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The Next Source of Instability

2011 February 9

Food shortages are fueling unrest all over the world.

In Tunisia, riots spurred by rising grain prices and food scarcity could not be quashed, and as anti-government sentiment rose to a deafening, piercing pitch, President Zine al-Abedine Ben Ali was forced to abdicate, leaving the country’s Prime Minister Mohamed Ghannouchi in control.

There has been speculation that rising food costs have contributed to the violence and instability now in Egypt, where weeks of protesting have left more than 100 dead and over 4000 injured. Shaken, President Hosni Mubarak realizes his rule is quickly drawing to a close: he has vowed to step down come September, but demonstrators are demanding his immediate resignation.  “There is no trust between him and the people,” said Khaled Fahmy in an interview with Bloomberg news.  Protesters in Egypt can only hope that their autocrat will emulate Tunisia’s, as a weak international spotlight fails to bring about any guarantees.

Violence is also threatening despotic governments in Yemen, Algeria and Jordan.  In the shadow cast across the Arab world, the outcomes of these desperate revolutions are uncertain.

But why now?  With economists projecting the global economy’s recovery, and developing nations across Africa and Asia forecasted to make unprecedented economic growth in 2011, why are we seeing a world in the throes of upheavel?  Why is the time for change now?  The answer is food.

Recall, if you can, the riots of the starving in 2008.  From Africa to the Middle East, from China to India and Bangladesh, rapidly rising food prices cut a swathe of destruction through much of the developing world, touching off turmoil and unrest almost overnight.  In North Africa, the earliest food revolts began in Burkina Faso, where food prices increased up to 65% in the span of one month.  Shipping in Cameroon, the world’s fourth largest cocoa producer, was brought to a halt as hungry rioters, lamenting the high price of oil, shut down the port of Douala.  This resulted runs on stockpiled food and gasoline.

One of the most disturbing stories to come out of the 2008 riots was the murder of a 15-year-old boy amidst food riots in the city of Mahalla in Egypt.  Violence and outrage at high prices quickly spread to other regional countries including Senegal, Mauritania, and Cote d’Ivoire in a pattern which policy analysts have deemed the ‘demonstration effect,’ a term that has also been used to describe the violence which spread from Tunisia to Egypt late last month.

Many commentators are reluctant to to blame this new rash of violence in Egypt on the increased cost of food, citing it as an ‘oversimplification’ of complicated economic conditions and years of political oppression.  One factor that has likely prevented more dramatic displays was the Egyptian government’s stockpiling of wheat and grain late in 2010, in response to reports of Russian grain shortages (Egypt is, after all, the world’s largest importer of wheat, and much has been made of the place of bread in the nation’s daily life).  However, it is difficult to deny the role that the Tunisian riots played in catalyzing protests in Egypt, undoubtedly a revolution that  was brought on by escalating food prices.

Currently, food commodity prices are topping the levels reached in 2008, a jump that is due, in part, to undeniable climatic occurrences.  The torching of Russia’s grain crop this summer and continued drought/flood patterns in Australia have caused wheat prices to surge. This, in turn, has driven up the price of rice as an alternative grain.  In Brazil, drought and early harvests are profiting farmers, but driving world sugar prices, to an all-time high.  This has forced up the cost of corn as many turn to cheaper solutions for sweeteners.  In mid-January, a pessimistic forecast issued for Soy and Corn production in 2011 by the US state department drove prices to their highest level in nearly three years.  The cost of corn for animal feed has been driven up too, paralleling the increase in demand for meat, due to growth in China and to compensate for anxiety over Gulf seafood after the BP oil spill.

Some like Paul Krugman will attribute more meaning to climatic events, which he blames for steady price increases and portents to be the major reason for more increases in the foreseeable future.  Others like Vaclav Smil take a more mediated though pessimistic approach.  Smil believes that the world economy is dealing with the shock of rampant population growth, and trying to right itself with its invisible mechanisms.  On the topic of commodities, though, it seems many agree that prices will continue to increase.  The more pressing issues are tracking patterns of consumption and teaching sustainable growth to the developing world.

