Another “Global Crisis”
- 04.25.2008 - 1:32 PMToday, United Nations Secretary-General Ban Ki-moon said that the recent increase in food prices has become a “real global crisis.” His comments come after weeks of food riots in Haiti, Egypt, Indonesia, the Philippines, and Ethiopia. The Thai and Pakistani governments have had to call out troops to protect crops. Cambodia and Kazakhstan are banning grain exports. Stores in the United States are limiting purchases of rice. North Korea faces famine. Is this a job for the UN?
Perhaps not. On Sunday, Jean Ziegler, the UN’s special rapporteur on the right to food, accused the West of causing starvation in poor countries through, among other things, the promotion of biofuels and the maintenance of farm subsidies. “This is silent mass murder,” he said. Multinationals, for their part, are responsible for “structural violence.”
Ziegler also attacked commodity markets. “And we have a herd of market traders, speculators and financial bandits who have turned wild and constructed a world of inequality and horror,” he noted. “We have to put a stop to this.”
What we have to put a stop to is the UN promotion of world government and socialism. The solution to rising global food prices–they have increased 83 percent in the last three years according to the World Bank–is not more UN food aid, which has undermined agriculture in fragile states. The answer is allowing markets to work. Increasing food costs, after all, will encourage further farm production.
And let me add this: there is no right to food. There is, however, a right to live in a free society where people have the ability to provide for themselves. Unfortunately, the UN has yet to appoint a special rapporteur for common sense.
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April 25th, 2008 at 1:43 PM
How are ethanol and other massive agricultural subsidies allowing markets to work? The Farm Bill is the single biggest market distorting act of Congress, and the Energy Bill is close behind.
April 25th, 2008 at 2:05 PM
I am not defending ethanol, for the reasons you suggest, and I do not like subsidies in general.
By the way, ethanol is not contributing as much to the increase in global food prices as the popular press says. The biggest factor is that, fortunately, people in India, China, and other developing nations are eating better.
April 25th, 2008 at 2:19 PM
Ban Ki Moon is late on this. If he would have listened to Barack Obama, he would have gotten out of his comfort zone, and gotten engaged, shedding his cynicsim, er, I mean, have you seen the price of Arugula at Whole Foods?
April 25th, 2008 at 2:25 PM
I concur with Ziegler that ethanol and America’s farm policy may constitute crimes against humanity. I agree with Chang that charitable food aid oftentimes displaces or preempts functioning domestic food markets. On the other hand, in a humanitarian crisis international food aid serves an indispensable role.
April 25th, 2008 at 2:44 PM
Dellis, I am not arguing against food aid in general. It is absolutely necessary in emergencies. I am concerned when food aid undermines a society’s productive capabilities and when, as in the case of North Korea, it supports oppressive governments.
April 25th, 2008 at 3:25 PM
Here are some suggestions from an economist:
How to solve the global food crisis
By Kaushik Basu
Professor of economics, Cornell University
Even small price rises can hit the poor hard
The world economy has many problems but none more pressing than what is happening to food prices.
There have been food riots in Haiti, the Philippines, Ethiopia, Indonesia and several other nations.
Twenty thousand desperate textile workers in Bangladesh went on a rampage, giving rise to fears of wider instability, since the garment industry accounts for three-fourths of the country’s exports.
Global food prices have been rising over the last three years; but in the last few months they have spiralled out of control.
Over the last 12 months the average price of food has risen by 56%, with wheat rising by 92% and rice, the staple of half the world, by 96%.
This has given rise to the spectre of famine; and the crisis is being made worse through misdiagnosis.
Some commentators have remarked how this is all a matter of supply and demand and if governments do not interfere in trade, the price rise will bring a supply response, which will cause prices to level out.
Sure, demand and supply play a role, but there is much more to the current crisis. Understanding this is not easy since we have not seen a food-price surge like this in 30 years.
There is no doubt that demand for food is rising as the world’s population increases and there is new prosperity in India and China. Moreover, as people switch to greater meat consumption this causes greater demand for grain, since rearing cattle and poultry is a particularly grain-intensive activity.
There is also the increase in the production of biofuels in industrialized nations. This has caused over 20% of corn and rapeseed production in developed countries to be diverted away from food.
Small triggers
But all these changes have occurred over a long time and cannot explain the price spiral of the last few months.
A more proximate cause is the severe drought in Australia and shortfall in the production of staples in Ukraine and Kazakhstan. These are, however, not big enough to explain the large inflation.
To understand the latter we have to analyse how these small triggers have caused speculative moves and given rise to a complex brew of corrective measures.
India, Argentina and other food-exporting nations have, in response to global inflation and in order to protect their own consumers, imposed restrictions on exports.
