Food Shortages: 'Problem-Reaction-Solution' ?

Times

Expensive food will make economic slowdowns a lot harder to manage.

Over the past half-century, Western consumers have come to expect plentiful food supplies, at costs that have declined both in real terms and as a proportion of their earnings. Had it not been for the price-distorting peculiarities of the Common Agricultural Policy, the benefits for Europe of these years of plenty would have been still more marked, but the cost of food has in general been one thing that governments in industrialised countries have not needed to worry about.

The “Great Grain Robbery” in the 1970s, when massive Soviet purchases of US grain sent world prices through the roof, was an exception that proved the rule; Moscow was denounced so bitterly at the time precisely because stable supplies and prices were thought of in rich nations almost as a birthright. Similarly, what Europeans most resented about the adoption of the euro was the way that their grocery bills jumped overnight.

The grocery bills are jumping again today, not just in Europe but all over the world. The age of cheap food has abruptly come to an end, and food prices are likely to remain high for some considerable time. The reasons are soaring demand in the developing world, high oil prices contributing to the costs of planting, fertiliser, harvesting and transport, poor harvests in major grain and rice-producing regions because of drought in Australia and cold summers in Europe and parts of North America, and, finally, disastrously timed official policies on ethanol and other biofuels. Take all these together, and the result is a jump of 40 per cent in the UN's 2007 global food price index.

For British households, more expensive food means less spare cash at the end of the month. For Afghans faced by flour costing up to 80 per cent more, it means going hungry - and, probably, even greater political instability.

For many governments, from Mexico to Malaysia, it means food riots. For everyone, persistently higher food costs will translate into hefty wage demands, and make it much harder for governments to finesse the nasty combination of weakening economies and gathering inflationary pressures. No one is talking stagflation yet, nor should they - but double-digit inflation of any kind is bad news and commodities such as soya beans, maize and wheat are up by as much as 100 per cent.

Governments are worried not only by costs, but by supply, as traditional sources of imports dry up. US wheat stocks are at their lowest since just after the Second World War, and in Europe proverbial seas and mountains of surplus produce have vanished. Argentina has set ceilings on its beef exports, and China, where inflation is at a ten-year high in large part because the prices of pork and other staple foods have gone through the roof, has, Heinz-like, slapped export taxes on 57 varieties of farm produce.

Export tariffs are the worst possible response to shortages. Farmers need every encouragement to expand production. Trade barriers send the opposite signal. There is scope for increasing productivity per hectare right across Asia and, even more so, in Africa. Genetics has the potential to usher in a second green revolution, if science is not fettered by superstition. But these are long-term solutions. There is one thing that politicians can do in the here and now: free up farm trade while the going (for farmers) is good, and when even the EU is busy cutting tariffs unilaterally and has eliminated, albeit “temporarily”, all barriers to cereal imports. A Doha deal will be done this year, or not at all. The time is now.

Source: Times Online

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Pasha Law: Points to Note

- Companies such as Monsanto have successfully copyrighted seeds that farmers around the world have used for centuries.

- One of the most active funders of GM research has been the Rockefeller Foundation.

- Henry Kissinger’s words in the 1970s capture the motivation: ’Control the oil and you can control entire continents. Control food and you control people ...’


Further Reading:

Scientists Warn of Wheat Disease

Who is Responsible?