Recipe for Catastrophe: Climate, Fuel, and Food
Food riots turn deadly in Haiti. Food riots fear after rice price hits a high. And so it starts.
Globally there has been roughly a 25% increase in food prices. In some areas - such as Haiti - food prices have increased almost 50% in the last year. The poor of the planet who always live on the razor's edge of survival, are getting hit by multiple blows aimed directly at the food supply.
From subsistence farmers eating rice in Ecuador to gourmets feasting on escargot in France, consumers worldwide face rising food prices in what analysts call a perfect storm of conditions. Freak weather is a factor. But so are dramatic changes in the global economy, including higher oil prices, lower food reserves and growing consumer demand in China and India.
The world's poorest nations still harbor the greatest hunger risk. Clashes over bread in Egypt killed at least two people last week, and similar food riots broke out in Burkina Faso and Cameroon this month.
But food protests now crop up even in Italy. And while the price of spaghetti has doubled in Haiti, the cost of miso is packing a hit in Japan. (Food prices rising across the world)
This didn't start with the current economic crisis which comes with the so-called "mortgage crisis." It doesn't start with the recent sky rocketing increase in oil and gasoline. It started with the U.S. turn to bio-fuels production. It has been accelerated by multiple other issues.
The U.S. bio-fuels incentives put not just the U.S. food supply, but the global food supply, in competition with the fuel supply. Farmers (and corporate agriculture) in the U.S. took much of the corn crop to the refinery rather than to the food processing plants. Most of the food price increases seen in the U.S up until about a month ago were due solely to this shift. Globally this policy has increased grain costs, but the new push has also hit the global cooking oil supply. This switch from food (or even cooking oil) crops, to crops for fuel, result in both rainforests and existing fields falling to the more "profitable" crop - that which can be used for bio-fuels.
The global food supply is also being hit by a series of other blows. This includes the continued steep rise in the cost of oil, and climatic disasters.
China was hit hard this winter by horrendous storms in January and February of this year. Those storms hit heavily in Southern China, dramatically impacting the growing area. Poor harvests are among the factors that are creating a rice shortage which is hitting Asian nations hard. Rice prices have increased as much as 70% during the last year alone, The price has more than doubled since 2003.
Wheat crops from Russia to Africa are being hit by the deadly grain virus "rust." If this spreads as currently predicted, it could hit the wheat region of India with devastating consequences.
The spread of the deadly virus, stem rust, against which an effective fungicide does not exist, comes as world grain stocks reach the lowest in four decades and government subsidized bio-ethanol production, especially in the United States, Brazil and the European Union, are taking land out of food production at alarming rates. (Rust to fertilize food price surge)
The fertile Ganges delta and Sundarban Islands (India and Bangladesh) are rapidly disappearing. This is largely due to the glacial melt from the Himalayas caused by global warming. Some of the Islanders have been displaced for each of the last three years, and daily they fight a losing battle against the rising waters (Guardian, 3/30/08). While the assumption in the U.S. is that fuel prices are driving increasing costs (at least partially true), it is food that is driving inflation in India. There was a 7% increase in food prices for the first three months of this year alone.
There are expectations that Asia and Africa face famines (or should we say increasing famine) from global warming.
The United States is not immune to the food catastrophe happening around the globe. Eckholm, writing in the NY Times reported that the confluence of a flagging economy and inflation are driving increased food stamp usage. Since only those near or below the poverty line are eligible for food stamps, growth of usage shows growth in this population. However, it under-represents the number of people who are struggling. The cost of everything is going up while wages remain stagnant (at best). While many folks may hold onto their jobs, the increasing costs are dramatically eroding incomes. We should look for dramatically increasing food bank usage as the various forces at play on the food supply continue to mount.
As much as half the population of the planet faces dangerously increasing food pressures. It is telling that riots regarding food prices are starting to occur (i.e. Egypt and Haiti). These type of events will likely increase. Unfortunately, while riots may result in governments applying some price controls, they will not affect food availability, and food availability is a very real issue in an expanding number of places. At this point, the big nations seem to be doing little if anything to address the growing global crisis. The United States, rather than acknowledging the impacts of bio-fuels incentives, expanded the programs again this year. It is very likely that corn prices may go up by over 50% this year.
Since corn is in almost everything in the U.S. food supply, then that cost will be directly felt come later this year. Of course, that increase will also effect the cost of fuels using corn-based fuels. There is no anticipation that oil prices are going to come down, nor that the economic recession is going to ease in the near future. Therefore this situation is likely to get worse before it gets better - if it gets better.
Further, the situation is complicated by shortfalls in food reserves. Nations have been strong armed by the General Agreement on Tariffs and Trade (GATT) to switch agricultural production from food for sustenance to commercially exportable crops. The expectation being that sustenance crops would come from outside the country (primarily the U.S. and Europe). This is one reason why changes in incentives and production in the United States have such devastating consequences on grain prices globally (Digiacomo, Bello).
The image of 3 billion people rioting for food will hopefully not become a reality. However, to avoid that scenario governments need to act now - not later. Hesitation or avoidance of the issues driving the growing food crisis will not make it go away. Some things are seen fairly immediately - dramatically increasing transportation costs for example. However, much of the current pricing and shortages are from last year. The situation has deteriorated since then, and certainly for the current and upcoming growing season. We need to get ahead of this problem, or it will hit with crushing affect come late summer to next winter.
Posted by Rowan Wolf at April 7, 2008 10:58 AM
to avoid that scenario governments need to act now - not later
And we should do what, exactly?
No surprise here Rowan, anyone with their head not buried up AlGore’s butt could have figured this out. Burning food for fuel has been condemned by many but their voices were drowned out by the man-made global warming crowd.
Starvation in the name of curbing the false theory of man-made global warming is considered to be politically correct in many circles.
I guess we should rush through those new nuclear energy plants. At least we should try to catch up with the French.
We clearly cannot rely on biofuels for the total solution. Nuclear power is THE answer for the near future. Farther along we may be able to develop solar and wind power that works well enough to pick up the slack.
I still go with carbon tax as the best way to accomplish our goals. Government should “act” in that way soon.
The biofuel/corn crisis you mention is CAUSED by government action. It is the best arguement AGAINST strong government action since we were defeated in the “War on Poverty”.
Rowan another excellent and informative article. I sure wish I had some solid answers for these hard questions we face but it seems all I have are questions.
So all you free market types blaming the global warming crowd, government etc. what is the free market answer to this free market problem? Send more manufacturing jobs to Communist China and other slave wage nations from the US or grow more corn etc. to meet the demand? Can the problem be solved by voluntary contributions to second harvest type food bank programs? What say you.
How will nuclear energy plants stop the need for bio fuels for vehicles? Do you see the demand for oil falling that much due to nuclear energy plants that will take 3 to 5 years to buld?
Jack why do you blame the government for the biofuels crisis? Isnt the Farmer & Producers in Iowa (and other places) and the Environmentalist partially to blame for this? The Government was responding to a real problem in a free market sort of way and we are now seeing the unintended consequences of this effort.
How would a carbon tax help to feed the poorer nations of this world? Perhaps supplying corn seed, water and non oil based fertilizers to those in need would acheive more. Maybe its time to rethink our foreign policy a bit and turn some of those weapons into plowshares so these other nations can fend for themselves. Adding a carbon tax as we enter into trying economic times may not be wise, certainly Hoover would say its not a good idea.
j2t2, