Some kind of quantity changing into quality point has been reached--suddenly the newspapers are full of "in-depth" reports on the global food crisis, a crisis that seems to have sprung up as suddenly as the credit crisis did a few months ago. I've been tracking this for a while and decided to think on the keyboard instead of out loud. I think it is important to try and understand this while it is a New Thing, before it becomes more background noise in world politics and our daily lives.
1. Production shortages and inflation are two major factors in the crisis.What's causing the shortages?Global warming is widely regarded as a contributing factor in droughts which have stricken not only subsistence farmers in East Africa, but also major commodity grain producers in the Southern Hemisphere--Chile, Argentina, and especially Australia, with thousands of square miles in their eighth straight year with no rainfall to speak of.
Growing Asian economies, especially in China and India, have made possible better and more diverse diets for hundreds of millions of people. This growing demand for food has additionally seen rising meat consumption by the middle class (echoing US consumption trends), and, as vegetarians are quick to point out, it takes 16 pounds of grain to produce a pound of beef.
The great ethanol scam has been US government's main answer to peak oil and to rising fuel and energy prices. Even favorable estimates suggest that producing a gallon of ethanol requires inputs of 70% of the energy it will eventually produce when burned. In the meantime, just under one third of the nation's entire corn crop is already being converted into ethanol.
Enormously wasteful factory fishing has resulted in population collapse of many major species of food fish. Pollution has deepened the damage in coastal areas and in freshwater fisheries.
Globally, inventories of staple foodstuffs have dwindled drastically. The IMF's neo-liberal policies penalized developing countries for national food policies which "interfered with market mechanisms," including maintaining stockpiles as a bulwark against shortages and famine. Even in the US, the government-sponsored wheat stockpile today is smaller than it's been since the late 1940s.
Neo-liberal "free market" policies, spearheaded by the US and implemented through the World Bank and IMF, relentlessly pushed poor countries over the last 25 years to gear their agriculture for the export market and to open their domestic markets to Western agribusiness exports and investment. The combination severely undercut local producers of staple crops and national food independence. In addition, marketing boards for commodities like cocoa--agricultural OPECs which tried to have products released into the market in a coordinated, controlled roll-out to buffer against price swings from glut or bad harvests-- were dismantled as "anti-competitive."
The ongoing destruction of productive farmland is not limited to suburban sprawl in the US and the urbanization of coastal China. In the Philippines, for example, where mass struggles led by the Communist Party and the New People's Army have forced the ruling class to pass laws mandating some distribution of farmland to the people who work it, big landlords would rather convert agricultural land into golf courses, residential villages, and agro-industrial parks than take government offers for it.
Why inflation, besides the obvious fact of supply shortages?
Many Third World counties, including even a powerhouse like China, have their currencies pegged to the US dollar, which continues to fall like a rock. If they were paying in euros, the price rises would be nowhere near as steep.
The cost of agricultural inputs has risen rapidly, especially petroleum, now at about $115 a barrel, which not only fuels farm machinery and transportation of crops to market, but is also is a basic feedstock for the manufacture of much fertilizer.
Agriculture is not like manufacturing, where the cost of each additional unit tends to bring the price down, because the fixed capital (plant, machinery, etc.) is already there and is being used more fully. In farming, the best land (most fertile, best supplied with water and closest to transportation) is already being used. Bringing more into production means higher costs of production for each additional bushel of output, not less.
Hoarding is an brutal fact of life in capitalist and semi-capitalist economies. Someone with a warehouse full of flour is not going to sell it today if he thinks that the price will be 20% higher next week--unless he thinks that he'll otherwise get dragged to jail or see his warehouse looted by desperate mobs.
2. The food crisis may have erupted onto the scene very quickly, but it is very, very real.
Haiti has been widely reported on in the US because of at least seven deaths during rioting in Port au Prince and elsewhere, and because popular anger forced the Prime Minister out. I'll bet you didn't read about the food riots in Cameroon in February in which at least 40 people died. Or the less deadly riots and protests this year in places like Senegal, Ivory Coast, Ethiopia, Bangladesh, Morocco, Uzbekistan and Yemen.
