Chapter 4


1 The Macroeconomy and Food Security

1.1 Introduction

Up until this point in the manual, the emphasis has been on the food chain itself, how it links
with the agricultural sector, and the relationship that individuals and households have with the
food system as producers, consumers and distributors. These are essentially relationships at the
micro level, whether the main element of these interactions is social, economic or political.
This module introduces the macroeconomic relationships which can affect very fundamentally
the constraints and incentives which individuals face when trying to satisfy their food needs.

The macroeconomic environment is determined by certain crucial parameters and rules, often
set by government, which affect the basis on which nations trade with one another, and the
conditions for longer-term economic growth within the economy. These parameters can be
classified into three broad areas: those affecting international resource flows, such as exchange
rate regulations; those concerned with the monetary regime, such as the rate of interest: and
those set by government to finance its own operation, fiscal mechanisms such as taxation and
public expenditure levels.

These parameters and policy options may well have as much, or more effect, on food security
as policies aimed specifically at the food and agricultural sectors, yet the links between the
macroeconomy and food security are often not well understood. Even where they are. the
longer term objectives of achieving more permanent food security for all citizens and the short-
term issue of protecting existing levels of food security often has to take second or third place
to what are seen as more immediate concerns of controlling a balance of payments crisis or
tackling high levels of inflation. However, these different objectives need not always be
incompatible. Governments can make choices between alternative strategies for achieving
economic growth in ways which are sustainable, some of which may be more beneficial to
their most vulnerable citizens than others. If major policy decisions have to be made in ways
which have a negative impact on those who are already food insecure, then there may be ways
of offsetting that damage by implementing specially designed and targeted welfare
programmes.

To do this, there must be a clear understanding of how macroeconomic policy affects those
suffering from food insecurity, based on a well developed analysis of policy linkages for the
specific country concerned. The general nature and direction of the linkages concerned will
conform to a broad pattern for all countries, but the precise interpretation and implications will
vary according to elements such as the degree of monetisation in the economy, the nature of
international markets for the commodities produced in the national economy, the degree of
urbanisation, the capacity of state administration and the overall philosophy of the government
in power.

What determines the choice of economic policy followed by government? Most textbooks on
economic policy characterise governments as having one overriding policy objective, to
maximise the welfare of its citizens. This would typically involve aiming for stable
growth levels, through such intermediary objectives as low inflation rates, sustainable budgets
and balance of payments, low unemployment and high levels of investment. This view of


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