See also (1) pp 94-95: ‘despite the disastrous failure of food output, food prices did not go up very much and for ve;y long in Wollo’. (2) DO 95-96: ‘Food orices in Dessie - the &&’ grain market ‘in Wollo in the famine year 1973 were, on the whole, remarkably close to pre-famine levels People starved to death without there being a substantial rise in food prices.’ (3) p 101: ‘the Wollo agriculturist could not provide much effective demand for food in the market, and despite widespread starvation the food prices in Dessie and elsewhere recorded very little increase’. (4) p 103: ‘the observed largely stationary prices of foodgrains at Dessie and elsewhere’. 18Peter Cutler, ‘Famine forecasting: prices and peasant behaviour in northern Ethiopia’, Disasters, Vol 8, No 1, 1984, p 53. ‘%eaman and Holt, op tit, Ref 10, pp 286 and 293. See also J. Rivers, J. Holt, J. Seaman and M. Bowden, ‘Lessons for epidemioloqv from the Ethiopian famines’, Anna/es S&iete beige de Medecine Tropica/e. Vol 56. 1976, p 347: we recorded market prices ‘during the famine in northern Wollo at Korem, Alamata and Kobbo markets. Prices for staple grains rose rapidly during the first part of 1973, so that by the beginning of the rains, in the middle of the year, they had nearly doubled.’ High staple food prices In Wollo were also reported by the Ethiopian Nutrition Institute (ENI); see ‘Famine in Environmenfal Child Health, Ethiopia’, Febriary 1977, p 24. ‘%en, op tit, Ref 1, 1981, p 101. “Seaman and Holt, op tit, Ref 10, p 286
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the pattern determined
not accompanied population
and timing of migration
not by food shortage simply, by a sufficient
access to food.
in prices quite out of proportion
and starvation
was overwhelmingly
but by the sudden rise in food prices,
rise in income,
which
the extent of starvation
denied
part
was magnified
of the by a rise
to the supply of food in the area.”
The ‘price ripple hypothesis The evidence that food prices did rise abnormally before and during the 1972-74 Wollo famine is explained by Seaman and Holt in terms of three factors. On the supply side, there was (1) the drought-induced fall in output; and (2) the withholding of surpluses, as well as continued exports out of the region, by large farmers. On the demand side, there was an increased market dependence of formerly surplus (or subsistence), but now deficit, food producers, selling off their assets for food. In the Bangladesh famine of 1974. where similar price rises were
275
recorded, Seaman and Holt found that the movement of food prices in local markets followed a fairly consistent geographical and time pattern, with price rises spreading outwards in a wave from the epicentre of the famine region over a period of some weeks. This led them to suggest that certain famines produce predictable food ‘price ripples’. which both are caused by the crisis and contribute to it.” Cutler has applied this hypothesis to the recent Ethiopian famines, where a factor likely to produce a ‘price ripple’ is the migration of drought victims in search of food or work. Initially, according to Cutler, food prices may be much lower at the edge of the famine zone than at the ccntre. As the crisis deepens and large numbers of people migrate out of the famine zone. food prices begin to rise at the periphery, demand of the victims (constrained reduced
‘z/bid. It should be noted that Seaman and Holt found stronger empirical evidence for a ‘price ripple’ in food prices in Bangladesh in 1974, where a relatively large amount of price data was collected, than for Wollo in 1973. “%utler, op tit, Ref 18, p 50. 24Bob Baulch, ‘Entrtlements and the Wollo famine of 1982-l 985’, Disasters, Vol 11, No 3, 1987. “See Amartya Sen, ‘Food, economics and entitlements’, Lloyds Bank Review, April 1986, p 14.
supplies as the population
reacting to the increased aggregate effective though it is for individual
in the peripheral
households)
and to
:ireas expands.”
Unfortunately, the evidence for Wollo in 1973 is limited by the paucity of data. Circumstantial support is provided by slightly better data from the famine of 1982-85, as reported by Cutler (1984) and by R. Baulch, who found that prices of foodgrains in Korem, Alamata and Kombolcha markets rose dramatically some three to four months in advance of similar price rises in Dessie market. Baulch concludes, albeit tentatively. that this supports Cutler’s theory of a migration-induced ‘price ripple’.24 The ‘price ripple hypothesis’, which reflects essentially a FAD view of famine causation, is far broader than the ‘transport limitation view’ which Sen sets up, almost as a straw man. merely to refute. Seaman and Holt introduce the effects of precautionary and speculative hoarding on marketed supplies to their analysis. while Cutler refers to the effects of ‘distress sales’ and ‘distress migration’ on market drmatrrl. Seaman and Holt describe their general approach as being consistent with Sen’s notion of ‘the deterioration of exchange entitlements’. As noted above, the entitlements framework is broad enough to incorporate rising real food prices due to food supply shortage. But Sen is not content with such an explanation of the Wollo famine, perhaps because this would lend too much credence to a ‘modified FAD’ interpretation. This analytical disagreement has fundamental implications for both theory and policy. In terms of famine relief policy, the evidence for price rises throws doubt on Sen’s proposal of cash handouts to boost effective demand and attract traders into a food shortage region, based as it is on an ‘entitlements’ interpretation which claims a collapse of effective demand as the major precipitating cause of famine.” In theoretical terms, it is not sufficient to attempt to subsume FAD-based explanations under the entitlements umbrella. Either people starved because of supply failure (FAD), or they starved because of effective demand failure (FED). Alternatively. as argued beIow, they were victims of both.
The ‘FAD-FED
paradox’
If this had been a pure ‘demand slump’ famine, food prices would not have risen in the way observed. A parallel collapse in the ‘direct’ and ‘exchange’ entitlements of peasants, as argued by Sen, would have left food prices unchanged. On the other hand, if this was a pure FAD famine, the failure of traders to respond to the effective demand signal
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of dramatic price rises still needs to be explained. Why were people forced physically to migrate to neighbouring markets for food? Since food is a necessity for survival, why didn’t traders move in. whatever the transport costs, and hold the starving to ransom? The ‘FAD-FED paradox’ can be partially resolved by examining more closely two aspects of the market for food in food shortage areas firstly, various trurzsacfiorzs costs incurred by merchants in servicing these markets; and, secondly, the distribution of income and assets in the affected villages. Murket fragmentation and transactions costs
*% simple Marshallian analysis, if supply and demand fall equivalently, prices will remain unchanged. “Cutler, op tit, Ref 18, p 55.