This is becoming a desperate situation. As anyone who has seen Sergei Eisenstein's masterpiece, The Battleship Potemkin knows (watch the maggoty meat section here from about minute 5 to minute 17), food shortages can be the spark for a revolutionary upsurge. In Burkina Faso two weeks ago, the unions held a general strike protesting inadequate government concessions after February food riots there. In Egypt, the semi-legal opposition has made food prices a central theme of pro-democracy agitation against the Mubarak regime.
But that's only one side of the contradiction. Widespread hunger can destroy the fabric of a society. In deep famines, people find it very difficult to maintain social solidarity and moral and ethical values. In prolonged periods of hunger, people sink into lethargy or move to where there is food. The Irish potato famine of 1845-52 didn't produce an immediate national rebellion against British colonialism, but rather a million deaths and the start of the wave of emigration which left the island's population in 1911, 4.5 million, at half what it had been before the famine began 65 years earlier!
For poor folk in the US too, hunger is a growing problem. 28 million Americans are on food stamps. The value of food stamps has been cut by inflation to the point where they last only only about half the recipients past the 15th of the month. Then it's food bank time--except that across the country church volunteers and others who staff the food banks report that requests for help are way up and donations from supermarkets and other donors are down. Some have had to close up entirely. What will happen as the recession bites harder, layoffs climb and the end of the social safety net as we know it becomes manifest?
3. The food crisis may change its form, but it won't be going away any time soon, and "waiting for the market" to solve it will prove catastrophic.
There will not be an international free market in food. Period. The elites who rule nations are stupid if they don't protect their production, because they are courting instability and worse if they can't keep the population fed. Countries in which it's been tried, like Mexico where NAFTA drove millions of traditional maize growers under with cheap US corn which is suddenly extremely pricey, suffer. Right now Vietnam and India, the number two and three rice-producing countries in the world, have export bans in place. They are forgoing massive profits from selling into a soaring market, because the social and political cost of shortages at home would be too great.
Even if there were a more open global market, agriculture responds slowly to market stimuli. Consider what the business press calls "Turf Wars"--the struggle to predict and beat the market in allocating land to production. In the US this year, wheat and soybean plantings are up, while corn, potatoes and rice plantings are down, all based on last year's crop prices. In the meantime, rice has skyrocketed by 145% since New Years Day. But with seed purchased, fields prepped and the harvest contracted for, few farmers are in a position to turn on a dime and put everything into rice.
The other thing that comes with "free markets" is speculation.
Three major factors are at work in the recent spike in futures prices for agricultural commodities, from soybeans to orange juice. The first is that the rise of commodity hedge funds using fancy financial instruments have driven up the volume and volatility of commodity trades--as they did in mortgage and other credit markets. Second, since nobody is buying tranches of subprime mortgages anymore and other credit markets are sitting dead in the water, the money has to go someplace. Third, the evil little Wall Street ratbags in their $280 silk ties look around and say "Hey, people are rioting over food. Looks like a good place to make a buck."
The big role played by hoarding and speculation means that the stunning increases reported in news headlines may reflect a market bubble. Certainly the massive ramp-up in prices we've seen across the board this year suggests that something more is going on than just the corner being turned on a Malthusian imbalance between population and food. Well, doesn't that mean that when the bubble pops, tons and tons of food will come flooding back into the market and prices will be forced back down to a stable affordable level?
Nunh-unh. The underlying factors cited in point one are still operative, just intensified by speculation. And a collapsing commodity bubble could produce continued "contraction" of the broader credit markets, meaning banks will be too leveraged or too scared to lend. This could easily cut off credit to farmers, and agriculture is a business in which producers have to borrow at the start of every production cycle to buy seed, fertilizer, and/or machinery and to pay hands until the crop is in when they see if the price they get keeps their heads above water. Any sudden big drop in prices will hit small farmers, especially in the Third World, extremely hard, especially if they've invested in expanding or modernizing their operation. Like the credit crisis, there is no easy way out of this one, and the stakes are higher.
And like that deepening crisis of the credit markets in the aftermath of the collapse of the housing bubble and sub-prime mortgage scam, the current food crisis makes crystal clear, one more time, that the neo-liberal ruling consensus that dominated the global economy for the last quarter century is a colossal failure which has resulted in poverty, hunger and insecurity for the many and almost inconceivable wealth for a few.
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