Ideas@TheCentre
Foreigners are not going to take our food
The debate over foreign investment in Australian agricultural land has seen the merger of capital xenophobia with the age-old myth that the world is going to run out of food. The suggestion is that we need to lock down our agricultural land to secure future food supplies.
The merger of food security and xenophobia as an issue has a long history. Sir William Crookes’ 1898 ‘The Wheat Problem’ predicted not only that the world would run out of grain but that ‘the great Caucasian race will cease to be foremost in the world, and will be squeezed out of existence by races to whom wheaten bread is not the staff of life.’
Crookes would have been astounded to know that the world’s population would quadruple in the following century, that world incomes would increase by a factor of 20 and yet real commodity prices, the ultimate measure of resource scarcity, would decline. This was in part due to a tripling of agricultural productivity during the twentieth century.
This increase in productivity has seen a decline in land under cultivation, not least because of the shift from carbohydrates to hydrocarbons as a source of fuel. Even since 1960, almost all of the increase in demand for grains has been met through increased yields rather than land under cultivation. It is productivity growth and global free trade and investment that underpins food production, not ownership of land.
Capital intensity is the key to agricultural productivity, and foreign investors have capital in abundance. Much of the foreign interest in Australian agriculture is in agribusiness rather than land. Foreign investors see Australian agribusiness as an ideal way to gain exposure to growing Asian markets via Australian exports. Foreign investors want Australia to become an even bigger food producer and exporter.
It is not hard to imagine extreme scenarios such as war, natural disasters, or a collapse in world trade that could threaten food security. In extreme circumstances, the Australian government could impose export controls on food, subsidise domestic consumers and producers to buy food in world markets, and expropriate foreign investors. Even the most strategic and mercantilist of foreign powers would find their investments in Australian agricultural land of little use in such circumstances.
Dr Stephen Kirchner is a Research Fellow at The Centre for Independent Studies and a Senior Lecturer in Economics at the University of Technology Sydney Business School.
