Genetically modified organisms (GMOs) are plants, animals, or microorganisms that have had their genes altered in such a way that does not naturally occur. This type of technology, commonly known as “biotechnology” or “gene technology,” allows for individual genes to be transferred from one organism to another. Genetically modified (GM) crops are developed and marketed because there is a perceived advantage to them – they cost less and supposedly have a greater benefit to them in terms of durability and nutritional value. Initially, the main purpose of GM crops was to improve the durability of individual plants in such a way that increased their resistance against diseases that were caused by insects or viruses, and increased their tolerance to herbicides. Some of the most common genetically modified crops are cassava, wheat, potatoes, soy, and rice, all of which can be considered staple foods in certain regions of the world.
The biotechnology produced in both Green Revolutions was vital in creating Golden Rice, which is a strain of rice with increased amounts of vitamin A. It was invented by Peter Beyer, of University of Freiburg, and Ingo Potrykus, of Swiss Federal Institute of Technology Zurich University, in 2000. Beyer and Potrykus developed Golden Rice by transferring phytoene synthase (PSY) and carotene desaturase (CrtI) genes, found in both daffodils and maize, to rice. This action dramatically increased the concentration of the B-carotene, or vitamin A, in rice.The rise of genetically modified crops on the market occurred because of the Green Revolution, a movement that can be divided into two parts: the First Green Revolution and the Second Green Revolution. The First Green Revolution began in the 1930s and ended in the late 1960s, and jumpstarted the development of biotechnology. The First Green Revolution was led by Norman Borlaug, who was dubbed the “Father of the Green Revolution,” due to his leadership and contributions during the movement (Briney 2017). Borlaug was recruited by the Mexican Agricultural Program to begin working on genetically modifying crops, with a focus on wheat breeding. Eventually, Borlaug developed different strains of wheat that were resistant to rust (a fungal disease) and able to grow in any part of the world, regardless of environmental and ecological conditions. This biotechnology that Borlaug produced took off in the 1950s and 1960s, spreading beyond Mexico to India, Pakistan, Vietnam, Bangladesh, and the Philippines, and lent a hand in producing several other genetically modified plants. The crops developed during the Second Green Revolution (Though there is some debate as to whether a Second Green Revolution has started – some countries have called for a second one while others remain skeptical about the topic.) were mainly those of high yield varieties, or crops that were bred specifically to have higher production rates.
This increase in productivity made it possible to feed the growing human population, preventing starvation in many developing countries (most notably in the Pakistan and India). By developing staple crops (specific crops that are regularly consumed in high quantities), such as wheat, this set a precedent for other types of genetically modified foods to be produced.
The first thing to consider when discussing the economic viewpoint of Golden Rice is its overall price. When compared to price of regular, white rice, Golden Rice is exponentially more expensive. In the United States, the price of one pound of white rice equates to $0.69 (Statista 2016). The average cost to produce a pound of regular rice is $0.06, but the price can range anywhere from $0.0399 to $0.0894 (Livezey and Foreman 2004). On the flip side, Golden Rice is perceived to have annual costs of around $199 million, not including an additional one-time administrative fee for implementing the Golden Rice program and whatever it will cost to maintain the program (Wesseler 2014). It is estimated that Golden Rice would cost around $100.00 for every life it
saved from vitamin A deficiency, and when that price is multiplied by the number of people in the developing countries that would benefit from Golden Rice (ex. India, Bangladesh, or the Philippines), those countries are looking at calculated prices of well over a billion dollars (Lomborg 2013).
Vitamin A deficiency is a problem faced by most developing countries, and is considered one the most harmful forms of malnutrition. It can cause blindness, limit the natural growth rates of individuals, and weaken the body’s immune system. With the development of Golden Rice, it was thought that vitamin A deficiencies would decrease in most of the developing countries, since rice is considered a staple food and would be readily accessible to the masses. However, the economic consequences, both positive and negative, of Golden Rice may outweigh any benefits it has.
The price of Golden Rice in itself can be considered an economic disadvantage. The cost of production, maintaining, and distributing Golden Rice is too expensive for the developing countries that need it. Currently, the only countries that can afford Golden Rice are first-world and developed countries, but there is no market for this product in those types of countries because vitamin A deficiency is not a widespread or detrimental problem.
This high fee for Golden Rice also puts it at a disadvantage as a product on the competitive market. Since it is one of the most expensive solutions to fixing the vitamin A deficiency problem, developing countries often choose alternatives. Cheaper methods of addressing vitamin A deficiency, such as reinforcing flour with more vitamin A through processing methods, increasing the availability of fortified milk and ready-made meals, and simply raising awareness about the consequences of a vitamin A deficiency, are more appealing to developing countries simply because it costs less than implementing Golden Rice (GM Watch 2013). There has also been speculation that it would take 3 kg of Golden Rice per day for a child to meet their vitamin A requirement, which is an obscene amount of rice to eat in one day since the average amount of rice eaten in countries where that grain is a staple is 400 g, and continues to up the price on Golden Rice (Free Rice 2017).
Another economic disadvantage to Golden Rice is the fact that it encourages monopolistic behavior. When Peter Beyer and Ingo Potrykus invented Golden Rice, they needed an industrial partner that would be willing to both the humanitarian use and commercialization of this product. In 2001, Beyer and Potrykus exclusively signed over the rights to Golden Rice to Syngenta, an agrichemical and seed company located in Switzerland, which effectively gave them a monopoly on Golden Rice (Golden Rice Project 2016).
