$200 Million: The Price of Sri Lanka's Botched, All-Organic Farming Scheme

Last July, the UN published a startling report documenting the pandemic's effect on global food security in 2020: “In many parts of the world, the pandemic has triggered brutal recessions and jeopardized access to food.” In total, three billion people could not afford to eat nutritious diets, and just under 10 percent of the world's population was classified as undernourished, an increase from 8.4 percent in 2019. Overall, the report continued,

“... more than 2.3 billion people (or 30 percent of the global population) lacked year-round access to adequate food: this indicator – known as the prevalence of moderate or severe food insecurity – leapt in one year as much in as the preceding five combined."

What's the worse thing a government could do in these circumstances? Make it more difficult for farmers to produce food. Sadly, that's exactly what Sri Lanka did in 2021. Following the advice of head-in-the-clouds environmental activists, the island nation banned imports of synthetic pesticides and fertilizers as part of its effort to achieve 100 percent organic food production. [1] When this policy led to shortages, as any economist or agriculture scientist knew it would, the government blamed rich people for hoarding commodities and set price controls for staples like sugar, onions, and rice.

The results of Sri Lanka's experiment are in—and they're nothing short of devastating. Al Jazeera reported on January 26 that the government has agreed to pay $200 million in restitution to rice farmers “whose crops were destroyed,” the country's agriculture minister said, on top of another $149 million in subsidies to help these growers rebuild their operations. In total, in the middle of a pandemic that has left so many people hungry, Al Jazeera noted that

“About a third of Sri Lanka’s agricultural land was left dormant last year because of the import ban.”

A predictable outcome

Economist Alex Tabarrok's pithy take on Sri Lanka's experiment: “A good example of central planning in action.” The government was forced (or rather forced its citizens) to learn the hard way that public officials are incapable of dictating how a nation's food should be produced. They literally cannot know, for example, how much rice consumers will eat in a given year or how much of which inputs (like fertilizer) farmers will require to grow the crop.

Lofty goals like protecting “the health of the people and environment” are no substitute for the market mechanisms that accurately guide the decisions farmers and consumers make. The same rule applies to any good or service we consume. Leonard Read outlined this argument in his classic essay I, Pencil, in which he asserted that no one “mastermind” has the expertise to produce something as simple as a pencil. Even that requires the contributions of millions of people with specialized knowledge:

"I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human masterminding!"

Lesson learned?

The people least likely to learn this lesson are those most in need of an education: organic food activists and the popular outlets that give them a platform. Despite their ignorance of science and economics, they wield tremendous influence worldwide, including in the European Union—which is poised to do serious damage to its agriculture sector by mandating significant cuts in agrochemical use and increases in organic production.

For now, the dispute over organic food is primarily an academic debate for us in the US, rich and well-fed as we are. But as Sri Lanka's experience confirms, bad policies can have tragic consequences. We can only ignore reality for so long before people really begin to suffer.

[1] "Synthetic" is a meaningless term in this context. I use it here out of convenience. The reality is that "natural" chemicals are often very toxic, even those approved for use in organic farming.