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Generational Dynamics Web Log for 30-Apr-08
Food crisis suddenly becomes a top media issue

Web Log - April, 2008

Food crisis suddenly becomes a top media issue

Is Al Gore planning a new movie, perhaps "An Inconvenient Famine"?

We're now into the second week of major mainstream media news coverage of the food crisis. After eight years of steadily rising food prices, it's about time.

Here's how one news story described the situation in Haiti:

"On the roof of the former prison, enterprising women prepare something that looks like biscuits and is even called by that name. The key ingredient, yellow clay, is trucked in from the nearby mountains. The clay is combined with salt and vegetable fat to make dough, which is then dried in the sun.

For many Haitians, the mud biscuits are their only food. They taste of fat, suck the moisture out of the mouth and leave behind an aftertaste of dirt. They often cause diarrhea, but they help to numb the pangs of hunger. "I'm hoping one day I'll have enough food to eat, so I can stop eating these," Marie Noël, who survives with her seven children on the dirt cakes, told the Associated Press.

The clay to make 100 of the biscuits costs $5 (€3.15) and has risen by $1.50 (€0.95), or about 40 percent, within one year. The same is true of staple foods. Nevertheless, the same amount of money buys more of the mud cakes than bread or corn tortillas. A daily bowl of rice is almost unaffordable.

The shortages triggered revolts in Haiti last week. A crowd of hungry citizens marched through Port-au-Prince, throwing stones and bottles and chanting, "We are hungry!" in front of the presidential palace. Tires were burned, and people died. It was yet another of the rebellions that are beginning to occur with increasing frequency worldwide, but which are still only a harbinger of what is yet to come."

Unrest is increasingly breaking out around the world, as illustrated in this map from Der Spiegel:

Food crisis: Map of riots and export bans <font size=-2>(Source: Spiegel)</font>
Food crisis: Map of riots and export bans (Source: Spiegel)

The above map shows the increasing number of countries that are limiting food exports, and the increasing number of places where food riots and other unrest are taking place.

For some time now, I've been making fun of the global warming "crisis" as big farce, whose major purpose was to give organizers the chance to take jet planes to vacation spots like Bali and run air conditioners all day, while they sit around and whine about not having the chance to get rich over "carbon credits." The whole thing is a joke.

Unlike global warming, the food crisis is an actual, real worldwide crisis.

The United Nations held a food crisis conference on Monday and Tuesday, but they didn't hold it in Bali. They held it at the United Nations offices in Bern, Switzerland.

Secretary-General Ban Ki-Moon said the following:

Ban Ki-Moon, UN Secretary General <font size=-2>(Source: BBC)</font>
Ban Ki-Moon, UN Secretary General (Source: BBC)

"Today, I would like to inform you about the outcome of our discussions concerning the dramatic escalation of food prices worldwide, which has evolved into what we believe is an unprecedented challenge of global proportions that has become a crisis for the most vulnerable. This has multiple causes, which includes escalating energy prices, lack of investment in agriculture over the past years, increasing demand, trade-distorting subsidies and recurrent bad weather. This crisis has multiple effects, with its most serious impact on the most vulnerable in the poorest countries. We see mounting hunger and increasing evidence of malnutrition, which has severely strained the capacities of humanitarian agencies to meet humanitarian needs, especially as promised funding has not yet materialized. ...

We have agreed on a series of concrete measures that need to be taken in the short, medium and long terms. The first and immediate priority issue that we all agreed was that we must feed the hungry. The CEB calls upon the international community, and in particular developed countries, to urgently and fully fund the emergency requirement of $755 million for the World Food Programme, and honour outstanding pledges.

Without full funding of these emergency requirements, we risk again the spectre of widespread hunger, malnutrition, and social unrest on an unprecedented scale. We anticipate that additional funding will be required."

Here we see the first problem. Ban and the U.N. don't have a snowflake's chance in hell of getting that money. As Ban suggests, a number of countries (not the U.S.) have even not honored their outstanding pledges, and it's highly doubtful that they'll honor them AND pledge even more money.

Ban used the word "unprecedented" twice in the above quote. He said it was "an unprecedented challenge of global proportions," and that "we risk again the spectre of widespread hunger, malnutrition, and social unrest on an unprecedented scale."

