Hunger is Showing Its Ugly Face
April 29, 2008 by Omar Upegui R.
It was Thomas Robert Malthus (1766-1834), who once said that uncontrolled population growth could lead to global famine. He regarded ideals of future human improvement with skepticism, considering that throughout history a segment of every human population seemed relegated to poverty. He explained this phenomenon by pointing out that population growth generally preceded expansion of the population’s resources, in particular the primary resource of food.
To give a mathematical perspective to his observations, Malthus proposed the idea that population, if unchecked, increases at a geometric rate (i.e., 1, 2, 4, 8, 16, etc.), whereas the food-supply grows at an arithmetic rate (i.e., 1, 2, 3, 4, 5 etc.).
Malthus population theory is valid today. Only now it’s called “The New Economics of Hunger”. A brutal convergence of events has hit an unprepared global market, sending food prices sky high. The world’s poor suffer most—as always.
We are currently experiencing the globe’s worst food crisis in a generation. For the 1 billion people living on less than a dollar a day, the world’s worst food crisis in a generation is a matter of survival. Food is now considered the new gold.
In large U.S. cities, traders watched from the pits early last summer, as wheat prices spiked as a result of mediocre harvests in the United States and Europe and signs of a prolonged drought in Australia. But within a few weeks, the traders distinguished a threatening snowball effect—one that would eventually bring down a prime minister in Haiti, make more children in Africa go to bed hungry, and even cause American executives at Sam’s Club to restrict sales of large bags of rice.
As prices rocketed, major grain producers like Argentina and Ukraine, battling inflation caused in part by soaring oil bills, were moving to prohibit exports on a range of crops to control costs at home. It meant less supply on world markets even as global demand entered a fundamentally new phase. Already, corn prices had been climbing for months on the back of booming government—subsidized ethanol programs. Soybeans were facing pressure from surging demand in China. But as supplies in the pipelines of global trade shrank, prices for corn, soybeans, wheat, oats, rice and other grains began shooting through the roof. This led to the eruption of food riots worldwide.
“We have never seen anything like this before,” said Jeff Voge, Chairman of the Kansas City Board of Trade and also an independent trader. “Prices are going up more in one day than they have during entire years in the past. But no matter the price, there always seems to be a buyer. . . . This isn’t just any commodity. It is food, and people need to eat.”
The food price shock now agitating world markets is destabilizing governments, igniting street riots and threatening to send a new wave of hunger rippling through the world’s poorest nations. It is exceeding even the Soviet grain emergency of 1972-75, when world food prices rose 78 percent. By comparison, from the beginning of 2005 to early 2008, prices leaped 80 percent, according to the U.N’s Food and Agriculture Organization.
Food prices—totally out of control—have snowballed into world wide civil turmoil. Hungry mobs and violent riots recently toppled Haiti’s government. Malaysia and Bangladesh are suffering from the same malaise. To calm things down countries are subsidizing food prices as famine spreads like a wild fire in areas as far-flung as north Korea and West Africa. The crisis, it fears, will plunge more than 100 million of the world’s poorest people deeper into poverty, forced to spend more and more of their income on skyrocketing food bills.
The U.N. Food and Agriculture Organization’s (FAO) Food Price Index, measuring the market prices of cereals, dairy produce, meat, sugar and oils, was 57 percent higher in March 2008 than a year earlier. The surge is due to several factors, including increased demand in developing countries, higher fuel costs, drought in Australia, the use of crops for biofuels, and speculation on global commodity markets.
In the United States, experts say consumers are scaling down on quality and scaling up on quantity if it means a better unit price. In the meat aisles of major grocery stores, said Phil Lempert, a supermarket analyst, steaks are giving way to chopped beef and people used to buying fresh blueberries are moving to frozen. Some are even trying to grow their own vegetables.
“A bigger pinch than ever before,” said Pat Carroll, a retiree in Congress Heights. “I don’t ever remember paying $3 for a loaf of bread.”
The World Bank called on countries not to ban exports of food, saying that only worsens the problem. “We are urging countries not to use export bans,” World Bank President Robert Zoellick said in a statement. “These controls encourage hoarding, drive up prices and hurt the poorest people around the world who are struggling to feed themselves.”
Local governments will have to step in and control the “invisible hand” of Adam Smith’s free market. Leaving the forces of supply and demand to determine food prices is suicidal. Last week, French Agriculture Minister Michel Barnier warned E.U. officials against “too much trust in the free market.” “We must not leave the vital issue of feeding people to the mercy of market laws and international speculation.”
