Market Failure

Market failure famines occur when free, competitive market forces, driven by agriculture, transportation, communication and trade, and enabled by an abiding government fail to assure minimal entitlement to food, either directly (through subsistence) or via trade for a large sector of society. Following Amartya Sen, entitlement failure is an economic phenomenon, broadly defined, in which individuals and households are unable to obtain sufficient amounts of food through all available legal means (cash, labor, skills, credit, and other assets that comprise 'endowment') at the market's existing terms of exchange (costs of securing sufficient amounts of food). Combinations of loss of endowment and adverse shifts in the conditions of exchange (e.g., spikes in grain prices) can lead to certain classes of society being severely deprived of food. Component causes that lead to market failure-driven famine are complex, interacting over an extended time

Precipitating event

Earliest cause

Other causes

Migration Excess I deaths

Famine

Sufficient cause

Latent periods

Distress sales Changing diets Indigenous responses Migrating labor

Camps Food relief

Figure 2 A model depicting actions of individual, or component, causes that can lead to a sufficient cause of famine, and societal, indigenous responses to famine predominantly caused by market failure. Famine may be latent or delayed from external view until migrations or excess deaths occur. Government relief is typically a late response to famine.

(Figure 2). Causes acting at various times in the pathway to market failure can be numerous, including long-and short-term adversity in climate leading to drought and excessive floods, pestilence and other causes of lost crop yield, reduced food imports or inefficient transport and marketing infrastructures. These all can lead to a national or, more often, regional declines in food availability, inflationary grain market responses to speculation and hoarding, other aspects of infrastruc-tural neglect, ineffectual trade policies, political instability and corrupt governance, market depressions with year-round or seasonal job losses, and depletion of assets of the poor (endowment). Prior or present conflict can destabilize markets and contribute to such types of famine. Famines that can be classified as those primarily of market failure include the Great Irish Famine from 1844 to 1848, the Great Bengal Famine of 1943, the Bangladesh famine of 1974, and the Sudan famine of 1984-85. The Great Irish Famine was triggered by a potato blight that stripped the country of the only staple that Irish peasantry could afford to grow on their small parcels of land. Peasants who grew other staple grains had to sell them to pay rent to landlords. However, during these same years, there were substantial exports of wheat, barley, oats, and animal products by landowners to English markets. Food did not enter the local Irish markets because the peasants lacked effective demand.

Market or entitlement failures marked the last two great Bengal famines of the twentieth century: The Great Bengal Famine of 1943 and the Bangladesh Famine of 1974-75 (Figure 1). The 1943 famine, during which some 3 million people are estimated to have died, was originally judged by a Famine Inquiry Commission to be due to a shortage in rice supply. However, a seminal in-depth analysis years later by Sen showed that the famine occurred in a year during which rice production in Bengal was only 5% lower than the average of the previous 5 years. It was also a year when most economic indicators of Bengal were showing a 'boom' in growth due to World War II. Rural food stocks were being procured by the government to support military needs, subsidize rations for civil servants, and stabilize general prices of rice in Calcutta, which drove up the price of rice in rural areas. This practice, coupled with 'boat blockade' and 'rice denial' policies imposed in regions along the Bay of Bengal for reasons of defense, left certain low wage-earning rural classes (agricultural workers, day laborers, artisans, and fishermen) disentitled, and unable to acquire enough food for their own survival.

In Bangladesh, at least 100 000 people died between 1974 and 1975 in a famine that followed an unusually severe flood. During the several years leading up to the famine there were events that brought the country to a highly vulnerable state, including a devastating cyclone and tidal wave, a civil war that led to the country's independence, and a series of partial crop failures, all superimposed on preexisting high burdens of malnutrition, disease, underdevelopment, and ensuing political chaos. The flood in the middle of 1974 was expected to destroy much of the major 'aman' rice to be harvested a few months later. In anticipation of impending rice shortage, rural traders began to hoard grains in early September of that year causing rice prices to spike across the country's rural markets in a contagious pattern (Figure 3). Rice prices remained at about twice their normal level for months thereafter, even after it became evident that the speculated poor rice harvest was, in fact, a normal one. Thus, total and per capita aggregate grain supplies in Bangladesh remained at about average levels throughout the famine. Local area food deficits and hoarding of grains by traders led to the observed points of inflection in the price of rice throughout the country that caused the entitlements of rural wage earners to collapse, initiating a famine that resulted in extremely high mortality and massive migrations to urban centers in search of relief.

The Horn of Africa has been wracked by famine or famine-like conditions, leading to what have become classically defined as 'complex emergencies' for much of the past three decades. Aggregate food shortage has appeared to play a more variable and, at times, prominent role in recent famines in the eastern Horn. In Ethiopia, Sudan, Eritrea, and Somalia large tracts of land are drought-prone, average annual rainfall has been declining since the

Figure 3 Consecutive weekly maps of a contagious spread of spikes in the price of rice in local markets throughout rural Bangladesh from (A) late August 1974 through to (H) the end of October 1974 during a flood-associated period of a famine that reportedly killed from 100 000 to 1 million persons. (Adapted from Seaman J and Holt J (1980) Markets and famines in the third world. Disasters 4(3): 283-297.)

Figure 3 Consecutive weekly maps of a contagious spread of spikes in the price of rice in local markets throughout rural Bangladesh from (A) late August 1974 through to (H) the end of October 1974 during a flood-associated period of a famine that reportedly killed from 100 000 to 1 million persons. (Adapted from Seaman J and Holt J (1980) Markets and famines in the third world. Disasters 4(3): 283-297.)

1930s, and robust, indigenous farming and animal husbandry practices have been weakened as agricultural land has increasingly been used for growing export crops. In the Ethiopian famine of 1972-75, in which over 100 000 people died, national crop production dropped to only below normal levels, a decline that, like in Bengal in 1943 and 1974, would not have been expected to trigger a famine. However, crop production had been severely below normal in Wollo Province, where the famine began. Although the famine subsequently spread to other areas of the country, a reluctance by the government to formally recognize the famine and excessive delays in mobilizing and targeting food aid within country (whether from national or international stocks) were deemed responsible for unleashing a famine that, based on national stocks, should have been averted. Famines during 1982-85 in Ethiopia and the Sudan appeared to be more closely tied to gradual declines in national food security during the preceding decade. These trends were exacerbated by repressive governments enacting targeted, famine-promotive rather than preventive policies, resulting in civil wars and severely deteriorating economic conditions that were compounded by weak international food aid responses.

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