Free Markets and Food Riots Redux

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In a previous life (1990s) I studied the political-economy of development with an emphasis in the Indian subcontinent, in particular India and Nepal. I traveled to India in 1993 when the market was first opening to Foreign Direct Investment. Like the rest of my cohort I was extremely skeptical of “globalization” or capitalism in general. One book that had an impact on me at this time was Seldon and Walton’s, Free Markets and Food Riots: The Politics of Global Adjustment. The basic thesis is as follows:

In numerous countries in the global South, from the Middle East to Latin America, shock treatment in the form of structural adjustment, privatization, and so on established the conditions for “IMF Riots.” In the Middle East alone, major austerity protests occurred in Algeria (1987, 1988, 1990); Egypt (1977, 1986, 1987, 1989); Jordan (1989); Lebanon (1987); and Turkey (1978-1979, 1980, 1990). Sedden and Walton argue these outbursts were analogous to the “bread riots” in eighteenth-century Europe and “part of the process of international economic and political restructuring” that swept the globe from the late 1970s to the early 1990s. Countries that pursued a more moderate course of economic liberalization (e.g. Mexico) experienced less unrest.

There were food riots in over thirty countries last week but the economic forces at play in 2007 are not the same as those in the 1990s. The reasons given for the current food crisis include:

1) Increasing oil prices. Oil is critical for agricultural production whether as gas in tractors or as a primary component of pesticides, etc.

2) Drought/Climate change. For example, Australia, a major wheat producer, has been experiencing drought for a decade.

3) Demand for biofuel. The NY Sun reports, an estimated 30% of America’s corn crop is now used for fuel instead of food.

4) The booming economies of India and China. Both countries are consuming more energy than in the past. And an increasing middle-class in both countries means that their food consumption patterns are changing. They want to eat more animal protein, especially in China. Today, China purchases 2/3 of Brazil’s soybean crop to feed animals.

Given that so many factors are contributing to these high food prices, what can be done to remedy the situation? The first thing Western nations can do is assist in situations of food emergency. We also need to cut subsidies to agribusiness. The United States and Western Europe should be ashamed that we tell poor countries to open their markets and cut subsidies (Haiti imports 90% of its food) while providing massive aid to our ADM and other mega-producers.

Meanwhile, back here in the U.S. Costco and other retailers are rationing the amounts of rice, flour and cooking oil they are selling to customers. Foreigners and immigrants are buying large quantities of grain and other foodstuffs to ship back home to their relatives in Latin America, Asia, Africa and the Caribbean. The dollar is weak and is buying less food overseas these days so they are asking for direct shipments of food instead. Yet as my wife pointed out to me, a lot of these packages will likely not make it to the families and loved ones they are intended to reach as the civil services in many of these countries (including the postal service) are rife with graft and other forms of corruption.

Read More:

AP: UN food agency needs hundreds of millions of hungy

Commodity Online: Food crisis is a silent tsunami

Foreign Policy: Seven Questions, the Silent Tsunami

The Hindu: UN food agency warms of eroding capacity

Seattle PI: A food disaster is brewing

Washington Post: U.S. Scrambles to Address International Food Crisis

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