The Sydney Morning Herald
Comments 71
Illustration: John Shakespeare
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 Herald's international editor.
Follow the National Times on Twitter: @NationalTimesAU
71 comments so far
Don't forget the US Federal Reserve debasing its currency and exporting inflation to the world. This is how it works:
http://www.youtube.com/watch?v=PTUY16CkS-k
As is always the case with Hartcher, there are some valid points amongst the plethora of ideological pre-occupations, but those ideological idee-fixe detract from the overall sense of him having much to contribute on this subject. Just how dismantling the French agricultural system would contribute to food security is not explained; probably because the explanation would be risibly ideological and counter-intuitive. Indeed food security for each nation can only be guaranteed with an internal agriculture that can feed the population. History is replete with examples of countries starved into famine by being required by the "free trade" theory, to ignore their own internal capacity to grow crops for their population and engage in monocultural agriculture for export.
The problem now of course is that the very trade system that has encouraged vast waste of resources in transporting low value produce around the world has also been responsible, in substantial part, for the warming of the planet and hence the reduction in capacity of many countries to reliably grow their own foodstuffs.
Blaming biofuel is ridiculous.Depopulation is the only solution.Cheap food in third world countries just produces more people.When the inevitable famine arrives, as it does every few years, tens of millions die instead of millions.
Peter,It must please you to lift yourself from the turbid Canberra cess-pool to view the wider world. And you're right - the view is a rather disturbing one.Malthus is right in primitive situations and Charles Darwin drew on his idea to apply it to natural biological systems and it is the basiss of evolution.We humans have set ourselves above the natural; inventing an environment in which Mathusian/Darwinian selection is made irrelevant - until the artificial system breaks down. We see glimpses of catastrophic consequences with crop failures due to drought and flood in poorer countries, less so in more advanced.The problem is bigger than us and, despite (our Tory) Mr Hockey's effete effort to blame our government, and given past unfortunate events, unlikely to be solved on a world scale. The British Tory minister declaring it criminal for other countries to cease exporting food in crises is anathema.Biofuels are for biofools and greedy investors will probably mean greater risk of our descending to natural solutions as climate change exaggerates the crises
Peter, a situation here in Queensland does nothing to help the current world wide food problem.Money seems to be more important than people and the environment and living conditionsHuge areas of Qld productive land is being destroyed by drilling for coal gas. At the same time those gas companies are poisoning the water in the Great Artesian Basin. Farmers ,landholders, for generations, are unable to stop this destruction. Very large tract of Qld. are under claim by those gas companies> If nothing is done they will create the deserts of the future. Please look into this Peter.
That's a lot of "could be's" Peter. And if G20 members were held accountable by their country's constituents some of them might actually do something about pushing for meaningful action. It's late in the day to be at the discussion stage. I'm of the opinion that most of the populations of G20 countries are completely unaware of what will almost certainly happen over the next 3-5 years. Even with good harvests and favourable weather. Hopefully I am wrong but I'm expecting food prices and the cost of living to rise substantially further than they have to date with attendant political instability and civil unrest. Recent events in north Africa and Middle East demonstrate the tensions that exist and how easily they rise to the surface. It's hard to believe nations haven't anticipated this.
And the other obvious issue being ...? (or is it taboo?). What about increased/improved global exposure to general family planning information, improved female education in strategic pockets of the world's population and commonsense from influential religious leaders.
Regulation, dismantling industry, subsidies - seems economics is the new altar. We've lost touch with the human sciences.
So can I safely assume that continued buying of food futures by Goldman Sachs has nothing to do with these price rises? I think if Mr Hartcher looked closer, he will find that speculation in food is one major factor that he has overlooked.
The US is creating many hundreds of billions of dollars out of thin air. China's bank lending of the last 2 years has exploded.
Where does that money go?It goes looking for a return, that is where it goes.
Where are these returns to be had?
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