The COVID-19 pandemic has delivered a major shock to global health and the world economy, and governments everywhere have responded with policy measures to limit the spread of disease and cushion the resulting economic impacts. Low- and middle-income countries face an array of problems, including food system disruptions, the risk of rising poverty, and growing debt. Crises typically test the ability of policy makers to manage different interests and incentives, and political economy dynamics—among governments, citizens, and the private sector—often shape the outcomes of these difficult balancing acts.
An Oct. 22 IFPRI virtual discussion explored some of the political economy dynamics emerging from the pandemic and their effects on food policies. COVID-19 has the potential to trigger major policy changes, IFPRI Director General Johan Swinnen said. “We know from research on political economy that changes in welfare and incomes and the distribution of income typically affects policies because it affects … the pressure that’s put on political systems,” Swinnen said.
Swinnen identified two ways the pandemic and control measures are affecting food security: By lowering incomes and employment rates, and by disrupting food systems and value chains. While similar shocks occurred during the world food price crisis of 2007-2008, the 2020 global food system disruption has been much greater in magnitude.
The discussion covered four key political economy issues.
First, concern about the vulnerability of long supply chains has stimulated a rethinking about the role of market intermediaries. For example, before the pandemic, Indian agricultural markets were tightly regulated by Agricultural Produce Market Committees (APMCs), explained Ashok Gulati, Infosys Chair Professor for Agriculture at the Indian Council for Research on International Economic Relations. In most parts of the country, laws forbade farmers from selling their crops outside APMC markets. Farmers had little control over their crop prices, and the traders running the markets often formed cartels, increasing their profits by agreeing to pay farmers less. However, concerns over COVID-19 spreading at these markets led the government to suspend the regulations and ask buyers to purchase crops directly from farmers.
What began as a temporary measure to slow the spread of COVID-19 ended up being not only safer than the existing market system, but more efficient as well. “That particular experiment as pilot turned out to be extremely useful,” Gulati said. “India ended up procuring 39 million tons of wheat during the lockdown period when all things were shut down except the essentials. And the government found that this system works better than the system they had.” After many years of delayed reforms, Prime Minister Narendra Modi proposed a permanent change to the marketing system, which became law in September. Farmers can now choose to either sell their crops directly to buyers or to sell through APMC markets. Agricultural economists had advocated for this sort of market reform for years; it took the shock of the pandemic to prompt the government to make the change. “Such global shocks offer a window of opportunity for major changes,” Gulati said.
Second, the pandemic will intensify political economy struggles over resource distribution and the prioritization of public investments. In many African countries, pandemic-related government spending will result in rising debt. In fact, already 20 African countries are at high risk of debt distress. Moreover, pandemic-related fiscal policies are currently estimated to cost 1% of GDP, or about $32 billion, for African countries, said IFPRI Africa Regional Office Deputy Director Samuel Benin. This combination of debt and COVID-19 expenditures will constrain African countries’ budgets and limit public investment in coming years, Benin said.
Chile will face similar fiscal restrictions in the wake of the pandemic, resulting in limited public resources and spending, said former Chilean Minister of Agriculture Carlos Furche. “It will be very difficult to keep a reasonable amount of resources to support agriculture, and mainly small agriculture,” he said, noting that scarce resources are more likely to go towards other sectors, such as construction and services. In the meantime, though, Chile’s public policies are keeping its agricultural sector and rural populations afloat during the pandemic, he said. The government is distributing food boxes and cash to vulnerable families, maintaining Chile’s agricultural export chains, and providing financial support to smallholders.
With scarcer resources, their distribution becomes more intensely contested and stronger interest groups are likely to benefit. The United States, for instance, is providing massive farm subsidies. “Since COVID, over $23 billion has either been paid out or will be paid out to producers to help compensate for some of the damages and some of the price drops that we’ve seen,” IFPRI Senior Research Fellow Joseph Glauber said. The payments have raised concerns at the World Trade Organization. Since 2000, the U.S. has committed to keep its trade-distorting subsidies below $19.1 billion annually; 2020 is the second year in a row that it has exceeded that number (2019 was the first time in 25 years).
The politicization of food and cash transfers constitutes a third trend emerging from the pandemic. International Growth Center Policy Director Astrid Haas spoke about the pandemic’s impact on her home city of Kampala, centering her discussion on Uganda’s emergency food aid policies. Uganda’s government responded to this food crisis by distributing food aid—but only in Kampala. This raised questions about whether politics played a role in the decision; as Haas noted, “Kampala is an opposition stronghold in a relatively single-party country.” The government also ensured that only Kampala would receive food aid by making it illegal for any non-government organizations to distribute food aid in the country. The government has said the food aid is meant as a temporary measure to sustain people who had become poor as a result of the lockdown, not for those who were already poor.
Precisely because of these dramatic effects, IFPRI Senior Research Fellow Danielle Resnick emphasized that unlike past crises, COVID-19 has directed policy makers’ attention to the informal sector, manifesting in new and adapted policies supporting informal workers. “Informal food traders are typically quite marginalized in their political space,” she said. “In many cases there’s regulations against street vending and hawking, but the pandemic has definitely put their vulnerability into stark light. And we have seen a wide range of countries, from Burkina Faso to India, instituting social protections to particularly support this group.”
Timothy Karoff is an IFPRI Communications Intern.