After the food riots began in 2008, researchers at the International Fund for Agricultural Development (IFAD), an organization that frequently advises the Food and Agriculture Organization of the UN, published an assessment of the impact of high food prices, and recommendations to reduce the risk of future price instability.  The highest food insecurity levels, and thus the greatest price fluctuations, were to be found in countries that relied on imports in order to feed the majority of households.  In many developing nations, 60-80% of consumer spending goes toward food, and as rising commodity prices intersect with domestic price inflation, households have nowhere to turn for relief.

Governments wishing to address these concerns face a brutally difficult choice. Short-term spikes can be solved by lowering tariffs and deflating domestic pricing, but this strategy can have devastating effects for a country in the long-term:

First, by maintaining farm-gate prices artificially low they discourage the much-needed supply response and productivity increase that is required for long-term food security. Second, export restrictions lower supply on international markets, pushing prices higher and aggravating the global situation. Third, higher subsidies and/or lower taxes and tariffs increase the pressure on national budgets and reduce fiscal resources available for much-needed public investment and other developmental expenditures[.]

The FAO has compiled a list of countries at risk for food shortages called Low-Income Food-Deficit Countries (LIFDCs).  Using this index, examining current economic and political conditions, and looking back to 2008 for a historical record of food shortages, we can begin to make some predictions about the next sources of instability: nations that may enter revolutionary situations like Tunisia and now Egypt, commodities that could touch off violence.

Fellow Busy-Signal contributor Jesse Myerson, in his most recent article, turns his gaze from Egypt to Zimbabwe and ponders where mass-democratization in the Middle East might lead.  Not so coincidentally, Zimbabwe is predicted to suffer from rising food prices; inconsistent rainfall has dampened the output for harvests at the end of 2010 and is predicted to cause further poor harvests this coming summer.  This doesn’t bode well for a country whose President is trying to maintain autocratic control despite recent conflicts over labor.

Cocoa is quickly becoming a decisive commodity in West Africa, and one which nearly every American will be trading or consuming come Valentine’s day.  Cote d’Ivoire, the world’s leading cocoa producer, has been asking buyers to boycott their crop since early December, at a time when the harvest is predicted to be the best in years.  The conflict, stemming from incumbent ruler President Laurent Gbagbo’s refusal to step aside for the recently elected Alassane Ouattara, has driven up cocoa prices, with thousands of tons waiting in the capital’s warehouses to be exported.  Ouattara has asked the world to stop buying from Cote d’Ivoire, hoping to starve his opponent out of power, drying up the money from cocoa Gbagbo is using to pay soldiers and faithful supporters who keep him in power.

For nearby countries who also reap profits from cocoa, this regional turmoil is being viewed as a golden opportunity.  In Cameroon, farmers  are hoping that burgeoning harvests along with high prices will give them big profits this year, possibly big enough to improve their agricultural infrastructure and challenge Cote d’Ivoire as the leading cocoa producer.  Not only could this economic competition hurt millions of farmers in the Ivory Coast, but it may lead to military clashes, especially given the uncertainty of food supplies in both of these countries over the past five years, and the fact that currently there is no clear leader in Cote d’Ivoire.

With February 14 less than a week away, and the newly elected President of the world’s biggest cocoa-producing nation barricaded in a hotel, held hostage by the incumbent autocrat of the former French colony, where your chocolate came from might not be at the front of your mind, but it should be.  America is the biggest consumer of chocolate, and like it or not, our nation’s consumption is funding a dictator who would rather let his people starve than cede power to a democratically elected successor.  It is this kind of agonizing oppression that is causing people all over the world to rise up and declare their hunger.  Price fluctuation is just that to businessmen, but for most of the world, commodities are either affordable, or they aren’t.  The challenge is to try to predict early when prices will rise into this red zone so that consequences can be mitigated or prevented.  But once prices reach a certain tipping point, there’s no telling what the outcome might be, for democracy, and for the world.

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