While Syngenta was the sole owner of the Golden Rice commercial rights, they had agreed to allow access to Golden Rice for humanitarian uses, free of charge, so that developing countries who would greatly benefit from this genetically modified crop could do so (Golden Rice Project 2016). However, the creation and production of Golden Rice involved several patented technologies, or licenses that conferred the right to exclude others from making, using, or selling a certain type of technology. When Syngenta obtained the rights to Golden Rice, they also managed to obtain a license that allowed them access to all the technology (patented by companies such as Bayer AG, Monsanto Co., Orynova BV, and Zeneca Mogen BV) needed to create Golden Rice, further strengthening their monopoly on Golden Rice in a commercial sense. Fortunately, the companies that owned patents on the technology needed for Golden Rice also allowed access to Golden Rice for humanitarian use.
In spite of allowing humanitarian access to Golden Rice for free, Syngenta has faced opposition over their monopoly on Golden Rice. In the countries where Golden Rice has been planted, groups of farmers have risen up against Syngenta, protesting its monopoly and want to profit from Golden Rice (Sustainable Pulse 2013). This controversy is detrimental to the market and commercialization of Golden Rice because it presents Syngenta with the potential for huge economic losses.
Even though Golden Rice has obvious disadvantages, it does have some advantages.
The most obvious economic advantage of Golden Rice is that it has the potential to feed and nourish more people, which leads to those people having the ability to contribute back to the economy through the workforce. Any type of nutritional deficiency has the possibility to impact labor outcomes by limiting labor productivity and human capital accumulation. The vitamin A deficiency, which is considered one of the most severe forms of malnutrition, can cause blindness, weaken the body’s immune system, and hinder the natural growth rates of individuals, all of which are factors that cripple one’s ability to work (Golden Rice Project 2016). This is especially detrimental in developing countries, where most of the workforce is centered around labor. With the introduction of Golden Rice, the percentage of the population affected by malnutrition decreases, which allows the potential for capital growth to increase. Since nutrition is positively related to cognitive ability, an increase in nutrition, due to Golden Rice, would result in an increase in labor productivity, which benefits the economy as a whole (Wesseler 2014).
Another economic advantage of Golden Rice is that it has the possibility to widen the market of GMOs. The development of new markets, with the potential for high returns, is always beneficial to the economy and its growth. If Golden Rice is successful, there would be a dramatic increase in the production of genetically modified foods and crops, which would lead to the development of new GMO companies, which would lead to thousands of new jobs that needed to be filled. There would then be a decrease in unemployment rate, a sure sign of a strong, and growing economy.
Essentially, Golden Rice has the potential to start a chain of events that are beneficial to the economy, but will only occur if Golden Rice itself takes off.
Unfortunately, the market for Golden Rice is non-existent; however, predictions regarding the behavior of Golden Rice upon introduction into the market can be speculated. Since price is determined at the intersection of supply and demand, speculating the price of Golden Rice in relation to white rice will provide insight into the potential influence of Golden Rice in the market and the consumers’ perceptions of the product.
According to the International Rice Research Institution (IRRI), Golden Rice should not surpass white rice in shelf price (if it should ever take off in the market); in fact, the IRRI predicts that Golden Rice will be slightly less expensive than white rice. These predictions indicate either the presence of a smaller demand, or larger supply of Golden Rice in comparison to the demand for and supply of white rice. However, even if the shelf price of Golden Rice is predicted to be less than the shelf price of white rice, the production costs of Golden Rice will continue to make the price of Golden Rice substantially higher than white rice.
The figure to the left describes the relationship between Marginal Cost (MC), Average Total Cost (ATC), and the Demand in the rice market. Marginal Cost and Demand are stagnant; however, Average Total Cost moves vertically. If Average Total Cost is below the Demand, farmers in the market for rice will have long-run economics profits, which would encourage perspective farmers to produce rice. This occurrence causes increased substitutes in production for rice and subsequently lowers the demand for rice. As demand decreases, the Average Total Cost increases to mimic the figure above. Therefore, the introduction of Golden Rice into the rice market would cause an increased Average Total Cost and no economic profit to be made by farmers in the rice market, which makes an unattractive product to the producers.
Even though Golden Rice possesses many benefits to combat the widespread Vitamin A deficiency in developing countries, the fact remains that the demise of Golden Rice in the market is inevitable. In order for Golden Rice to generate demand, it must overcome the substantial production costs and the negative perception of genetically modified foods in each country that opts to implement it. Though these deterring factors can be combatted through educating consumers about genetically modified crops, finding ways to lower production costs, and implementing government subsidies to encourage farming of Golden Rice, these efforts are partially impeded by the presence of the Syngenta monopoly over Golden Rice. In order for Golden Rice to become truly beneficial to developing countries, some sort of action (whether in the form of government or other competition presented by other GMO companies) must be taken to eliminate, or break up, the monopoly. Though Golden Rice holds possible potential in the future, it is currently trapped in economic conditions that make it an implausible product on the market.
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GM Watch. (2013, Oct. 16). New briefing on Golden Rice shows many better alternatives. GM Watch. Retrieved from http://www.gmwatch.org/en/bills-test/15115-new-briefing-on-golden-rice-shows-many-better-alternatives
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Statista. (2016). Retail price of white price (long grain, uncooked) in the United States from 1995 to 2016 (in U.S. dollars per pound). Statista. Retrieved from: http://www.statista.com /statistics/236628/retail-price-of-white-rice-in-the-united-states/
Sustainable Pulse. (2013, Aug. 9). Philippine farmers uproot Syngenta’s GMO Golden Rice field tests. Sustainable Pulse. Retrieved from: http://sustainablepulse.com/2013/08/09/-philippine-farmers-uproot-syngentas-gmo-golden-rice-field-tests/#.WihzH0qnFPY
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