Is the current food price crisis the result of overpopulation, or just the uneven distribution of wealth?
So, I was talking to this dancer the other day. She mentioned that her income had gone down because noone can afford lap dances any more, because of the rising price of milk. It’s nice to see North & South has picked up on this development, and continues to fret about the finances of middle New Zealand, substituting dairy prices for real estate or school zoning as the worry de jour. This has led to one of the most gorgeously mediocre headlines ever produced: “Jack’s only allowed two glasses of milk a day: As the financial crisis bites, middle class families are cutting costs as never before.” Inside, North & South’s Caroline Courtenay plumbs the depths of consumer confidence surveys and responds with budgeting advice.
It seems everyone’s talking about the price of food. The Economist picked up UN World Food Programme head Josette Sheeran’s quip that the rising cost of basic food is a “silent tsunami” and emblazed the phrase across an ominous wheat field. The magazine uses this crisis to support their ongoing argument that trade-distorting subsidies and tariffs are to blame:
Food is riddled with state intervention at every turn, from subsidies to millers for cheap bread to bribes for farmers to leave land fallow […] For decades, this produced low world prices and disincentives to poor farmers. Now, the opposite is happening. As a result of yet another government distortion – this time subsidies to biofuels in the rich world – prices have gone through the roof. Governments have further exaggerated the problem by imposing export quotas and trade restrictions, raising prices again.
So what is this crisis? The World Bank’s recent report ‘Rising Food Prices: Policy Options and World Bank Response’ states that global wheat prices rose 181% in the last three years, while overall global food prices rose 83%. These increases have accelerated in the last year, with the cost of rice and grain more than doubling in the parts of Africa and the Caribbean that import most of their supplies. Locally, the New Zealand Herald found the cost of its trip to the supermarket was 28% more expensive than a year ago, with butter and cheese prices more than doubling despite the fact that they are locally produced. What makes these price increases into a crisis is the fact that they hit the poor hardest, while barely effecting the wealthy.
New Zealand’s inflation rate is able to hover around 3% despite rising food costs, because the price of luxury electronic goods is falling. Those wealthy enough to afford such pleasures (i.e. most New Zealanders) can thus juggle food price rises into their budgets, while the hundreds of millions of people who spend more than half their incomes on food are stung.
On 12 April, Haiti’s Prime Minister Jacques-Édouard Alexis was removed from office after a week of food riots. President René Préval then announced a rice subsidy to cut its cost by 15%. One thousand protestors marched through Dakar, Senegal, holding empty rice sacks. In both Bangladesh and Côte d’Ivoire, police have tear gassed crowds of thousands chanting “we are hungry.” Police in the Philippines, Sri Lanka and India have raided warehouses and arrested rice hoarders.
Too Many Homo Sapiens?
It may be that the current food crisis is a sign that our rapidly increasing population (from one to six billion over a single century) is unsustainable. An increasing population alone does not create starvation, but when the amount of resources consumed by each person is also increasing, a crisis follows. For much of the last century, both the high consumption of the developed world and the high rate of population growth in the undeveloped world felt sustainable, because the poor consumed so much less. However, with the economic success of India and China, this is no longer the case. In two decades, the amount of meat consumed per capita in China has doubled, putting pressure on grain production to feed livestock.
UN Secretary General Ban Ki-moon has confirmed that global grain consumption has outstripped production since 2000, and reserves have dwindled. Africa’s per capita grain production has fallen since the 1960s as the land has dried out (Zimbabwe, once the ‘bread basket’ of Africa, has been further crippled by mismanagement). Last year, droughts in Australia halved the wheat harvest, while a cyclone in Bangladesh wiped out part of its rice and wheat crops. Meanwhile, the inexpensive highyield harvests we have enjoyed have been made possible by cheap petrol and petrochemical products (such as fertilizers), which are no longer possible.
Furthermore, the world’s largest corn exporter, the USA, has converted one third of its crops to biofuel production due to the over-consumption of oil stocks, further reducing the world’s food supply – Oxfam claims biofuel production targets may force another 600 million into starvation in 20 years, and the European Union has promised to reconsider its targets.