FOOD POLICY August
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For (notional) effective demand for a good to be converted into actual supplies of that good through the market mechanism, three conditions must be satisfied. First, appropriate signals (usually in the form of higher prices for available supplies of the commodity) must be generated by consumers; second, those signals must be received by the relevant agents; and third, these agents must be willing and able to act on those signals and satisfy consumer demand. Sen implies that the Wollo famine of 1972-74 can be explained in terms of a failure of the first condition above. He believes that appropriate signals were not generated from drought-affected communities because consumers there had suffered a purchasing power collapse in line with the local food supply collapse.” But Sen appears to have misread the situation in Wollo food markets, and his ‘demand slump view’ offers no explanation for the substantial food price rises which were actually recorded. Sen’s view of the Wollo 1972-74 famine relies on the existence of fairly well functioning markets permitting trade and arbitrage. which in turn implies the existence of good flows of information, developed transport and marketing networks, and a laissez-faire or neutral state, which does not interfere with the operations of the ‘free market’. In fact, in rural Ethiopia, there is not one famine region surrounded by a but thousands of fragmented, perfectly functioning set of markets, almost isolated communities, each with their own food supply problems and poor transport and communications links with neighbouring villages and districts. The reason why traders failed to respond to price signals must therefore lie in the failure of conditions two and/or three instead. With poor communications networks inside Wollo, limited inter-regional mobility of people at the best of times, and poor media coverage of the food crisis, it is possible that traders were unaware of the potential to exploit the starving until the famine was well under way - or after distress sales had stripped the poor of their assets and reduced them to destitution. Inadequate knowledge of the scale and severity of the crisis. exacerbated by the government’s campaign of secrecy and denial, may also explain the rather slow response of aid agencies, and of the government’s own relief programme. The first sign to the outside world of a regional famine may well have been what Cutler describes as ‘a terminal indicator of distress’27 - the mass migration of hungry people. Transport problems would partly explain market ‘response failure’ in terms of the third condition above. However, the ‘transport limitation view’ focuses too narrowly on the logistical feasibility of moving food into famine-afflicted regions. Transport deficiencies alone cannot
explain the magnitude of price rises recorded during 1973 (the fivefold increases in food prices at Alamata, a roadside town, for instance). A much broader notion of transactions costs to traders should be adopted, one which would include traders’ estimates of ~11the costs and rewards associated with servicing each isolated rural food market, in a situation of serious logistical constraints and severely limited information. One factor already mentioned is the limited availability of food surpluses in neighbouring areas, where traders would have to purchase grain. Traders might also have been deterred by the illiquidity of low quality land and livestock which peasants were offering in exchange for food. Another factor is small market size - a substantial local demand for food may be insignificant in regional or national terms. The individual focus of the entitlements approach obscures the fact that traders would respond only to a sizeable ‘aggregate entitlement’ of a market or community, not to individual signals of effective demand. Besides, apart from being very small, these new pockets of demand were only temporary - they would disappear when ‘normality’ returned to the region. These and related factors could resolve the apparent contradiction of food being exported from Wollo while prices within Wollo were much higher than those recorded in Addis Ababa, or even Dessie, at the same time. Traders may well have found it more convenient, and probably more profitable, to continue their established pattern of transporting food from rural to urban areas, rather than setting up new routes at great cost and uncertain reward to supply small, isolated communities with a few bags of grain each for a short period of time.‘” To summarize, the fragmented nature of rural markets in Wollo creates many transactions costs, which may have constituted a binding constraint on food traders in 1973, and contributed to turning the Wollo drought into the Wollo famine. The costs identified here include the following: Logistical construints: 0 transport costs 0 costs of reorienting distribution channels l inaccessibility of famine-affected villages l small surpluses available for merchants to purchase
for resale
Limited rewards: 0 small size of famine markets 0 short duration of famine markets a opportunity cost of losing regular customers elsewhere l ifliquidity of assets offered by peasants in exchange for food Risk and uncertainty: 0 risk of being undercut by other traders 0 uncertainty caused by limited information
about
famine
markets
The common element linking these costs is the fact that much of the demand for food in rural Wollo was ~rrrt~!\, clerrretl by the drought. A crucial but under-analysed feature of this famine was the enforced switch by large numbers of foodgrain farmers from self-
market “For
example, traders might have chosen
to continue exporting grain to Addis Ababa if they valued the certainty of, say, 10% profit on 1000 bags of grain with their regular customers more than the possibrlity of a ‘once-off’ profit of 500% on 20 bags of grain in a drought-stricken village.
278
provisioning
to market
dependence
to meet
a significant
proportion
of
food needs. Neither FAD nor FED explores the dynamics of such a situation. because neither approach fully articulates the relationship
their
FOOD
POLICY
August
1988
Enlitlements,
uvailahility
und fumine
between people and markets in times of food crisis. This is ironic, since a theory of trade and markets is implicit in both approaches, FAD effectively assumes trade away, in the context of a subsistence economy; while FED lucidly explains how adverse shifts in terms of trade can push vulnerable people into the ‘starvation set’, in the context of a market economy. The implications of sudden shifts in farmers’ access to food, from production to the market, are not adequately discussed by either paradigm. The distribution
29Similarly, Alamgir suggests the following as an empirically testable hypothesis about famines: ‘The more unequal the distribution of income generating assets, the greater the probability of intensity of famine. A class famine situation is triggered off or accentuated by an exogenous shock more easily if the command over productive assets is unevenly distributed.’ Alamgir, op cif, Ref 4, p 48. 30Keith Griffin develops a similar ‘demand disaggregation’ approach to highlight the role of distributional issues during food crises (International hequality and National Poverty, Chapter 8 on ‘Inequality, effective demand and the causes of world hunger’, Macmillan, London, UK, 1987).
Figure 2. The coexistence food prices and entitlement during food crises.
FOOD POLICY August
of high failures
1988
of income and assets
The second component of the solution to the ‘FAD-FED paradox’ suggested here lies in inequalities in the personal distribution of wealth (income, property and assets) in the affected region, both before and during the food crisis. It is reasonable to assume that some degree of economic stratification existed in even the poorest rural communities in Wollo. However, given that the poor substantially outnumbered the rich, it is clear that many people will have been excluded from the market for food during the famine as a consequence of price rises induced by the demand pressure exerted on restricted supplies by the wealthy minority. The more unequal the initial distribution of wealth, the more pronounced this effect will be.*” The mechanism can be demonstrated with a stylized example. Assume two classes of consumers in the famine region, one rich and the other poor. Initially, both depend on the market for some or all of their food needs. Assume also that the staple foodgrain can be purchased only in discrete units - say in l-kg bags. Since food is essential for survival, all market-dependent individuals, of either class, have an inelastic demand for grain at subsistence, given their respective budget constraints. These two demand curves are sketched as D,. (initial demand of the rich) and D,,’ (initial demand of the poor) in figure 2.3” Now assume a reduction in marketed supplies of grain, from a quantity (4’) where all local demand is satisfied to a level (q2) where local subsistence needs can no longer be met. Since grain is sold in discrete units, its supply is totally inelastic at S’ and S-’ respectively, and demand is totally elastic above each individual’s budget constraint.
42
4/ Quantity
279
311n non-famine years, only about 5% of the population in Woilo depends on the market for their food needs (Seaman and Ho&, op tit, Ref 10, p 287). However, as mentioned earlier, and as Kumar notes: ‘in the Ethiopian context, crop failure may work to increase market dependence rather than to decrease it and this would, Inter alia, accord with our earlier finding that pace Sen food prices did on the whole increase during the Wollo famine’. Kumar, op tit, Ref 6, p 17. 32According to Bondestam, hoarding was a feature of the famine: ‘The starvation in Wollo and Tigrai followed a typlcal pattern: grain prices were rising and cattle prices were dropping, the reasons being obvious. Those merchants and dealers, who had grain stored, could speculate in it, waiting for the prices to rise further.’ Lars Bondestam, ‘Ethiopia: hunger and famine in the 1960s and 1970s’. prepared for the workshop on Hunger and .Society, Soliwayo, Tanzania, December 1983, p 17. 33Seaman and Ho&, op tit, kef IO. p 234. In the case of the more recent Wollo famine of 1982-85, Cutler has provided anecdotal evidence to suggest that some people starved with money in their pockets - a striking case being that of an old man who died in Korem with 1000 birr (about $450) in cash on his person. Cutler, op tit, Ref 18, p 51.
