The consensus around the world is that there is a food crisis upon us, and that the world simply cannot produce enough food to feed the growing population.
The New York Times contributes as it continues to substitute hyperbole for information in its reporting on rising food prices:
Hunger
bashed in the front gate of Haiti's presidential palace. Hunger poured
onto the streets, burning tires and taking on soldiers and the police.
Hunger sent the country's prime minister packing.
Haiti's hunger,
that burn in the belly that so many here feel, has become fiercer than
ever in recent days as global food prices spiral out of reach, spiking
as much as 45 percent since the end of 2006 and turning Haitian staples
like beans, corn and rice into closely guarded treasures.
It's
a cute opening. If it were followed by substance, analysis, and
insight, it might even work. Instead we get 3,000 words of "the
children are dying". Yes, children are dying. The problem is an urgent one. But there is a more nuanced story here, and I subscribe to the Times instead of watching Fox News so I can get it.
First, we need to be a little less Amero-centric. From John Quiggin:
prices
for commodities, including oil as well as most ag commodities, are
typically quoted in $US. In a situation where, for obvious reasons, the
value of the $US is declining against all major currencies, this can be
quite misleading. Measured against the euro, the currency of the
world's largest unified economy, the increase looks a lot less steep.
Short
story: let's not mix up the U.S. currency crisis--that is, mortgage
meltdowns and overspending on overseas wars--with global food prices.
Second, I am flabbergasted that almost no newspaper has mentioned there are people in poor countries who actually sell commodities.
The
rural poor are often the principal concern of anti-poverty programs,
and many produce the very foods that are rising in price. That means
the historically poor are getting wealthier. Not a peep from them?
Well, finding them requires leaving the comfy capital and makes a less
compelling news leader. But they could at least bury the observation on
page A19. Alas, no.
The rise in food prices is creating a
transfer of wealth from net consumers to net producers. Net consumers
tend to live in urban slums. Net producers tend to live in mud shacks
hundreds of miles from the capital.
The rise in food prices is
also probably going to cause a boom in production. Farmers are rushing
to turn their cotton fields to wheat and rice production. Governments
are pushing their agricultural extension services to boost productivity
in grains. This is why commodity shocks tend to be spike-like: they
shoot up and shoot down, sometimes causing just as much instability on
the down-swing as they did on the upswing.
What do we
conclude? First, national subsidy programs may not be required.
Targeted interventions towards the poorest net consumers will be more
effective and cheaper. (More on this from a 1988 article by Tim Besley and Ravi Kanbur.)
Second,
we might want to think about how to create a soft landing. If rice and
wheat prices come down quickly, we'll see an awful lot of rioting and
children dying in net production areas next, as farmers who have
invested everything in grains lose their shirts.
In the
meantime, will governments topple from rising prices? Maybe. Granted,
most insurgencies arise in rural areas (the majority of whom, we saw,
may be getting better off), and most coups are masterminded by (usually
well-fed) militaries. So I expect more rioting than toppling. I hope to
have some historical analysis of this pattern sooner rather than later.
The Author is an Assistant Professor of
Political Science and Economics at Yale University. He publishes the
Chris Blattman blog. He has previously served in development work in Kenya and Uganda.
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I hope that in Blattman's rush to prove that his analysis isn't "Amero-centric", that he doesn't completely discard the fact that we live in a global society, Like it or not, oil is quoted globally, in dollar denominations. And as the Federal Reserve tries to inflate the US economy out of another recession, the unintended consequence is that it will take more dollars to buy a kiloliter of petrol. Since almost all goods (including foodstuffs) are transported using some-kind of fossil fuel, it means the higher costs go into the prices of everything that we buy.
Another contributing factor, is supply and demand. The United States, (like it or not) produces an extremely large portion of the worlds agricultural products. And since the US has decided to subsidize ethanol production, many food producers have switched from producing food, to producing ethanol. This policy, has reduced the global supply of food further driving up the prices of some commodities.
I'm sure there are other contributing factors globally, (rice fungus, weather patterns, etc..) but to outright dismiss the falling dollar and bad energy policy, on the grounds that they are part of an "Amero-centric" explanation is rather foolish in a global society. The Law of Supply & Demand, and the Law of Unintended Consequences, like the Law of Gravity, work universally regardless of cultural or political bias.
Aside from what may be causing higher food prices, I do agree that those same high prices will no doubt entice a boom in food production globally as farmers worldwide respond to the higher prices by increasing production. However, Danson Mungatana's talk of establishing price controls on foodstuffs will likely have the effect of discouraging food production in Kenya, and may leave market stalls, kiosks, and supermarket shelves empty of controlled commodities. link here
US government intervention in the credit, food, and energy markets, have been partly responsible for this. It would be a shame for Kenya to repeat America's mistakes with yet another government intervention. I hope that in the end, Kenya's leaders will not resort to such politically-popular but economically-ignorant policies.