This is an understandable move, but it is exacerbates inflation in food-importing countries.
Moreover, the policy of holding prices down for the benefit of consumers can dampen farmer incentives. In Pakistan this year farmers have used about 600,000 tonnes of fertiliser, which is a drop of about 50% from earlier levels. This is bound to mean less on wheat production.
Massive aid
In thinking about global policy, we have to distinguish between the short and the long run.
In the immediate scenario there is no escape from massive government and international agency intervention in the form of aid from rich nations and subsidies to at-risk consumers.
If the state can bail out Bear Sterns, it surely can help poor consumers stave off famine.
Many economists will tell you that the ideal intervention to help the poor is to simply give them money (a negative income tax) - that shores up their income - rather than directly controlling prices. In general, this is correct advice; but not in this case.
Suppose we collect $1000 from the rich and hand this out to the poor. Since the rich spend a tiny fraction of their money on food and the poor a large fraction, this transfer will cause food prices to rise.
In general, this would not matter since the price was being driven up by the greater purchasing power of the poor. But in the present precarious situation, the risk is that if the negative income tax does not reach all the poor, then the ones who are left out will see their position deteriorating as prices rise further.
No escape
In the Bangladesh famine of 1974, it was the government’s success in protecting the urban poor from food shortages that exacerbated the problems of the rural population.
Therefore, in a crisis like the present one, there is no escape from holding consumer prices down. Ideally, we should drive a wedge between the price that producers get and the price that consumers pay.
None of this can be a long-run policy, since it will cause food production to decline and governments to go bankrupt. Long-run policy has to be more market-oriented, creating incentives for producers to increase output and boosting the incomes of the poor.
Relative price fluctuations are an unavoidable part of an efficient economy. This becomes worrying when some people are so poor that a small rise in price becomes a life and death question for them.
This crisis therefore should also be a reminder that the level of inequality that prevails in the world today is untenable.
April 25th, 2008 at 4:21 PM
[…] from an earlier article that I linked to… Another Global Crisis. Jean Ziegler, the UN’s special rapporteur on the right to food, accused the West of causing […]
April 25th, 2008 at 4:56 PM
“This is silent mass murder,” possibly the sickest sentence I have read since….
April 25th, 2008 at 5:46 PM
There is such a network of arbitrary, non-market forces suppressing productive agriculture in the Third World, the UN’s knee-jerk accusations against “commodity markets” is absolutely absurd.
Ethanol mandates aren’t at the top of the list of reasons why poor nations have a food problem, but at least they’re ON the list, unlike “commodity markets.” Local war and social organization (failure of governments to promote property ownership and protect industrial-level farming and commerce from lawless thuggery and extortion) are at the top of the list. Also on the list, however, are the DDT ban, and global activism against modern farming techniques, fertilizers, and “Frankenfoods” — which advances underlie the abundance created by agriculture in the wealthier nations. UN representatives themselves have actually induced some African nations to outlaw the use of advanced fertilizers, and crops engineered for improved yield.
Frankly, although agricultural subsidies in the wealthier nations are idiotic, and so are ethanol mandates, these measures would not have the impact they seem to on food availability in the poor nations, if there weren’t already so many uneconomic constraints — many of them purely evil — on the poor nations’ own food production and distribution. There’s way more than enoug blame to go around.
April 28th, 2008 at 4:12 PM
So, how come, other than some not very persuasive comments about “ethanol mandates”, nothing is being said, even in these posts, about the huge increased food production costs associated with the most recent round of extortion and usury presently being employed by various Arab and other OPEC thugs, like Mr Chavez in Venezuela, say?
If you are looking for the real villains in this piece, for the food and other shortages now being experienced by just about everyone, except for the Oil Sheiks in their mansions with the 500 rooms and the gold taps in every bathroom, may I suggest that perhaps, as a possible working hypothesis, that one might wish to consider, yet again, the handiwork of that inveterate knave of Teheran who, only recently, was heard to be muttering that yet a further oil price increase would be a most beneficial event in the prevailing circumstances, serving all the various agendas which he seeks to promote, and to which, it would seem, can now be added, a campaign to induce and sustain, a world food crisis, through severe aggravation of all the cost aspects in the food production chain, of which oil and petroleum products constitute a major cost element.
Why, also, am I not surprised, that Mr Ziegler, the but recently constituted special “food expert” to the UN, is apparently also complicit and implicated in this most recent attack on both “Western” [read American] Food Aid Policies, AND upon the starving masses of the world’s poorest nations who, in the end, as history has shown time and again, will, of course, ultimately end up being assisted and fed out of danger, by that wicked “Great Satan” that Ziegler and Ahmadinajad so love to hate and to harm.
Wake up and watch them oil spigots turning [very slowly indeed].