280
If any effective demand remains in the region at all, prices can now be expected to rise. This is because people are bidding against each other for smaller supplies of grain than were previously available. and because dettzmd pressure increases as formerly surplus, now deficit food producers are thrown onto markets for their food needss3’ In the figure, market demand by the poor rises from ZI,,’ to D,,‘, with an equivalent increase in total demand for food, from n,’ to D,‘. Rising food prices will affect each group to differing extents. Because the rich by definition have much greater wealth. their demand for food is totally inelastic at subsistence (D,.) over the range of prices between 0 and i-7’. so they continue to buy all the food they need until the price exceeds p’, where $ reflects the exchange value of their assets. Their demand might even increase in the short run, if they purchase food for precautionary or speculative reasons.32 But the poor have strictly limited resources, so their demand (U,,) is totally elastic above p’, This means that their ‘trade entitlement’ for food drops to zero as soon as prices rise above p’, so they rapidly drop out of the market altogether. Hence the brunt of the reduction in food supply inevitably falls on the poor, because of their acute sensitivity to food price rises. The new ‘equilibrium’ price is difficult to determine, Since the demand and supply curves intersect and are inelastic at q’ over the range 0 to p’* 2 ‘core’ of possible prices exist over the range $--j>‘. The exact outcome is determined by the relative bargaining strengths. in this case, of the rich individuals and the food traders. This in turn depends on the traders’ knowledge of the rich individuals’ effective demand, and on the competitiveness of the food market. The key to solving the paradox of high food prices during an apparent ‘demand slump’ famine, therefore, is the disuggregutiot7 of the re,giotzaf demand curve. in normal times, total market demand (/I,) is a summation of the demand of the rich (Dt-) and that of the poor (D,,). The aggregate demand curve changes dramatically during a food crisis, however. As prices rise and the effective demand of the poor falls towards zero, the aggregate demand for food on the market approaches the effective demand of the rich alone. In the case of the Wolio famine, this analysis may further clarify why traders failed to bring food into the famine region, despite the demand signal of high food prices. Prices would have to be driven down to 17’ before any additional demand was created; while the profit margin on a few bags of grain sold to the rich would not be enough to justify the expense, effort and risk involved in market reorientation. So traders would not come in because effective demand in limited. High prices send an inflated signal of real effective demand in the community. In support of this argument, it is worth rn~nti~~ning Seaman and Holt’s observation that not all the famine victims in relief camps in 1973 and 1974 were absolutely destitute: ’ . . _ in Alamata relief shelter there were some people who. in terms of the local society, were not poor . . . which suggests that their relative affluence had been in cash and goods rather than in food.‘33 This analysis illustrates how a local supply failure can be translated, via differential demand failure, into a local famine. The Wollo famine might be described as a FAD famine for those who retained some wealth but were unable to convert this into food, due to regional food shortage and market failure, and a FED famine for the poor, who were
FOOD
POLICY
August
1988
Enri/lemenrs, uvailuhili~y und fumirw
made destitute by the collapse of their direct and exchange entitlements, which excluded them from what market for food still remained. Some reservutiorls
34For evidence from India, see N.S. Jodha, ‘Effectiveness of farmers’ adjustment to risk’, ICRISAT Discussion Paper, Hyderabad, November 1977. For a review of the evidence from Africa, see Jane Corbett, ‘Household food security when famine threatens: how do households cope?‘, paper for joint IFPRI-FSG Workshop, is&es in Fobd Security, Oxford, July 1987 35Wolde Mariam. op cit. Ref 8. op 61-62. 36A class famine’ is contrasted with a general or regional famine by the fact that: ‘In a class famine, the burden of foodgrain intake deficiency falls primarily on the weaker sections of the population. .’ Alamgir, op tit, Ref 4, p 14. 37Similarly, although an empirical feature of famine conditions in Ethiopia is the sale of grain in extremely small quantities sometimes even tn handfuls - this modification would cause the demand curves in the diagram to have unit elasticity, but would not substantively affect the argument.
FOOD POLICY August
1988
Four caveats must be noted. First, while the focus of this article is the immediate behaviour of markets during a food shortage caused by drought, this is not to suggest that crop failures and market imperfections alone ‘caused’ the famine. A complete explanation would pay at least as much attention to the long-run, underlying causes of poverty and vulnerability in Wollo as to the proximate factors which ‘triggered’ the crisis. Second, this analysis is conducted in terms of comparative statics. In reality, assets were sold sequentially, not instantaneously, and the famine occurred over a relatively long period of time. The same critique applies to Sen’s idea that people are ‘plunged’ into the ‘starvation set’. Starvation is the end result of a long and painful process; it does not strike overnight. Third, some people probably rationed their consumption of food, in order to preserve their productive assets. The growing literature on ‘famine coping mechanisms’ argues that voluntary rationing of food consumption typically precedes the conversion of assets into food through distress sales.‘4 In the case of Wollo, Wolde Mariam argues that peasants were reluctant to part with their livestock or land, seeing these productive assets as their only hope in a post-famine future. His figures show that almost four times as many livestock died as were sold in Wollo in 1974, and that nearly 85% of peasants failed to sell or mortgage their lands, even in the face of acute starvation.j5 However, whether this should be explained in terms of ‘rational choice’ or a lack of buyers is not clear. Finally, though Figure 2 explicitly tries to reflect Alamgir’s notion of a groups may be more ‘class famine’,j6 Sen’s use of different occupation precise than an artificial dichotomy between a rich and a poor class. Such a refinement might extend the diagram from two to four or five categories of market-dependent consumers, each with a different level of ‘market entitlement to food’, but it would not alter the basic conclusions?’ For one thing, distinguishing simply between a relatively affluent class of landlords and large farmers and a relatively homogeneous ‘subsistence’ peasantry is not entirely unrealistic for Wollo in 1973. Moreover, even if wealth were distributed less unequally than as depicted, Figure 2 does at least demonstrate the mechanism whereby the poor are progressively (or suddenly) excluded from the market for food following quite small shifts in food supply and/or prices. On the positive side, this exposition may have wider application than the simple analysis of drought-induced food output decline. It may be used to demonstrate the effect on the poor of speculative hoarding of grain surpluses by the wealthy, which has the identical effect on marketed supplies as a production failure. It may also have relevance to analyses of the ‘hungry season’ in many rural areas, since the mechanism whereby the poor are excluded from the market for food as marketed supplies fall and prices rise is similar in both cases.
Conclusion In
recent
years,
Amartya
Sen’s seminal
contribution
to famine
analysis
281
38As Sen himself states: ‘The FAD approach applied to the food availability for the population of an entire country is a gross approach, lacking in relevant discrimination.’ Sen, pp 157-l 58.
282
op
tit,
Ref
1,
1981,
has resulted in a massive swing in the pendulum of academic opinion, from predominantly supply-side to predominantly demand-side explanations. In the process, it appears that some perspective has been lost. FAD-type arguments along the lines of ‘food shortage causes famine’ or ‘drought causes famine’ have been shown to be incomplete, but the role of supply factors as precipitating factors or ‘proximate causes’ should not be entirely disregarded. Given that FAD offers only a partial explanation of contemporary famines, the argument here is that the ‘market entitlement failure’ framework is open to precisely the same criticism - especially in the African context. This is particularly true if the level of analysis is narrowed down from the national or global perspective, where there is rarely an aggregate shortage of food, to the local or regional level, where a decline in food production usually precedes a local or regional famine.3x However, since a food shortage never affects all classes in the affected area equally, FED has relevance in identifying who will starve and who will survive the crisis, and why. A synthesis of the strengths of both approaches might therefore offer a more complete analytical framework than the current attempts of each paradigm to gain academic dominance over each other. The reconciliation suggested here is that supply-side (or FAD) explanations be used for identifying the proximate or ‘trigger’ causes of a particular famine, with demand-side (FED) explanations being invoked to analyse its impact among various groups of people. In addition. however, an empirically validated theory of the role of markets and traders is vital for a complete understanding of the economics of famine. The ‘FAD v entitlements’ debate is both sterile and redundant. There is no single theory which explains every aspect of every recorded famine. What is needed now is a typology of different famines, with an evaluation of the role of supply and demand factors in each. This will assist all those concerned
with
famine
prevention
and alleviation,
in the analysis of famine causation and in indicating policy responses to be adopted in future food crises.