India and Vietnam, who together produce one third of global rice exports, put a halt to their exports earlier in the year to rebuild stocks and feed themselves. Other nations, including China, Brazil and Egypt, followed with more moderate export restrictions – again, the result is that prices rise. In the USA, Filipino migrants have been sending rice home to the Philippines, Wal Mart’s food distributor Sam’s Club has had to enforce a maximum four bags per person sale limit. The net result of all these restrictions and crop failures is that commodity market traders have begun frantically buying up stocks and, once again, pushing up prices.
Such responses suggest that increasing population and wealth may not be the sole cause of this crisis. The UN World Food Programme’s recent report ‘International Assessment of Agricultural Science and Technology for Development’ (IAASTD) states that 800 million people are going hungry even though there is enough to feed everyone. The IAASTD argues that the crisis is simply a result of unequal distribution. The USA could use its corn production to feed the poor instead of inefficiently fuel its cars – but then, poor people don’t pay as well.
Trade Protection or Liberalisation?
France’s Agriculture Minister Michel Barnier has blamed the free market for this unequal distribution, and argues that Europe should be allowed to continue with farming subsidies. There are, of course, plenty of precedents for the argument that trade can create famine: millions starved during the Irish potato famine of the 1840s, even as their country exported tones of wheat, because the British landowners insisted the market could not be stopped. However, this famine was not caused by the free market, but by unfair land-ownership. And the EU and USA’s agricultural subsidies have done much more harm than good: they artificially lower the price of their own crops, undercutting farmers in the developed world who are thus discouraged from farming. After adjusting for inflation, food prices fell 75 % from 1975 to 2005, before their recent rebound.
Ian Angus, writing for Socialist Voice, provides an overview of how he believes these policies have destroyed Haiti:
Rice has been grown in Haiti for centuries, and until twenty years ago Haitian farmers produced about 170,000 tonnes of rice a year, enough to cover 95% of domestic consumption. Rice farmers received no government subsidies, but, as in every other riceproducing country at the time, their access to local markets was protected by import tariffs.
In 1995, as a condition of providing a desperately needed loan, the International Monetary Fund required Haiti to cut its tariff on imported rice from 35% to 3%, the lowest in the Caribbean. The result was a massive influx of US rice that sold for half the price of Haitian-grown rice. Thousands of rice farmers lost their lands and livelihoods, and today three-quarters of the rice eaten in Haiti comes from the US.
US rice didn’t take over the Haitian market because it tastes better, or because US rice growers are more efficient. It won out because rice exports are heavily subsidized by the US government. In 2003, US rice growers received $1.7 billion in government subsidies, an average of $232 per hectare of rice grown. That money, most of which went to a handful of very large landowners and agribusiness corporations, allowed US exporters to sell rice at 30% to 50% below their real production costs.
In short, Haiti was forced to abandon government protection of domestic agriculture – and the US then used its government protection schemes to take over the market.
[6] and [7] – Oxfam International Briefing Paper, April 2005. “Kicking Down the Door.” http://www.oxfam.org/en/files/bp72_rice.pdf
What’s fascinating about this socialist argument is just how similar it is to The Economist’s call for free trade. Angus agrees that free trade is not the reason food is unequally distributed; rather, unfair trading rules have created the crisis. The Doha Development Round of talks at the World Trade Organisation were intended to remove these unfair subsidies, but collapsed in 2006 after the USA and EU simply refused to play fair. Protectionist measures, including both France’s meat subsidies and India’s rice export ban, help individual nations keep domestic supplies high and prices low, but adversely affect the world as a whole.
Both socialist and market-capitalist commentators are thus agreed that the best way to solve the current crisis is to remove subsidies for rich farmers. Although developing nations have recently attracted ire for imposing food export limits, their moves are a response to the legacy of these distorting subsidies. In the short term, the UN World Food Programme has called out for the extra $500 million it needs, simply in order to buy the same amount of emergency food aid it doled out last year. Response to this call has been positive, and the UN has already received most of the money. In the long term, however, the developed world’s short-sighted agricultural protectionism must be abandoned. I would like to argue that we should resuscitate the Doha round to make another go at removing such subsidies, or suggest the G8 tackle the matter at their summit in Tokyo. Past precedent, however, tells me they won’t achieve a fucking thing. And in the even longer term, even if the uneven distribution of food is addressed, increasing food consumption may still prove unsustainable. We may find that when poorer nations catch us up, the world will no longer be able to support our habits.