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Flawed Incentive Systems

Retrieved November 2010 from:

What is clear when confronting the issue of food security is the importance of the economy, and how subsequent policies are implemented to mitigate market failures. What is unclear though is exactly what has failed, and with what policies can we begin to solve the problem. With the current system in place, the economy is geared in such a manner that staple crop production is stunted and opted out for more profitable ventures such as importing food from other countries or focusing more on cash crops. Every solution and policy change considered has in some direct or indirect way an effect on the local and global market, and is structured in such a way that changes behavior on an aggregate scale. When dealing with food-deficient nations, especially with nations with food surpluses, we must be careful not to create incentive structures that neither negatively affect our cause, nor significantly hinder other sectors of the market. Of course, when implementing any solution, there will be an alteration on surrounding sectors, but when in the context of food security, these changes are justifiable.

Under the current system of incentives and profits, staple crop production is often stunted and opted out for more profitable ventures such as importing food from other countries or focusing more on cash crops. Producers who are subsidized often sell crops at prices that do not reflect their actual prices. In allowing this to happen, developed countries such as the United States can sell their crops at prices lower than the global price; developing countries who would otherwise grow their own crops then find it cheaper to import food. This hinders food production on a global scale. At the same time, natural disasters and weather and climate factors create highly volatile prices, so countries that would export their goods cannot find a steady rate of income. By enacting our Crop Subsidies and Price Control and Crop Insurance plans, we can deal with these issues and increase incentive for agricultural ventures while also regulating food prices to ensure farmer's livelihoods.

Retrieved November 2010 from:


Another production issue to consider is the lack of government investment in agriculture infrastructure, leaving small farm holders behind in the market. Government spending in the world's poorest regions averages to 4 per cent of public expenditure. By 2006, Government investment in agriculture in developing countries fell by one third in Africa and by as much as two thirds in Asia and Latin America (IFAD, 2010). This, coupled with the fact that there are too few small farms to compete with preexisting large farms, adds insult to injury. By providing Aid Through Investment, farmers can be given both food and crop aid to deal with food-insecurities in the present and foreseeable future. At the same time however, aid given to politically corrupt countries is often ineffective in achieving reform. The current system of aid may actually be contributing to the problem of corruption by providing for countries that are unwilling to follow set protocols. Competitive Conditional Aid can minimize this issue by making countries compete for aid, and parcel out funds according to their efforts and performance.

Working under small economies of scale, small farmers pay higher input prices for fertilizer and transportation than what do large farms. To mitigate theses issues, we can implement Public-Private Partnerships. This reduces public capital investment while improving efficiency due to strong profit incentive, and incorporates significant investment to infrastructure. Furthermore, dealing with small scale projects, Microfinance can contribute to the increase in agricultural investment by allowing individuals who want to start up their own ventures to get start-up capital through microloans.

Although aid programs and direct funding hold themselves to an altruistic ideal, all too often there are complications and inefficiencies that hinder their effectiveness in resolving the issue. Programs to ensure the productivity of aid investment must also factor in, specifically an Impartial Evaluation Program and a Transparency Committee in place to ensure the efficiency of overall efforts to alleviate food deficits.

Works cited: 

Inter-american institute for cooperation on agriculture. (2010). Retrieved from

Chicago council on global affairs. (2009). Retrieved November 29, 2010, from