both
the appropriate
FOOD POLICY
August
1988
Stephen Devereux
This article reviews two stylized theories of famine causation, ‘food availability decline’ (FAD) and ‘food entitlement decline’ (FED), as competing explanations of the famine of 197274 in Wollo province, Ethiopia. A. Sen’s ‘market entitlement failure’ argument is challenged by J. Seaman and J. Holt’s ‘price ripple’ hypothesis. A consideration of the role of transactions costs and wealth inequalities suggests a synthesized approach: Wollo 1972-74 was a FAD (supply slump) famine for the relatively wealthy, and an ‘entitlements collapse’ (demand slump) famine for the absolutely poor. Stephen Devereux is a Doctoral Student in Economics, Balliol College, and Research Associate, Food Studies Group, University of Oxford, Oxford, UK. This article was presented at a workshop on ‘The Causes of Famine’ co-sponsored by the Refugee Studies Programme and the Food Studies Group, at Queen Elizabeth House, University of Oxford, 9 May 1987. I wish to thank the following for their stimulating critiques of earlier drafts, without implicating them in the final product: Jane Corbett, Lucia Da Corta, Jean Dreze, Roger Hay, Judith Heyer, Alex de Waal, members of the Food Studies Group and an anonymous referee. ‘This has been demonstrated by Sen for the Bengal 1943 and Bangladesh 1974 famlnes (Amartya Sen, Poverty and FarnInes, Clarendon Press, Oxford, 1981, chapters 6 and 9). But see the ‘Bowbrickcontinued on page 271
270
Since the publication in 1981 of Amartya Sen’s Poverty arid Funzitze.s. academic opinion has been divided about the relative merits of two alternative explanations of contemporary famines in the Third World. The older theory - that people starve because of insufficient supplies of food - Sen has labelled ‘food availability decline’. or FAD. Sen’s ‘entitlements’ approach. which argues that people starve when their command over available food supplies falls below their subsistence needs, is here labelled with a comparable acronym - ‘food entitlement decline’. or FED. FAD In its simplest incarnation. FAD argues that anything which disrupts food production (such as drought, flood or war) can cause famine. the logic being that a drought. flood or war causes crop failure and cattle death, reducing the availability of food in the affected region, and that such a ‘food availability decline’ to below the subsistence needs of a significantly large number of people for an extended period by definition constitutes ii famine. This argument has several limitations. The main problem is that a FAD is neither necessary nor sufficient for a famine to occur. It is not .sllfficipnt because food production is only one source of food. A local food shortage can be redressed by purchases from surplus regions. or by transfers of food aid from the state or voluntary agencies. For ;I local or regional decline in food availability to become a famine. trade and aid transfers to the affected population must fail as well. FAD is not /Icw.s.sur)’ because, as Scn has shown. ;I famine can occur with no obvious fall in national or regional food availability.’ A third wcnkness of FAD and related approaches is that they fail to distinguish between the victims and the survivors of a famine. FAD suggests that a regional food availability decline becomes a regional famine. with no recognition of the fact that some people will starve
0306-9192188/030270-l
3$3.00 0
1988 Butterworth
& Co (Publishers)
Ltd
Er~tikwwnt.~, uvuiluhility
und fumirw
while others will not, in the same region during the same food crisis, and that there are clearly identifiable reasons for this differential impact. A modified version of FAD acknowledges the first of these flaws (that FAD is not a sufficient condition for famine), and can be expressed simply as ‘FAD + isolation = famine’. The logic here is that a food production disruption causes a FAD, while poor infrastructure links (transport, communication and markets) makes compensating trade and aid flows impossible. The obvious conclusion is that the FAD approach requires ‘closed economy’ assumptions. A local FAD becomes a local famine if the region is effectively isolated, and so cannot call on food supplies from elsewhere. FED
continued from page 270 Sen debate’ in this journal for a challenqe to Sen’s analysis bf food availabillty -in Bengal in 1943: Peter Bowbrick, ‘The causes of famine: a refutation of Professor Sen’s theory’, Food Policy, May 1986, pp 105-124; Amartya Sen, ‘The causes of iamIne: a reply’, Fbod Policy, May 1986, pp 125-132; George Allen, ‘Famines: the Bowbrick-Sen dispute and some related Food Policy, August 1986, issues’, pp 25%263.
FOOD
POLICY
August
1988
The links between poverty and hunger have been recognized for centuries. During the 1970s. commentators increasingly focused on the relationship between poverty and fumine, noting that typically it is the poor who starve during food crises - not the rich, who invariably survive. Sen’s monograph, Poverty urld Fumirzes: An Essuy on Entitlernwt and Deprivution, published in 1981, was the first attempt to formalize this empirically observed relationship in theoretical terms. The ‘entitlements approach’ to famine analysis, as developed in Poverty und Famines, recognizes that people have several possible ways of gaining access to sufficient food. Sen categorizes four general sources of food entitlements - production. trade, own labour, and transfers. While not denying that famine can follow a decline in food availability in a region, Sen sees this explanation as focusing too narrowly on the local production of food, and as being a partial explanation at best - since it fails to explain who suffers during a famine. Instead, he argues that famine affects specific groups of people following a collapse of the ‘food entitlements’ (what is here labelled as ‘food entitlement decline’, or FED) of those identifiable groups. The mechanism whereby a food entitlement decline becomes a famine varies depending on the people concerned. Small-scale food producers and their families starve because they derive most of their entitlements directly. from the production of food. This ‘direct entitlement decline’ explains the irony of food producers being among those most vulnerable to famine. Other groups who depend indirectly on agricultural incomes suffer ‘derived destitution’. either through unemployment (agricultural labourers) or through loss of markets for their goods and services (agricultural processors and traders, rural barbers). A ‘pincer movement’ in food and asset prices adds to the problems of market-dependent households. As food production falls, the market demand for food rises, so prices rise. Livestock, land, and other asset markets will be flooded by ‘distress sales’, so the market value of these assets falls. Moreover, the quality of certain assets such as livestock will fall as a consequence of, say, drought. In economic terms, an excess demand for food, combined with excess supply of assets, leads to rising terms of trade for food relative to non-food goods, So a ‘direct entitlement decline’ for some people results in ‘derived destitution’ for others and ‘exchange entitlement decline’ for still others. FADv
The
FED
main
feature
distinguishing
FAD
from
FED
is
that
FAD
concentrates
‘Sen, op tit, Fief 1, 1981, p 162. 3Ashok Mitra, ‘The meaning of meaning’, Economic and Political Weekly, 27 March 1982, p 488. 4For example, Mohiuddin Alamgw notes that, during the Bengal famine of 1943: ‘There were locational and seasonal shortfalls in foodarain availabilitv’, and he coneludes that Ben ‘downplaied the importante of foodgrain availability decline, although his point about aggregate annual per capita availability is correct’. M. Alamgir, Famine in South Asia, Oelgeschlager, Gunn & Haln, Cambridge, MA, 1980, p 385. 5As Sen emphasizes, “Pull failure” is not, strtictly speaking, a “market failure” at all, since the market has no preassigned role of giving everyone “pull” to get what they need. In contrast, “response failure” is a failure of the market in its institutional role.’ (Amartya Sen, ‘Points on food, cash mimeo, University of and entitlements’, Oxford, Oxford, 1985.) In effect, Sen’s analysis of the Wollo famine attempts to prove that ‘pull failure’ predominated, whereas this article argues that ‘response failure’ was at least equally important.
on the totnl
a famine than as an explanation of how or why famine occurs. Even so, some critics have dismissed entitlements (rather unfairly) as merely an elaborate tautology. Ashok Mitra argues that Powrt_v urzci Furrzirws says nothing more than: ‘The poor starve because. given their small earnings. they are short of purchasing power with which to buy food.‘3 Moreover, in his efforts to discredit FAD as the dominant cxplanatory framework. Sen can be accused of ignoring or at least underestimating problems related to food output and availability.’ Sen’s approach does incorporate ‘direct entitlement failure’ as one possible cause of famine, but entitlement is usually seen as ;I theory which focuses on demand failure. as contrasted with FAD. which emphasizes food supply failure. Indeed, the acronym FED might equally . _ be read as ‘failure’cif effective demand’. _ Both FAD and FED effectively divide the world into two - the region or groups of people experiencing food crisis, and ‘the rest of the world’. The crucial difference is that FAD dichotomizes according to gcoraphical areas, while FED differentiates according to the categories of people involved. One implication is that FED assumes (notional) free && of food between surplus and deficit households, with effective demand being the binding constraint; whereas FAD assumes ;I failure of both production and transfers of food. so that available food supplies are the binding constraint which leads to famine. This distinction, ;IS sketched in Figure 1. corresponds to Scn’s discussion of ‘pull failure’ :rnd ‘response failure’ in the context of markets and famines.’ This discussion also addresses the unresolved debate about whether the entitlements framework incorporates FAD-type approaches or stands in theoretical opposition to them. Sen seems to believe that entitlements is ;I holistic framework, one which subsumes all possible explanations, but if the above argument is accepted, it is clear that FED and FAD (at le:ist as they :irc popularly understood) directly contradict each other. Starkly put, either people starve because they luck adequate entitlements to food. or they st:lrve tlrspite having adequate cntitlements in theory. which they cannot :~ctually convert into food because
FED Figure 1.
FAD
(Demand
v FED. Food deflclt
Source: Adapted from Stephen Devereux and Roger Hay, Origins of FarnIne: A Review of the Literature, FAO, Rome, 1986, p 63.
