SEND TO A FRIEND

|

PRINT ARTICLE

|

Rising Food Prices and Global Unrest

In April, the United Nations called the recent international spike in food prices "an unprecedented challenge of global proportions that has become a crisis for the world's most vulnerable." Beyond the hundreds of thousands of people that food inflation may push toward starvation and the millions more who might fall deeper into poverty, the World Bank warns that food shortages put as many as 33 countries at risk of civil unrest. That estimate may well understate the true scale of emerging food-related political risks.

Few threats drive people into the streets of the developing world faster than a food shock. Countries devastated by political upheaval, natural disasters and war have faced food shortages from time immemorial. But the crisis is now striking dozens of countries at once for the first time since the 1970s.

The problem has grown slowly but steadily. Global food prices have risen about 83 percent over the past three years. In rural areas of developing states like Pakistan, Afghanistan, Vietnam and Nigeria, food accounts for more than half of many average household budgets. Soaring prices for wheat, rice, corn and soybeans have already generated political turmoil in several countries.

In Pakistan, food prices have surged 35 percent in 2008. Any resulting civil strife could cripple public confidence in Pakistan's newly elected leaders at a particularly delicate moment in the country's transition to democratic rule.

In Indonesia, food inflation drove some 500 protestors from the Islamist group Hizb ut-Tahrir into the streets this spring to demand government action, raising official concern that conservative religious groups will use public anger over food prices to build support for other elements of their political agendas.

Rising food prices in South Korea fuel overall inflation, undermining the Bank of Korea's bid to address a fall in exports to the United States and a slowing economy. North Korea faces its worst food shortages since famine in the 1990s killed more than a million people. China and South Korea, North Korea's food lifelines, have restricted exports of staples to meet demand at home.

In Egypt, where 14 million people live on less than $1 per day and rely heavily on government-subsidized bread sold for less than a penny, violent street clashes sparked by food shortages have killed or injured scores of people. Fearing a repeat of the deadly bread riots of 1977, the Egyptian army has begun baking bread and selling it directly to consumers.

In Middle Eastern countries like Egypt, Syria and Yemen that are not profiting from windfall oil revenues, governments are straining to maintain food subsidies. Yet, even cash-flush, oil-exporting countries face risks of civil turmoil -- particularly from migrant workers, who tend to be poorer than domestic workers. Saudi Arabia has slashed import tariffs on poultry, dairy, and vegetable oils from 20 percent to 5 percent. The United Arab Emirates has signed an agreement with food distributors to keep prices of several staple food items at 2007 levels.

Rising rice prices could trigger unrest in Nigeria, particularly if its largest supplier, Thailand, places restrictions on rice exports. Several drought-prone, conflict-ridden countries in the Horn of Africa -- the continent's least-stable region -- are now at higher risk of famine.

In Argentina, a major grain producer, high external demand and weather disruptions at home have pushed wheat prices higher. To guarantee domestic grain supplies during an election year and keep prices under control in an environment of spiraling overall inflation, the government closed its wheat export registry in March 2007 -- helping to push global grain prices even higher. In response to an increase in export taxes, Argentine farmers launched a large-scale strike. The political standoff the conflict has generated between Cristina Fernandez de Kirchner's government and the farming sector will not be easily resolved.

Over the longer term, China may be the greatest source of food-related political instability. Within the country, freezing conditions earlier this year badly damaged harvests and intensified Asia's crop supply disruption. Surging food prices have helped drive overall inflation to 11-year highs. The Chinese farm sector has struggled to expand output in recent years as the breakneck pace of urbanization steers people and resources away from farming, and as new construction on the outskirts of China's cities reduces the country's stock of arable land. Some 15 million rural laborers move to Chinese cities each year, increasing annual urban demand for grain by 4.5 million tons.

But the broader food-related risks may well come from China's bid to guarantee long-term food security by buying farmland in Africa and Latin America. China has 40 percent of the world's farmers and less than 10 percent of its arable land; the risk is that state-subsidized Chinese agricultural firms will bring Chinese farm workers with them, provoking a backlash among local workers in several countries at once.

Food inflation, like the rising price of oil, won't simply go away, because the pressures that drive it are intensifying. Rising incomes in developing countries like China and India allow millions of consumers to move from one to two meals per day. Skyrocketing oil prices heighten demand for biofuels made from corn or sugarcane and increase shipping costs for food exports.

On the supply side, policymakers in many countries now accept that the most sensible policy response is to remove import tariffs, the barriers that both rich-world and developing countries often use to protect domestic farmers. But to stabilize local supplies and ease price swings at home, large exporting countries like China, India and Russia have placed export restrictions on food commodities.

In wealthier countries, supply will eventually respond to the price spikes, but export curbs and infrastructure constraints in poorer states limit the speed and efficiency with which crop production can respond. It's a lot easier to quickly increase the supply of textiles or toys than of crops that come to harvest just once a year. Making matters worse, policymakers in many states, eager to limit domestic unrest, have adopted shortsighted remedies like price caps and export restrictions that aggravate both shortages and global inflation.

Food inflation, like rising oil prices, is ultimately driven by the entrance into the international marketplace of hundreds of millions of new consumers. That's why food shocks -- and the threats they pose for social and political stability in dozens of countries -- will be with us for some time to come.

---

Facebook

|

Email

|

Print

|

---

Related Topics: africa | china | food | indonesia | latin america | middle east | pakistan | syria | united nations |

Sponsored Links