Arab Revolt underlines the need for action to remedy high food prices

By Mike Stones

- Last updated on GMT

When Tunisian street vegetable vendor Mohamed Bouazizi chose to end his life in fiery suicide, no one could have foreseen the firestorm his death would unleash across the Arab world. But, two months later, as the Arab Revolt shows no sign of fading, the lessons to be drawn about food security are becoming abundantly clear.

Food prices are too important to be left to the free market. Unless governments and international agencies act promptly to regulate both food supplies and their prices, the world will pay a high price.

Bloodshed

That price will include political instability in the Arab world and beyond, bloodshed resulting from continuing street violence, political and religious extremism and perhaps even the spectre of mass economic migration from the Maghreb into Europe.

While the unrest sweeping the Arab world cannot be attributed solely to high food prices, they have undeniably played a significant part. Bouazizi’s suicide became the focal point for a growing numbers of ordinary Arabs who find it increasingly difficult to feed their families.

Food prices have also played a key role in the unrest witnessed in other Arab countries such as Algeria and Egypt.

In Algeria, last month food prices focused on price hikes in sugar, milk and flour, which had risen by up to 30 per cent in the first week of January. Protestors, shouting ‘bring us sugar’ broke into warehouses to steal sacks of flour, reported the Arab news service Al Jazeera.

In response, the Algerian government cut import duties and taxes in an attempt to reduce food prices and subsequently claimed it had “turned the page​” on food riots.

In Egypt, the world’s biggest wheat importer, popular concern about the spiraling price of basic food commodities such as bread and tomatoes added to growing frustration with the repressive regime of Hosni Mubarak.

Meanwhile the dissent has spread to other Arab states including Jordan, Yemen, Bahrain and now Libya. This week, the son of Libyan leader Muammar Gaddafi, Saif al-Islam, delivered the chilling warning that the civil unrest in his country could lead to civil war.

Meanwhile, a recent report from UN Food and Agriculture Organisation (FOA) reported that global average food prices had reached their highest level since 2008, when millions were pushed to the brink of starvation.

These are not one-off events but a pattern of long term change linked to the inherent imbalance between food demand and supply.

Casting a long shadow is the threat of climate change and its impact on food prices. Food consultant Gwynne Dyer writing for Arab News pointed out: “The rule of thumb is that we lose about 10 percent of world food production for every rise of one degree C in average global temperature​.”

Those food shortages, aggravated by the drive towards energy crops and increasing urbanization, will drive the price of food inexorably upward.

That means we can no longer trust Adam Smith’s “the invisible hand​” of free market forces to regulate food markets. In the 21st century, the consequences of failure are simply too great to tolerate.

Turning Point

For that reason this Arab Revolt could mark a turning point in food policy: The universal acceptance of the need for government intervention in global food markets.

Already, commodity traders are noting that governments worldwide are increasing their role in global food markets and are boosting stockpiles and subsidies or imposing trade curbs. After witnessing regime change in Tunisia and Egypt, with Libya on the brink, which government wants to risk a similar fate?

Perhaps the legacy of Bouazizi’s ultimate protest will be global recognition that food market management is not an expensive luxury but vital for world stability.

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2 comments

Not whether but how govt regulates

Posted by Bill Freese,

Mike Stones is correct to say that "Food prices are too important to be left to the free market." But the status quo is not, as he seems to think, the free market. On the contrary, governments in both developed and developing countries intervene in food markets, but often in counterproductive ways. The question is not whether to regulate (food is too important to leave unregulated), but rather how to do so in ways that help the poor.

None other than Bill Clinton points to an example of bad food policy. Under his administration, Haiti was forced to practically eliminate tariffs that protected it's rice farmers from a flood of cheap subsidized rice from the U.S. Haiti's rice farmers couldn't produce rice cheaply enough to compete with US rice, the price of which was made artificially cheap by massive U.S. government subsidies to American rice farmers. Haiti's rice farmers went out of business and became part of the urban poor. Haiti became dependent on American rice at world prices. When world rice prices skyrocketed in 2008, people couldn't afford the rice, went hungry, rioted, forced their prime minister to step down. Now the prices are climbing again. For more on this, see http://www.huffingtonpost.com/2010/03/20/with-cheap-food-imports-h_n_507228.html.

Haiti is not an anomaly. The World Bank, IMF and developed countries have pushed the same hypocritical changes throughout the developing world. Poor nations are forced to give up protective tariffs that support their farmers, even while the U.S., Europe, etc. retain heavy subsidies for their own nations' farmers.

Dave Humbert is correct to say that subsidies for corn to ethanol are absurd and should be eliminated. That is no reason to damn all regulation, however, far from it. Prior to the ethanol boom, corn farmers suffered for decades from low corn prices. WHat is needed are policies that keep grain prices at reasonable levels - not too low (hurts farmers) and not too high (hurts urban poor). The way to do this is to manage supply to both keep prices from plunging, and to keep them relatively stable. This is much superior to supporting prices by increasing demand by providing subsidies for biofuels production. Supply side management is opposed by the big grain traders like Cargill and ADM, who benefit from the low grain prices that accompany unlimited production. These same companies have found a way to profit now, with high corn prices. They have done this (especially ADM) by investing heavily in biofuels production.

The world's farmers, whether in developing or developed nations, all benefit from reasonable, and relatively stable, grain prices. We need policies that support THEIR interests, not those of the many middlemen (grain traders, biofuels producers, etc.).

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Regulation

Posted by David Humbert,

Show me where a thing the government regulates, you produce more! We've come to realize the failure of government involvement in ethanol / corn production. Failed effect of the atmospheric impact, rise in cost of corn and sub grains in price, imbalance in supply, and costly subsidies.

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