I
failure) , I
Food surplus
reg,ons or
reg,ons or households
-
house holds
/
FAD (Supply fallwe)
FOOD
POLICY
August
1988
of, say, a failure of markets to respond theoretical contradiction will be explored specific famine.
to demand signals. below, for the case
This of a
Case study: Wollo, 1972-74 The famine of 1972-74 in Wollo province, Ethiopia. has been explained in terms of both FAD and FED. Proponents of FAD argue that drought caused crop failure and direct food shortages, and that transport links were so poor that trade and aid transfers were restricted, and FAD became famine.” Sen argues instead that ‘the fall in food output in Wollo resulted in a direct erztitlemetztfuilure on the part of Wollo farmers and a trude entitlementfailure for other classes in Wollo, e.g. labourers and providers of services’.7 The ‘market entitlement’
view
Sen makes four assertions in support of his ‘market entitlement failure’ explanation (a FED view) of the Wollo 1972-74 famine, against what he calls the ‘transport limitation view’ (a FAD view). Each of these assertions is critically discussed below.
‘This view is summarized by Gopalakrishna Kumar, in ‘Ethiopian famines 19731985: a case study’, paper presented to the WIDER conference, Helsinki, July 1986, p 12. 7Sen, op tit, Ref 1, 1981, pp 93-94. ‘Sen, op tit, Ref 1, 1981, p 92. An Ethiopian government official at the time was even more optimistic. He appeared on television in February 1973 to denounce reports of famine as ‘exaggerated rumour’, claiming that ‘according to experts there is surplus food production. .’ Quoted in Mesfin Wolde Mariam, Rural Vulnerability to Famine in Ethiopia 1958-1977, Vikas, Addis Ababa University, 1984, p 44. The important point underlying the arguments over gross production figures has been described elsewhere by Sen as ‘Malthusian optimism’. By this Sen means the logical fallacy of gross output or availability figures being invoked which imply no aggregate food problem, but which obscure significant distributional shifts in command over available food supplies. Amartya Sen, ‘The food problem: theory and policy’, Third World Quarterly, Vol 4, No 3, July 1982. ‘Sen, op cif, Ref 1, 1981, pp 94 and 96. “John Seaman and Julius Holt (‘Markets and famines in the Third World’, Disasters, Vol 4, No 3, 1980, p 289) note that if 90% of food productton is consumed by producers themselves, a 5% fall in production will result in a 50% fall in the marketed surplus.
FOOD POLICY August
1988
I. There was no FAD in Ethiopia it1 1973. Sen provides Ministry of Agriculture figures to show that staple crop production in Ethiopia as a whole fell by no more than 7% below ‘normal’ levels in 1972-73. He concludes: ‘There is, thus, very little evidence of a dramatic decline in food availability in Ethiopia coinciding with the famine. . A 7 per cent decline in the output of food crops is hardly a devastating food availability decline.‘” Although Sen accepts that there was a ‘disastrous failure of food output’ in Wollo itself, his argument is that: ‘In so far as the starving people in Wollo could draw on food from the rest of Ethiopia i’they had the market power to pull food into Wollo, the appropriate unit for a FAD analysis has to be Ethiopia rather than Wollo.‘” Since the effects of the 1972-73 crop failures fell disproportionately on Wollo province, this attempt to discredit FAD explanations by adopting a national level of aggregation is not persuasive. Sen might equally have produced figures showing that global food availability did not decline significantly during the famine period. The fact that people starved in Wollo following a crop failure in Wollo has still to be explained. In any event, the 7% decline in national foodcrop production may well have been ‘devastating’, coming as it did as the ‘final straw’ in a sequence of poor harvests going back six or seven years. Finally, an important fact about fragmented markets, especially where food production is typically close to subsistence, is that the marketed surplus available for redistribution in times of crisis will be strictly limited. I” If markets were spatially integrated, traders would purchase food in low-price surplus regions and transport it to high-price deficit regions. driving prices down to the levels prevailing in the surplus markets, plus a margin reflecting transport and transaction costs. In the case of Wollo, as will be seen, some observers argue that the reverse effect occurred. with local shortages leading to rising food prices being transmitted to neighbouring village markets. This evidence provides some support for an explanation of the famine based on localized food shortage exacerbated by market failure.
2. Rorrds lirrking Wollo to Addis Ahuhu ure udequute for moving food. Sen argues against the ‘transport limitation view’ by stating: ‘While roads are few and bad in much of Wollo, two highways run through it, and the main north-south Ethiopian highway linking Addis Ababa and Asmera runs right through the area most affected by the famine.“’ While major roads do exist which link most districts of the country to Addis Ababa, the network of secondary and minor roads is. for the most part, extremely undeveloped. According to Oxfam: ‘Only 2% of Wollo province is accessible by motor road and. indeed, much of the highland country cannot be reached at all by foot or by helicopter.‘” This makes the bulk movement of food to remote areas extremely problematic at the best of times, while the rapid movement of sufficient quantities of food in response to a local emergency may well be logistically impossible. This poor transport system is reflected in poorly integrated markets which, if anything, tend to become even more fragmented in times of crisis. An example from Wollo in 1973 is provided by J. Seaman and J. Holt. Prices in Alamata and Korem. markets separated by only 18km. were very different at the same time. This is not so unexpected as Korem is 70Om higher than Alamata, the journey between the two on foot is difficult, and the highland area does not produce tef. Tef prices in Korem market would be expected to fall only with the physical
“Sen, op tit, Ref 1, 1981, p 94. “Oxfam, to Learned: Drought and Famine in UK, 1984, P 8. ‘%eaman and Holt. OD cit. Ref 10. D 293. Writing on Ethiopian food markets generalIv. K. Griffin and FL Hav note that: ‘the relative prices of the different crops alter frequently and the price structure varies remarkably even between contiguous, well-connected districts of the same region. The evidence thus points to a highly fragmented market with very imperfect flows of grain and information. The most obvious reason for the limited movement of grain is the nature of the roads and the limited access they provide to rural areas. Grain may have to be packed by mule for days to reach a market where merchants are buying’. Keith Griffin and Roger Hay, ‘Problems of agricultural development in socialist Ethiopia: an overview and a suggested survey’, Journal of Peasant Studies, Vol 13, No 1, October 1985, pp 46 and 48. ‘%en, op tit, Ref 1, 1981, p 94. “Alex de Waal, personal communication, January 1988. ‘The economics of 16Martin Ravallion, famine: an overview of recent research’, Working Papers in Trade and Development, No 87/13, The Australian National University Research School of Pacific Studies, Canberra, Australia, June 1987, p 13.
arrival of the crop.‘.’
3. Food moved out of Wollo during the furnine. Sen cites evidence from Seaman and Holt (1976) that food was exported out of Wollo along the north-south highway to Addis Ababa, and to Asmera. in Eritrea, during the famine period itself. According to Sen: ‘This probably was not very large in volume. but it provides some support for the market entitlement view rather than the transport limitation view of food shortage in Wol10.“~ It is true that this suggests a demand slump within Wollo, but it does not prove that this was the case. An alternative explanation, based on ‘coercive extraction’, is suggested by Alex de Waal: There is evidence to suggest that one reason for the export of grain from Wollo in 1973 was that large landowners were continuing to receive rent in grain plus other grain payments from their tenants (amounting to a third of the crop or more) during the famine. The land tenure system in Wollo was extremely regressive and became more so during the early 1970s with distress sales of land. ” It is clear that traders responded sluggishly, if at all, to local food shortages in Wollo, but this could be due to purchasing power collapse (Sen’s view), market isolation (the FAD view), or both of these factors, exacerbated by the unequal distribution of wealth (the argument of this article). As M. Ravallion points out: ‘Food export during famine has often been viewed as an indication of the failure of markets as a means of relieving local famine by spatial arbitrage.“” However, whether such a market failure is primarily related to supply or to demand constraints is a matter for empirical verification.
4. Food prices did not rise in Wollo before or during the fumble. Although the entitlements approach explicitly allows for the case where famine results from price rises, Sen asserts repeatedly that food prices were not a significant factor in explaining this particular famine: ‘A
FOOD
POLICY
August
1988
remarkable feature of the Wollo famine is that food prices in general rose very little, and people were dying of starvation even when food was selling at prices not very different from pre-drought levels.“’ This assertion is highly controversial. Firstly, Sen’s data came from a misleading market - Dessie - a major regional market on the north-south highway linking Wollo to Addis Ababa. Prices here would be expected to reflect conditions in food markets in the capital city more accurately than conditions in remote rural communities. As P. Cutler concludes: ‘It may be that Sen misread the situation in Wollo during the last crisis by relying on data from Dessie Market which was a provincial central market getting grain from a large highland non-famine area at that time.‘lx Secondly, Seaman and Holt did in fact find evidence of quite dramatic price rises in more isolated rural food markets in Wollo. prices rose rapidly in early 1973. But by September, before the much-recovered main harvest, they had fallen to approximately normal levels. Early in 1973, prices in Alamata, a roadside town in the north of the Grain
famine area, had risen to 100E$/lOOkg. approximately of sorghum and tef, the usual staple, fell dramatically, the government
distributed
grain.
