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A new food crisis is on our plates
The world has entered a new food crisis. Prices have surged, contributing to unrest in the Arab world. The president of the World Bank, the former US deputy secretary of state Bob Zoellick, last week warned that global food prices are at “dangerous levels.”
It’s part two of the crisis that started in 2007-08, which led to food riots in 18 countries. Prices in 2008 reached their highest since 1845, in inflation-adjusted terms, according to the Economist magazine’s index, before slumping. The crisis seemed to have solved itself.
But last month, global food prices actually broke the record, according to the experts at the UN’s Food and Agriculture Organisation. Over the past year the price of corn has risen 52 per cent, wheat 49 per cent and soybeans 28 per cent.
Rising food prices have pushed an extra 44 million people into poverty in the past seven months, according to the World Bank. It’s even being felt in the rich world. In Australia, the opposition hopes to capitalise on it: “The year will begin and end with Australian families facing an ever-rising cost of living,” the Liberal Party’s Joe Hockey said in a speech last week.
Alarmed at spiking food prices, a score of countries, including big food suppliers such as Russia and Ukraine, have banned food exports to make sure they can feed their own people first.
This has provoked further alarm. Britain’s environment minister, Caroline Spelman, argued last month that it should be illegal for countries to halt food exports, even in an emergency.
At the same time, the British government’s chief scientific officer, Sir John Beddington, declared that “the case for urgent action in the global food system is now compelling”.
The Group of Twenty major economic powers, which includes Australia, agreed. But meeting in Paris on the weekend, the G20 finance ministers notably failed to do anything about it.
Thomas Malthus warned in 1798 that growing population would starve humanity. The world population at that time? About 800 million. Two centuries later, it’s about 6.9 billion. The world population is now growing at about 210,000 a day.
After being proved wrong for so long, is Malthus finally about to be vindicated?
Not at all. The world is today already producing enough food to feed 12 billion people, according to the FAO. There are only problems of price, supply and distribution.
Humanity managed to cheat Malthus through ingenuity and good policy. Improved farming techniques and developments in fertilisers, transport and plant genetics revolutionised food production.
In the so-called Green Revolution of the mid-20th century, India introduced high-yielding rice varieties that trebled the volume of rice produced per acre of land while halving its cost.
If there is so much food available, why are prices soaring and why is one-sixth of humanity permanently hungry?
There are old and new problems. The most glaring of the old include protectionism in the richest countries. The European Union spends about $365 billion every year subsidising uneconomic farmers and shutting out food exports. The US and Japan are almost as bad.
This tactic, which has distorted the world food system, would be ruled illegal in any other area of global trade, except that the rich countries, while successfully dismantling barriers to trade in manufactures and services, have kept the corrupt farm trade system off the agenda of the World Trade Organisation.
Then there is poverty: 1 billion people who subsist on $1 a day cannot afford to buy food.
There are three new problems. One is the “financialisation” of food. Big investors have come to treat the major traded commodities – including food – as instruments of portfolio investment and speculation.
In 2003, index funds had $13 billion invested in commodities in US markets. By 2008, this had reached $317 billion.
The UN’s Commission on Trade and Development reported in 2009 that commodity prices on traded markets moved in sync with speculative flows in other asset classes and traders paid “little attention to fundamental supply and demand”.
In August of that year, Professor Jayati Ghosh, of the Centre for Economic Studies and Planning at Jawaharlal Nehru University in Delhi, compared food staples traded on futures markets with staples that were not. Guess what? Foods that were not open to futures trading rose only a fraction as much as those that were.
Another new problem is biofuels. Some 40 per cent of the US corn crop, enough to feed 350 million people, goes to make fuel for cars.
A third new problem – or perhaps just a recurring one – is extreme weather. If this is just cyclical, it will pass. If it’s climate change, it will not.
The good news is that all of these problems, barring climate change, have a solution, though none is easy.
Farm protectionism is on the so-called Doha agenda for the WTO. A real conclusion to the tortuous talks could make a big difference.
And if the rich countries met their pledges of aid to assist the food problems of the poor – they promised $20 billion in 2009 but have delivered less than $1 billion – much of the starvation could be addressed, at least temporarily.
Output in poor countries can be improved.
Financialisation could be curbed by restricting speculation in food, which is the aim of this year’s G20 chairman, France’s President, Nicolas Sarkozy. ”If it is not regulated it is a free-for-all, it is the jungle law,” he says.
And the biofuels industry, a creation of governments less than a decade ago, could be dismantled.
These man-made problems have man-made solutions. Unfortunately, the men and women needed to solve them are all politicians.
Peter Hartcher is the international editor.
Editors Note: 1) get rid of the dollar as world reserve currency 2) grow hemp for biofuel 3) support alternative media 4) dismantle the war machines 5) wage peace 6) create food reserves