Wrong, wrong, wrong. There is nothing unprecedented about this. This happened before WW II and before WW I. It happens before and during almost every major war, and is part of the complex of factors that lead to war. Fat and happy people don't need to go to war; starving people have no choice. This problem is VERY precedented.

As an example, read the account of the 1943 famine in India, in my November article, "UN expert calls biofuels a 'crime against humanity.'"

It always surprises me how many people still vastly underestimate the seriousness of this problem. Several web site readers over the years have suggested that new food technologies like hydroponics will solve any food shortage problem. Maybe they will ... some day, but there's no technology that will help in the short to medium term.

Other people believe that the food crisis is simply a bubble, and that the bubble will burst by natural means before long.

In support of this, a web site reader on Tuesday referred me to an article by John P. Hussman, president of Hussman Investment Trust:

"As for agricultural commodities, what we are observing is probably not a Malthusian breakpoint, but what I'd call “speculative hoarding.” Essentially, as the prices of commodities rise, particularly in developing nations, there is a tendency to save in the form of real goods. We've observed this historically in various countries as hoarding of every form of physical output, even spoons and other household items. ...

In effect, we are observing a version of tulip-mania with foodstuffs. I would expect that prices will reach a speculative peak, probably within a few months, and then most probably plummet with very little in the way of relief rallies. That is a fairly predictable dynamic once commodity price movements reach the parabolic stage that they have entered lately. Still, it's not clear how high that parabola will ascend, because as the slope goes vertical, small differences in the exact point of the bust will lead to substantial differences in the price at the high. But the world has more arable land and more capacity to bring it into use within months and years than should cause near-term concern about a Malthusian breakpoint."

There are several problems with this analysis. For one thing, food prices have been increasing faster than inflation since 2000, and have really skyrocketed since 2004 -- but any evidence of speculators or hoarding has only surfaced within the last year. Furthermore, food stocks and inventories have been going down every year.

But a more important flaw is the reasoning that there's plenty of "arable land" that can be brought into use. There's much more to the problem than the single dimension of arable land.

We'll come back to this, but first, some people are calling for a new "Green Revolution" to repeat the success of the Green Revolution that was launced by the Rockefeller Foundation in 1948, and which revolutioned agriculture in India and other countries in the 1960s.

Just reading the above paragraph, you can see what an unrealistic idea that was. It took 20 years to implement that last Green Revolution. The current emergency may cause an explosion in less than 20 weeks.

The new Green Revolution is supposed to target Africa. At the UN conference, World Bank president Robert Zoellick responded to the calls for a new Green Revolution:

Robert Zoellick, World Bank president <font size=-2>(Source: BBC)</font>
Robert Zoellick, World Bank president (Source: BBC)

"[W]hile one talks about a green revolution for Africa, one has to distinguish it from the green revolution in South Asia [of the 1960s] because the circumstances are different. So it really has to focus all along the value chain: property rights; seeds; fertilizers; irrigation systems; markets; roads, so people can be able to get their food to markets. And that’s [where we're in] the process of working with FAO and IFAD and others."

Now we can get back to Hussman's argument about "arable land." That's only a small part of the problem. Zoellick has listed a number of problems that have to be solved before the food crisis can be resolved in Africa.

Solving all of these problems would require the coordination of many countries and agencies, in a world where governments of one country after another are becoming increasingly paralyzed.

Once again, there isn't a snowflake's chance in hell that this new "Green Revolution" program will be put into effect.

I have mixed emotions about Hussman's argument that food prices are going to fall when the commodities bubble bursts, because it belongs in the "be careful what you wish for" category.

Shanty town in Mumbai (Bombay) India <font size=-2>(Source: BBC)</font>
Shanty town in Mumbai (Bombay) India (Source: BBC)

The prices of wheat, rice, and other staples WILL fall from their high bubble prices -- but only as part of the general deflationary spiral that the world will be facing.

At that point, however, many people in the world will starve, because food distribution systems will collapse in many parts of the world.

The picture above shows a shanty town in Mumbai (Bombay) India. There are probably thousands of these around the world today, many of them packed into cities of millions of people, with no local farmland. The collapse of the commodities bubble will mean that food prices will collapse, but the deflationary spiral will mean that food distribution systems that normally deliver food to shanty towns like this one will not be in operation. (30-Apr-08) Permanent Link
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