Dessie, were reportedly the seasonal norm.‘”
capital,
five times normal; prices but briefly, at times when
At the same period,
lower (54E$/lOOkg)
prices in the provincial
but still much higher than
evidence points to a possible theoretical contradiction in Sen’s analysis. On the one hand, Sen argues that agriculturalists in Wollo suffered a ‘direct entitlement failure’ when their harvests failed. On the other hand, he argues: ‘The effective demand of the agriculturist was further restrained by three subsidiary factors in addition to the fall in agricultural output: (1) a fall in the market price of land, (2) loss of livestock, and (3) a fall in the market price of livestock.‘“’ However, this argument fails to separate out the tnarkct demand for food from the total demand for food. The fact that land and livestock prices fell clearly indicates an excess supply of these assets on the market. If self-provisioning farmers were transferring their access to food from own production to the market, this implies an increase in market demand for food, irrespective of whether non-food assets were being exchanged for food at their full value or at much lower ‘distress’ prices. Unlike Sen, Seaman and Holt see excessive food price rises as being a major factor contributing to the famine:
This empirical “Sen, op tit, Ref 1, 1981, p 111. See also (1) pp 94-95: ‘despite the disastrous failure of food output, food prices did not go up very much and for ve;y long in Wollo’. (2) DO 95-96: ‘Food orices in Dessie - the &&’ grain market ‘in Wollo in the famine year 1973 were, on the whole, remarkably close to pre-famine levels People starved to death without there being a substantial rise in food prices.’ (3) p 101: ‘the Wollo agriculturist could not provide much effective demand for food in the market, and despite widespread starvation the food prices in Dessie and elsewhere recorded very little increase’. (4) p 103: ‘the observed largely stationary prices of foodgrains at Dessie and elsewhere’. 18Peter Cutler, ‘Famine forecasting: prices and peasant behaviour in northern Ethiopia’, Disasters, Vol 8, No 1, 1984, p 53. ‘%eaman and Holt, op tit, Ref 10, pp 286 and 293. See also J. Rivers, J. Holt, J. Seaman and M. Bowden, ‘Lessons for epidemioloqv from the Ethiopian famines’, Anna/es S&iete beige de Medecine Tropica/e. Vol 56. 1976, p 347: we recorded market prices ‘during the famine in northern Wollo at Korem, Alamata and Kobbo markets. Prices for staple grains rose rapidly during the first part of 1973, so that by the beginning of the rains, in the middle of the year, they had nearly doubled.’ High staple food prices In Wollo were also reported by the Ethiopian Nutrition Institute (ENI); see ‘Famine in Environmenfal Child Health, Ethiopia’, Febriary 1977, p 24. ‘%en, op tit, Ref 1, 1981, p 101. “Seaman and Holt, op tit, Ref 10, p 286
FOOD
POLICY
August
1988
the pattern determined
not accompanied population
and timing of migration
not by food shortage simply, by a sufficient
access to food.
in prices quite out of proportion
and starvation
was overwhelmingly
but by the sudden rise in food prices,
rise in income,
which
the extent of starvation
denied
part
was magnified
of the by a rise
to the supply of food in the area.”
The ‘price ripple hypothesis The evidence that food prices did rise abnormally before and during the 1972-74 Wollo famine is explained by Seaman and Holt in terms of three factors. On the supply side, there was (1) the drought-induced fall in output; and (2) the withholding of surpluses, as well as continued exports out of the region, by large farmers. On the demand side, there was an increased market dependence of formerly surplus (or subsistence), but now deficit, food producers, selling off their assets for food. In the Bangladesh famine of 1974. where similar price rises were
275
recorded, Seaman and Holt found that the movement of food prices in local markets followed a fairly consistent geographical and time pattern, with price rises spreading outwards in a wave from the epicentre of the famine region over a period of some weeks. This led them to suggest that certain famines produce predictable food ‘price ripples’. which both are caused by the crisis and contribute to it.” Cutler has applied this hypothesis to the recent Ethiopian famines, where a factor likely to produce a ‘price ripple’ is the migration of drought victims in search of food or work. Initially, according to Cutler, food prices may be much lower at the edge of the famine zone than at the ccntre. As the crisis deepens and large numbers of people migrate out of the famine zone. food prices begin to rise at the periphery, demand of the victims (constrained reduced
‘z/bid. It should be noted that Seaman and Holt found stronger empirical evidence for a ‘price ripple’ in food prices in Bangladesh in 1974, where a relatively large amount of price data was collected, than for Wollo in 1973. “%utler, op tit, Ref 18, p 50. 24Bob Baulch, ‘Entrtlements and the Wollo famine of 1982-l 985’, Disasters, Vol 11, No 3, 1987. “See Amartya Sen, ‘Food, economics and entitlements’, Lloyds Bank Review, April 1986, p 14.
supplies as the population
reacting to the increased aggregate effective though it is for individual
in the peripheral
households)
and to
:ireas expands.”
Unfortunately, the evidence for Wollo in 1973 is limited by the paucity of data. Circumstantial support is provided by slightly better data from the famine of 1982-85, as reported by Cutler (1984) and by R. Baulch, who found that prices of foodgrains in Korem, Alamata and Kombolcha markets rose dramatically some three to four months in advance of similar price rises in Dessie market. Baulch concludes, albeit tentatively. that this supports Cutler’s theory of a migration-induced ‘price ripple’.24 The ‘price ripple hypothesis’, which reflects essentially a FAD view of famine causation, is far broader than the ‘transport limitation view’ which Sen sets up, almost as a straw man. merely to refute. Seaman and Holt introduce the effects of precautionary and speculative hoarding on marketed supplies to their analysis. while Cutler refers to the effects of ‘distress sales’ and ‘distress migration’ on market drmatrrl. Seaman and Holt describe their general approach as being consistent with Sen’s notion of ‘the deterioration of exchange entitlements’. As noted above, the entitlements framework is broad enough to incorporate rising real food prices due to food supply shortage. But Sen is not content with such an explanation of the Wollo famine, perhaps because this would lend too much credence to a ‘modified FAD’ interpretation. This analytical disagreement has fundamental implications for both theory and policy. In terms of famine relief policy, the evidence for price rises throws doubt on Sen’s proposal of cash handouts to boost effective demand and attract traders into a food shortage region, based as it is on an ‘entitlements’ interpretation which claims a collapse of effective demand as the major precipitating cause of famine.” In theoretical terms, it is not sufficient to attempt to subsume FAD-based explanations under the entitlements umbrella. Either people starved because of supply failure (FAD), or they starved because of effective demand failure (FED). Alternatively. as argued beIow, they were victims of both.
The ‘FAD-FED
paradox’
If this had been a pure ‘demand slump’ famine, food prices would not have risen in the way observed. A parallel collapse in the ‘direct’ and ‘exchange’ entitlements of peasants, as argued by Sen, would have left food prices unchanged. On the other hand, if this was a pure FAD famine, the failure of traders to respond to the effective demand signal
FOOD
POLICY
August
1988
of dramatic price rises still needs to be explained. Why were people forced physically to migrate to neighbouring markets for food? Since food is a necessity for survival, why didn’t traders move in. whatever the transport costs, and hold the starving to ransom? The ‘FAD-FED paradox’ can be partially resolved by examining more closely two aspects of the market for food in food shortage areas firstly, various trurzsacfiorzs costs incurred by merchants in servicing these markets; and, secondly, the distribution of income and assets in the affected villages. Murket fragmentation and transactions costs
*% simple Marshallian analysis, if supply and demand fall equivalently, prices will remain unchanged. “Cutler, op tit, Ref 18, p 55.
