Pathfinders

Double Bubble Trouble

The ‘peoplequake’ currently tearing up streets across North Africa is not just about dictatorial rulers and lack of democracy, it’s also about poverty, unemployment, corruption, social exclusion, simmering religious tensions and, significantly, rising food prices.

World wheat prices rocketed by 50 percent during 2010, and countries which are net importers of wheat, and whose populations spend on average a third or more of their income on food, are the most badly hit by these rises. The Japanese investment firm Nomura has created a Food Vulnerability Index (NFVI) of 80 countries in its report The Coming Surge in Food Prices (http://tinyurl.com/6eoz4d9). In the top 10 of these countries are Egypt, Algeria and Morocco, as well as Bangladesh, Sri Lanka and Hong Kong. In the top 20 are Tunisia, Romania, Ukraine and Libya. If another surge in prices is imminent, as Nomura predicts, the NFVI may suggest where the political heat will burn hottest.

Let us however dispose of one misconception at the outset – the volatility of food prices does not correspond with a similar volatility in the supply of food. The 80 percent increase in global wheat prices in 2008 occurred during a ‘super-harvest’ of American wheat and has been blamed squarely on speculators in Chicago and Minneapolis who have only recently converged like locusts on the world’s farm crops (see for instance ‘How Wall Street starved millions and got away with it’ by Frederick Kaufman, Harper’s Magazine, July 2010). That speculators were entirely responsible for creating a financial ‘food bubble’, as Kaufman claims, is frostily denied by Goldman Sachs, the chief bad-guy of his essay, but also disputed by several other independent reports, citing other factors such as the 40 percent crop loss due to the Russian drought, as well as floods in Pakistan and China, and the spike in oil prices which nowadays correlate closely with food prices. Nevertheless, speculator-frenzy was sufficient to alarm the Indian government into banning all agricultural futures trading in 2008.

Another misconception is that population is causing food prices to rise. Global population has been rising steadily for decades while real food prices have been falling since 1970. World population is expected to reach around 9.5bn by 2100 but a recent report from the UK Institution of Mechanical Engineers (http://tinyurl.com/4vodmec) argues that the anticipated food demand can be met with current engineering methods and that the barriers are largely political. They point to the 25 percent wastage of post-purchase food in developed countries, and the staggering 50 percent average post-harvest crop loss in developing countries because of poor storage and management: “It is evident that the barriers to deploying solutions are not technological. The issue is often one of implementation and in this area action should be taken by society and political leaders at national, regional and local levels” (Population: One Planet, Too Many People? p.40).

Meanwhile, other researchers are less optimistic, citing the unsustainable exhaustion of non-replaceable water supplies driving much of current global food production. In China an estimated 130m people rely on food produced through overpumping groundwater, in India around 175m, while Saudi Arabia, currently self-sufficient in wheat, has almost drained its fossil aquifers and next year’s harvest may be its last (New Scientist, 5 February). Agriculture accounts for 70-85 percent of global water consumption and half the world’s population live in countries with falling water tables. Lester Brown, president of the Earth Policy Institute, argues that this environmental ‘food bubble’ could burst at any time, with catastrophic consequences: “No civilization has survived the ongoing destruction of its natural support systems. Nor will ours….. the world is only one poor harvest away from chaos” (‘When Will the Food Bubble Burst?’, Earth-Policy.org, 12 January).

The UK engineers agree over the problem: “Indeed if there is one common factor that [we have] identified in the issues relating to water around the world, it is the unsustainable abstraction of groundwater at a higher rate than natural replenishment allows” (Population report, p.24) but they point out that this does not need to be so: “Given current techniques and capabilities there is no valid reason why there should be a shortage of water for human use. Fundamentally, there is no shortage of water on the planet to meet the anticipated rise in consumption of 30 percent by 2030. There is however, a spatial and temporal misalignment of supply and demand” (p.5). China, whose water is mostly in the south and population centres in the north, is currently dealing with this ‘misalignment’ in a refreshingly low-tech way, with a big canal. Other countries, given the removal of economic and political barriers, could theoretically do the same.

World food supply is affected by a number of factors, including population growth and rampant urbanisation, land and water depletion, invasive species, pollution, climate change and El Nino events. But prices are a function of the market system and volatility here is also driven by protectionism, speculation, oil costs and consequent biofuel demand, and plain old fashioned hoarding to inflate prices. The problem with the forecasts of Nomura, the engineers and the Earth Policy Institute, is that they are obliged to think within the capitalist box, and as far as solutions go that box is pretty much empty. Socialists can only hope that the world doesn’t have to starve half its population to death before coming to the conclusion that leaders are not going to change anything and that capitalism is the real bubble that needs bursting.