And it is back...
The Food Crisis, of course. In fact it really never left - since 2007 we've had more hungry people on the planet than ever before in human history, and while we've seen brief declines in the numbers of the hungry worldwide, those declines were of such short duration that they were essentially meaningless - earlier this year when the UN trumpeted that the number of the hungry had dropped back below 1 billion, it admitted that this excluded Pakistani flood victims, the impacts of the crisis in the Russian wheat crop and a host of other late-year issues.
On the lists of guests no one ever wants to invite to well...not eat dinner, the food crisis is probably number one, but it has a way of continuing to intrude. The thing about food is that it is both simple and complicated - very simple, in that when people don't have enough to eat, they die. Very simple in that just because we in the west became preoccupied with our own fiscal troubles doesn't mean that hungry kids stopped being hungry. Complicated, in the sense that food system responds to a great number of events - and we can expect it to keep on responding.
Why is it back? Well, a combination of factors. First, as we've seen over the years, it is simply impossible in our fossil-fuel drenched agriculture to separate out energy and food prices - high food prices and high energy prices go together. We invited the food crisis back to dinner as we began consuming more gas and oil after the recession.
Climate change played a role - consider the role of the drought in Kenya, where 1.3 million people are presently at radically increased risk of starvation. Consider the recurrence of export restrictions, characteristic of the 2008 food crisis, which began in August with the Russia's ban on wheat exports. 11 other countries now have major exports, including India's ban on exporting pulses.
The race against environmental degradation offered another invitation - last year the UN special envoy on the right to food observed that China's ongoing need for ever-increasing food imports is being fed by heavy topsoil loss and over development of good farmland, and of course, those problems are endemic across the developed world as well. Credit Suisse projected Asian food price inflation to hit 15% next year.
Remember, almost half the world's population spends more than half their income on food - price increases here affect families dramatically. In the US where one in seven (and it will probably shortly hit one in six) families is on food stamps (up from one in ten less than five years ago), it is very clear that food security is one of our vulnerable points, and that rising food prices will affect everyone. But for the world's most vulnerable, this is a disaster.
If 2008 is any measure, it may be a disaster for a new group of victims - those of globalization. What we saw in 2008 was that while the majority of the starving were stilll the traditional poorest people in the world - the landless or barely landed small farmers in rural districts, who lacked the land base to grow enough food to feed themselves, there was a newly emergent group of hungry. These are people who left their inadequate pieces of land to follow the jobs to the cities, and now found themselves both unable to afford food, and also unable to grow it.
The raging food riots in Tunisia are one logical outcome of rising food prices and the inability of young people to get work and buy food. We should expect more food riots - in 2008, the Egyptian government had to set its army to baking bread for its hungry people, and governments all over the world trembled because hungry people are angry people. World political stability depends on food stability - and climate and energy issues are likely to make food stability a thing of the past.
It may well also be a disaster for more of us than we think, with impacts most of us in the Global North never suspected. In 2008, I wrote an article arguing that much of the economic growth that had trickled back into the developed world over the last decade had been subsidized by profit increases for corporations made in the global south. The emergent middle class in places like China and india were feeding the world's economic growth. The folks who had new disposable income may not have consumed as much as Americans, but their cell phones and cokes and increased meat consumption and the books and paper they bought for their kids to go to school were an essential part of economic growth. I wrote:
Now it might be worth asking - where are those 175 million new starving people coming from? Before they were starving, who were they? And the answer would be that many of them were the people who left their farms in China and Vietnam and Indonesia and a host of other places to go live in the slums of various cities and work there. They were the people who were just getting by - the ones who sent a daughter to the factories and who did day labor in construction building up the economies. They lived quite close to the edge, and then, they crossed the edge when food prices began to rise. Now these were the lowest level new industrial workers - they weren't buying cell phones, but they might have bought a few things that they wouldn't have when they needed every penny for rice or bread - they sent their children, even their daughters to school, and bought clothes and pencils, they might save up for a radio for the family, and all these things, over millions of people, added up. And they produced more than they were paid for the economy as a whole - their work was more valuable than their salaries could account for, as is the way of things. But now they aren't buying those things - their kids are out of school, there is no money for radios or batteries, and there's no food - so they are working less, getting sick more, contributing less to the industrial economy, unable to make money selling things to the other people in their neighborhoods, because their neighbors have no extra money for anything either. Not only are they starving, but they've stopped adding money into the economy - and stopped spending it on anything but food.
Meanwhile, the next tier up in income were the people who had a little more than just enough - enough and a bit to send back home to their families, to get a cell phone and some jeans and buy meat a bit more often. These people worked pretty regularly at the new jobs - in factories, in building, in making the new globalized economy. And they spent money too and moved it around within their communities, and back into the global economy - the spent a little money buying coca cola, which came back this way. Now they aren't starving yet, but the rising cost of food has pushed them too - now the coca cola and the meat are gone, except for the holidays, and there won't be any more jeans. Because now the money goes for food - they have food to eat, but not enough for those other things. And so the money increasingly doesn't move around that much - because the farmer who grew the rice they are buying spent most of his money buying fertilizer. And so the money is headed mostly back to a few small companies - without a lot of stops around the neighborhood.
It is easy not to pay attention to such small things, and small people - after all, they aren't spending much money, and their wages aren't much. But they produce the stuff we need, they move money around - and hundreds of millions and billions of these small personal economies add up to quite a lot. And the money that they made went places - it took trips. The money a poor Chinese worker generated in productivity went a bit into his pocket - and some of that went back to American corporations that made things. And a lot of what he generated went into companies that invested in other things that fed our economy. And some of it went to the Chinese government that used it to buy up dollars and other things that seemed to have some value. It is perhaps not totally surprising, then, that as the Chinese worker got functionally poorer because of rising food prices, there was less money to pour back - times some millions.
And so it goes, down the ladder. The new workers, and the lubrication they provide in the global money system are being systematically impoverished, and what money they do spend goes to an increasingly narrow band of companies - instead of spreading the money around, money goes for very basic things - mostly food, and mostly basic foods. And the farmers who make the basic foods mostly send that money back to a very small number of companies - the ones that produce oil and the ones that produce fertilizer - many of them located in the same countries and places.
What is reducing the amount of productive work accomplished, and moving the money increasingly only into a few pockets? It is the high price of food.
Yesterday, Nicole Foss at The Automatic Earth wrote a piece arguing that the unified enthusiastic assertion that we are in a recovery should make us all nervous - that markets are never more certain than right before they reach a crisis point:
We are now seeing a firmly established received wisdom that recovery is underway and that the Fed has saved the day with quantitative easing. Bullishness is at an extreme. The psychology of the market is the opposite of what it was at the March 2009 bottom. This represents a large red flag, as sentiment extremes are major indicators of approaching trend changes. It takes time for a position to be widely accepted and internalized, and the greater the extent to which that has happened, the closer one is to a reversal. I think we are close to one, but it really doesn't matter whether the top is this week, next month, or even next year. It is coming soon enough that evasive action is thoroughly warranted now.
Is she right? I don't know, but I am wary of the euphoric claims that the economic crisis is over - this seems as unlikely as the claim that the food crisis was over. These things have a way of coming back, as we are seeing. Moreover, I would suggest that the very drivers of some measure of recovery are about to be torpedoed. It is hard to grow the economy when it turns out that an increasing number of people have to put all their resources back into simply getting enough to eat. We have entered the territory of the vicious circle, in which the complex intersections between food, energy, economy and environment begin to become horribly clear through repetition.
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