FOOD POLICY August
1988
For (notional) effective demand for a good to be converted into actual supplies of that good through the market mechanism, three conditions must be satisfied. First, appropriate signals (usually in the form of higher prices for available supplies of the commodity) must be generated by consumers; second, those signals must be received by the relevant agents; and third, these agents must be willing and able to act on those signals and satisfy consumer demand. Sen implies that the Wollo famine of 1972-74 can be explained in terms of a failure of the first condition above. He believes that appropriate signals were not generated from drought-affected communities because consumers there had suffered a purchasing power collapse in line with the local food supply collapse.” But Sen appears to have misread the situation in Wollo food markets, and his ‘demand slump view’ offers no explanation for the substantial food price rises which were actually recorded. Sen’s view of the Wollo 1972-74 famine relies on the existence of fairly well functioning markets permitting trade and arbitrage. which in turn implies the existence of good flows of information, developed transport and marketing networks, and a laissez-faire or neutral state, which does not interfere with the operations of the ‘free market’. In fact, in rural Ethiopia, there is not one famine region surrounded by a but thousands of fragmented, perfectly functioning set of markets, almost isolated communities, each with their own food supply problems and poor transport and communications links with neighbouring villages and districts. The reason why traders failed to respond to price signals must therefore lie in the failure of conditions two and/or three instead. With poor communications networks inside Wollo, limited inter-regional mobility of people at the best of times, and poor media coverage of the food crisis, it is possible that traders were unaware of the potential to exploit the starving until the famine was well under way - or after distress sales had stripped the poor of their assets and reduced them to destitution. Inadequate knowledge of the scale and severity of the crisis. exacerbated by the government’s campaign of secrecy and denial, may also explain the rather slow response of aid agencies, and of the government’s own relief programme. The first sign to the outside world of a regional famine may well have been what Cutler describes as ‘a terminal indicator of distress’27 - the mass migration of hungry people. Transport problems would partly explain market ‘response failure’ in terms of the third condition above. However, the ‘transport limitation view’ focuses too narrowly on the logistical feasibility of moving food into famine-afflicted regions. Transport deficiencies alone cannot
explain the magnitude of price rises recorded during 1973 (the fivefold increases in food prices at Alamata, a roadside town, for instance). A much broader notion of transactions costs to traders should be adopted, one which would include traders’ estimates of ~11the costs and rewards associated with servicing each isolated rural food market, in a situation of serious logistical constraints and severely limited information. One factor already mentioned is the limited availability of food surpluses in neighbouring areas, where traders would have to purchase grain. Traders might also have been deterred by the illiquidity of low quality land and livestock which peasants were offering in exchange for food. Another factor is small market size - a substantial local demand for food may be insignificant in regional or national terms. The individual focus of the entitlements approach obscures the fact that traders would respond only to a sizeable ‘aggregate entitlement’ of a market or community, not to individual signals of effective demand. Besides, apart from being very small, these new pockets of demand were only temporary - they would disappear when ‘normality’ returned to the region. These and related factors could resolve the apparent contradiction of food being exported from Wollo while prices within Wollo were much higher than those recorded in Addis Ababa, or even Dessie, at the same time. Traders may well have found it more convenient, and probably more profitable, to continue their established pattern of transporting food from rural to urban areas, rather than setting up new routes at great cost and uncertain reward to supply small, isolated communities with a few bags of grain each for a short period of time.‘” To summarize, the fragmented nature of rural markets in Wollo creates many transactions costs, which may have constituted a binding constraint on food traders in 1973, and contributed to turning the Wollo drought into the Wollo famine. The costs identified here include the following: Logistical construints: 0 transport costs 0 costs of reorienting distribution channels l inaccessibility of famine-affected villages l small surpluses available for merchants to purchase
for resale
Limited rewards: 0 small size of famine markets 0 short duration of famine markets a opportunity cost of losing regular customers elsewhere l ifliquidity of assets offered by peasants in exchange for food Risk and uncertainty: 0 risk of being undercut by other traders 0 uncertainty caused by limited information
about
famine
markets
The common element linking these costs is the fact that much of the demand for food in rural Wollo was ~rrrt~!\, clerrretl by the drought. A crucial but under-analysed feature of this famine was the enforced switch by large numbers of foodgrain farmers from self-
market “For
example, traders might have chosen
to continue exporting grain to Addis Ababa if they valued the certainty of, say, 10% profit on 1000 bags of grain with their regular customers more than the possibrlity of a ‘once-off’ profit of 500% on 20 bags of grain in a drought-stricken village.
278
provisioning
to market
dependence
to meet
a significant
proportion
of
food needs. Neither FAD nor FED explores the dynamics of such a situation. because neither approach fully articulates the relationship
their
FOOD
POLICY
August
1988
Enlitlements,
uvailahility
und fumine
between people and markets in times of food crisis. This is ironic, since a theory of trade and markets is implicit in both approaches, FAD effectively assumes trade away, in the context of a subsistence economy; while FED lucidly explains how adverse shifts in terms of trade can push vulnerable people into the ‘starvation set’, in the context of a market economy. The implications of sudden shifts in farmers’ access to food, from production to the market, are not adequately discussed by either paradigm. The distribution
29Similarly, Alamgir suggests the following as an empirically testable hypothesis about famines: ‘The more unequal the distribution of income generating assets, the greater the probability of intensity of famine. A class famine situation is triggered off or accentuated by an exogenous shock more easily if the command over productive assets is unevenly distributed.’ Alamgir, op cif, Ref 4, p 48. 30Keith Griffin develops a similar ‘demand disaggregation’ approach to highlight the role of distributional issues during food crises (International hequality and National Poverty, Chapter 8 on ‘Inequality, effective demand and the causes of world hunger’, Macmillan, London, UK, 1987).
Figure 2. The coexistence food prices and entitlement during food crises.
FOOD POLICY August
of high failures
1988
of income and assets
The second component of the solution to the ‘FAD-FED paradox’ suggested here lies in inequalities in the personal distribution of wealth (income, property and assets) in the affected region, both before and during the food crisis. It is reasonable to assume that some degree of economic stratification existed in even the poorest rural communities in Wollo. However, given that the poor substantially outnumbered the rich, it is clear that many people will have been excluded from the market for food during the famine as a consequence of price rises induced by the demand pressure exerted on restricted supplies by the wealthy minority. The more unequal the initial distribution of wealth, the more pronounced this effect will be.*” The mechanism can be demonstrated with a stylized example. Assume two classes of consumers in the famine region, one rich and the other poor. Initially, both depend on the market for some or all of their food needs. Assume also that the staple foodgrain can be purchased only in discrete units - say in l-kg bags. Since food is essential for survival, all market-dependent individuals, of either class, have an inelastic demand for grain at subsistence, given their respective budget constraints. These two demand curves are sketched as D,. (initial demand of the rich) and D,,’ (initial demand of the poor) in figure 2.3” Now assume a reduction in marketed supplies of grain, from a quantity (4’) where all local demand is satisfied to a level (q2) where local subsistence needs can no longer be met. Since grain is sold in discrete units, its supply is totally inelastic at S’ and S-’ respectively, and demand is totally elastic above each individual’s budget constraint.
42
4/ Quantity
279
311n non-famine years, only about 5% of the population in Woilo depends on the market for their food needs (Seaman and Ho&, op tit, Ref 10, p 287). However, as mentioned earlier, and as Kumar notes: ‘in the Ethiopian context, crop failure may work to increase market dependence rather than to decrease it and this would, Inter alia, accord with our earlier finding that pace Sen food prices did on the whole increase during the Wollo famine’. Kumar, op tit, Ref 6, p 17. 32According to Bondestam, hoarding was a feature of the famine: ‘The starvation in Wollo and Tigrai followed a typlcal pattern: grain prices were rising and cattle prices were dropping, the reasons being obvious. Those merchants and dealers, who had grain stored, could speculate in it, waiting for the prices to rise further.’ Lars Bondestam, ‘Ethiopia: hunger and famine in the 1960s and 1970s’. prepared for the workshop on Hunger and .Society, Soliwayo, Tanzania, December 1983, p 17. 33Seaman and Ho&, op tit, kef IO. p 234. In the case of the more recent Wollo famine of 1982-85, Cutler has provided anecdotal evidence to suggest that some people starved with money in their pockets - a striking case being that of an old man who died in Korem with 1000 birr (about $450) in cash on his person. Cutler, op tit, Ref 18, p 51.
