Catastrophic Expenditure and the Agricultural Industry
Each of us, at some point in our lives, has had to make difficult expenditure decisions. Many of us have faced financial shocks which adversely affected our spending, but none of us have ever been pushed to the brink of poverty because of them. Far from the woes of rural life, few of us have experienced catastrophic expenditure.
Common in rural areas of both high- and low-income nations, catastrophic expenditure generally occurs when a household faces such high medical costs, that they are unable to cover any of their other basic needs and fall into a spiral of poverty[1]. In my view, however, this is not limited to healthcare costs. With global trade in agriculture, fluctuations in commodity prices have made food expenditure so unpredictable, that they can leave low-income households penniless.
Such fluctuations ought to be controlled through financial regulation, but because of the power brokers hold, we may be better off focusing on rural safety nets and effective agricultural support initiatives. Though some may argue that policies like the Common Agricultural Programme (CAP) exist to help rural communities, according to Oxfam, the CAP does little to protect the most vulnerable. With “about 80 per cent of direct income support going into the pockets of the wealthiest 20 per cent – mainly big landowners and agribusiness companies”[2] it is clear that subsidies alone cannot solve rural livelihood problems, even in high-income nations.
With most agricultural programmes failing to protect rural families and creating trade issues in low-income countries, it is no wonder that there is a great deal of animosity towards them. However, the International Food Policy Research Institute (IFPRI) argue that we cannot only focus on poor families within cities and that if we invest in the correct agricultural programmes, millions of people could escape the poverty trap. We have to recall that “70 per cent of the developing world’s 1.4 billion extremely poor people [are] living in rural areas”[3], so though the media may highlight urban poverty (it is tough to find someone who has not heard of the Favelas in Rio de Janeiro), we need to consider those at the margins of society. For these families, who “spend 50 to 70 percent of their income on food”[4], any minor change in commodity prices or wages can drive them towards catastrophic expenditure.
Facing food price hikes, rural households have little choice but to select the cheapest products. Unfortunately, these tend to have the lowest nutritional value and threaten individuals’ overall wellbeing[5]. Malnutrition impacts learning abilities, productivity and health, as illustrated in a study wherein children from rural regions who received ‘nutritional interventions’ “earned wages as adults that were 50 percent higher than those of nonparticipants”[6].
So how do we give these households the stability they so desperately need? In Europe, catastrophic expenditure over healthcare costs is rare, since most nations have insurance policies. Additionally, lower-income nations have begun to understand the importance of – and started implementing – social safety nets. Thailand, for instance, initiated a universal coverage programme in 2001[7], which has helped reduce poverty figures. Following this example, could we not create a similar insurance scheme for food expenditure?
As detailed in my blog ‘Disaster Management or Disastrous Management’, rural development relies on individuals taking ownership of programs, so the effectiveness of such an insurance scheme would be secured by its inherent autonomy. Rather than relying on food stamps and donations during food crises, rural households could pay a regular premium (either in cash or crops) and receive a bundle of nutritious goods in return. The scheme managers, by purchasing food in bulk, would be less sensitive to price instability. Ultimately the feasibility of such a scheme would have to be tested, but it is clear that we cannot sit back and allow rural families to continue living in such an inconstant manner.
Beyond regulations of financial speculation and agricultural support, it is our duty to come up with creative solutions to this problem. Otherwise, we are simply creating a global example of catastrophic expenditure: in which our global resources are all directed towards the wellbeing of developed nations, and none are left to pull rural households out of poverty.
[1] Xu, K., & Evans, D. (2005). Designing health financing systems to reduce catastrophic health expenditure. Retrieved from http://www.who.int/health_financing/catastrophic/en/
[2] Oxfam (2011) Growing a better future: Food Justice in a Resource Constrained World. Retrieved from http://www.oxfam.org/sites/www.oxfam.org/files/growing-a-better-future-010611-en.pdf
[3] Heinemann , E. (2011). Rural poverty report 2011. Retrieved from http://www.ifad.org/RPR2011/
[4] J. Von Braun (2008) ‘Food and Financial Crises: Implications for Agriculture and the Poor’, IFPRI Food Policy Report. Washington DC: International Food Policy Research Institute. Retrieved from http://www.ifpri.org/publication/food-and-financial-crises
[5] Fields, S. (2004). The fat of the land: Do agricultural subsidies foster poor health?. Environ Health Perspect., 112(14), 820-823. Retrieved from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1247588/
[6] J. Von Braun (2008) ‘Food and Financial Crises: Implications for Agriculture and the Poor’, IFPRI Food Policy Report. Washington DC: International Food Policy Research Institute. Retrieved from http://www.ifpri.org/publication/food-and-financial-crises
[7] Somkotra, T. (2009). Which households are at risk of catastrophic health spending: Experience in thailand after universal coverage. Health Aff., 28(3), Retrieved from http://content.healthaffairs.org/content/28/3/w467.long
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