Most of NextBillion's visitors have heard about the current jump in food prices. These higher prices have already triggered responses locally in the form of riots in countries such as Haiti, Egypt and Bangladesh. The OECD and FAO have recently issued a report predicting that food prices have moved permanently to higher levels compared with past prices (the Financial Times offered an advance of the study's highlights some time ago). Although the reasons for this trend are beyond the scope of this post I suggest readers who are interested read this article.

In this post, I would like to explore the likely effects of higher food prices on the budgets of Base of the Pyramid consumers. An argument widely heard these days is that such food rises at least might improve the plight of poor farmers in developing countries, however, a recent study (which due to lack of data available includes only 16 countries) from the World Bank claims otherwise.

Price increases have a negative effect on urban areas since they are net buyers. In most rural areas, the effects are negative too. The overall impact in rural households is negative since possible benefits depend not on what they produce, but on the net sale of these goods. Often rural households have to acquire other goods for which the price has risen too, so the increased income is more than offset by the other price rises.

Most poor people are net consumers of food, and not net producers.
The only exceptions might be rural Peruvians thanks to high maize prices and rural Vietnamese thanks to high rice prices (although the Vietnamese government has set restrictions on rice exports to keep national prices under control).

At any rate, in every country taken into account by the authors of the study, the poverty rate increases and people who were already poor are made even poorer by high food prices.

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A spate of blogworthy mainstream media articles have come out recently, prompting this base of the pyramid news roundup:

Over the weekend, the Financial Times ran two pieces side by side.  The first, entitled 'Investing in People' by journalist Sarah Murray, smartly discusses the role of Ashoka, Endeavor and Acumen Fund.  Jacqueline Novogratz - my boss - described it as one of the best treatments of the BoP concept she's seen yet.  I tend to agree.

On the right column, next to Murray's piece, was an opinion column by Michael Edwards, author of Just Another Emporer: The Myths and Realities of Philanthrocapitalism.  His article, entitled 'Misguided Calls for Business Thinking', rails against the trend of non-profits behaving more like businesses. 

Read these two - Murray's and Edwards' - side-by-side for full effect.

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