280
If any effective demand remains in the region at all, prices can now be expected to rise. This is because people are bidding against each other for smaller supplies of grain than were previously available. and because dettzmd pressure increases as formerly surplus, now deficit food producers are thrown onto markets for their food needss3’ In the figure, market demand by the poor rises from ZI,,’ to D,,‘, with an equivalent increase in total demand for food, from n,’ to D,‘. Rising food prices will affect each group to differing extents. Because the rich by definition have much greater wealth. their demand for food is totally inelastic at subsistence (D,.) over the range of prices between 0 and i-7’. so they continue to buy all the food they need until the price exceeds p’, where $ reflects the exchange value of their assets. Their demand might even increase in the short run, if they purchase food for precautionary or speculative reasons.32 But the poor have strictly limited resources, so their demand (U,,) is totally elastic above p’, This means that their ‘trade entitlement’ for food drops to zero as soon as prices rise above p’, so they rapidly drop out of the market altogether. Hence the brunt of the reduction in food supply inevitably falls on the poor, because of their acute sensitivity to food price rises. The new ‘equilibrium’ price is difficult to determine, Since the demand and supply curves intersect and are inelastic at q’ over the range 0 to p’* 2 ‘core’ of possible prices exist over the range $--j>‘. The exact outcome is determined by the relative bargaining strengths. in this case, of the rich individuals and the food traders. This in turn depends on the traders’ knowledge of the rich individuals’ effective demand, and on the competitiveness of the food market. The key to solving the paradox of high food prices during an apparent ‘demand slump’ famine, therefore, is the disuggregutiot7 of the re,giotzaf demand curve. in normal times, total market demand (/I,) is a summation of the demand of the rich (Dt-) and that of the poor (D,,). The aggregate demand curve changes dramatically during a food crisis, however. As prices rise and the effective demand of the poor falls towards zero, the aggregate demand for food on the market approaches the effective demand of the rich alone. In the case of the Wolio famine, this analysis may further clarify why traders failed to bring food into the famine region, despite the demand signal of high food prices. Prices would have to be driven down to 17’ before any additional demand was created; while the profit margin on a few bags of grain sold to the rich would not be enough to justify the expense, effort and risk involved in market reorientation. So traders would not come in because effective demand in limited. High prices send an inflated signal of real effective demand in the community. In support of this argument, it is worth rn~nti~~ning Seaman and Holt’s observation that not all the famine victims in relief camps in 1973 and 1974 were absolutely destitute: ’ . . _ in Alamata relief shelter there were some people who. in terms of the local society, were not poor . . . which suggests that their relative affluence had been in cash and goods rather than in food.‘33 This analysis illustrates how a local supply failure can be translated, via differential demand failure, into a local famine. The Wollo famine might be described as a FAD famine for those who retained some wealth but were unable to convert this into food, due to regional food shortage and market failure, and a FED famine for the poor, who were
FOOD
POLICY
August
1988
Enri/lemenrs, uvailuhili~y und fumirw
made destitute by the collapse of their direct and exchange entitlements, which excluded them from what market for food still remained. Some reservutiorls
34For evidence from India, see N.S. Jodha, ‘Effectiveness of farmers’ adjustment to risk’, ICRISAT Discussion Paper, Hyderabad, November 1977. For a review of the evidence from Africa, see Jane Corbett, ‘Household food security when famine threatens: how do households cope?‘, paper for joint IFPRI-FSG Workshop, is&es in Fobd Security, Oxford, July 1987 35Wolde Mariam. op cit. Ref 8. op 61-62. 36A class famine’ is contrasted with a general or regional famine by the fact that: ‘In a class famine, the burden of foodgrain intake deficiency falls primarily on the weaker sections of the population. .’ Alamgir, op tit, Ref 4, p 14. 37Similarly, although an empirical feature of famine conditions in Ethiopia is the sale of grain in extremely small quantities sometimes even tn handfuls - this modification would cause the demand curves in the diagram to have unit elasticity, but would not substantively affect the argument.
FOOD POLICY August
1988
Four caveats must be noted. First, while the focus of this article is the immediate behaviour of markets during a food shortage caused by drought, this is not to suggest that crop failures and market imperfections alone ‘caused’ the famine. A complete explanation would pay at least as much attention to the long-run, underlying causes of poverty and vulnerability in Wollo as to the proximate factors which ‘triggered’ the crisis. Second, this analysis is conducted in terms of comparative statics. In reality, assets were sold sequentially, not instantaneously, and the famine occurred over a relatively long period of time. The same critique applies to Sen’s idea that people are ‘plunged’ into the ‘starvation set’. Starvation is the end result of a long and painful process; it does not strike overnight. Third, some people probably rationed their consumption of food, in order to preserve their productive assets. The growing literature on ‘famine coping mechanisms’ argues that voluntary rationing of food consumption typically precedes the conversion of assets into food through distress sales.‘4 In the case of Wollo, Wolde Mariam argues that peasants were reluctant to part with their livestock or land, seeing these productive assets as their only hope in a post-famine future. His figures show that almost four times as many livestock died as were sold in Wollo in 1974, and that nearly 85% of peasants failed to sell or mortgage their lands, even in the face of acute starvation.j5 However, whether this should be explained in terms of ‘rational choice’ or a lack of buyers is not clear. Finally, though Figure 2 explicitly tries to reflect Alamgir’s notion of a groups may be more ‘class famine’,j6 Sen’s use of different occupation precise than an artificial dichotomy between a rich and a poor class. Such a refinement might extend the diagram from two to four or five categories of market-dependent consumers, each with a different level of ‘market entitlement to food’, but it would not alter the basic conclusions?’ For one thing, distinguishing simply between a relatively affluent class of landlords and large farmers and a relatively homogeneous ‘subsistence’ peasantry is not entirely unrealistic for Wollo in 1973. Moreover, even if wealth were distributed less unequally than as depicted, Figure 2 does at least demonstrate the mechanism whereby the poor are progressively (or suddenly) excluded from the market for food following quite small shifts in food supply and/or prices. On the positive side, this exposition may have wider application than the simple analysis of drought-induced food output decline. It may be used to demonstrate the effect on the poor of speculative hoarding of grain surpluses by the wealthy, which has the identical effect on marketed supplies as a production failure. It may also have relevance to analyses of the ‘hungry season’ in many rural areas, since the mechanism whereby the poor are excluded from the market for food as marketed supplies fall and prices rise is similar in both cases.
Conclusion In
recent
years,
Amartya
Sen’s seminal
contribution
to famine
analysis
281
38As Sen himself states: ‘The FAD approach applied to the food availability for the population of an entire country is a gross approach, lacking in relevant discrimination.’ Sen, pp 157-l 58.
282
op
tit,
Ref
1,
1981,
has resulted in a massive swing in the pendulum of academic opinion, from predominantly supply-side to predominantly demand-side explanations. In the process, it appears that some perspective has been lost. FAD-type arguments along the lines of ‘food shortage causes famine’ or ‘drought causes famine’ have been shown to be incomplete, but the role of supply factors as precipitating factors or ‘proximate causes’ should not be entirely disregarded. Given that FAD offers only a partial explanation of contemporary famines, the argument here is that the ‘market entitlement failure’ framework is open to precisely the same criticism - especially in the African context. This is particularly true if the level of analysis is narrowed down from the national or global perspective, where there is rarely an aggregate shortage of food, to the local or regional level, where a decline in food production usually precedes a local or regional famine.3x However, since a food shortage never affects all classes in the affected area equally, FED has relevance in identifying who will starve and who will survive the crisis, and why. A synthesis of the strengths of both approaches might therefore offer a more complete analytical framework than the current attempts of each paradigm to gain academic dominance over each other. The reconciliation suggested here is that supply-side (or FAD) explanations be used for identifying the proximate or ‘trigger’ causes of a particular famine, with demand-side (FED) explanations being invoked to analyse its impact among various groups of people. In addition. however, an empirically validated theory of the role of markets and traders is vital for a complete understanding of the economics of famine. The ‘FAD v entitlements’ debate is both sterile and redundant. There is no single theory which explains every aspect of every recorded famine. What is needed now is a typology of different famines, with an evaluation of the role of supply and demand factors in each. This will assist all those concerned
with
famine
prevention
and alleviation,
in the analysis of famine causation and in indicating policy responses to be adopted in future food crises.
both
the appropriate
FOOD POLICY
August
1988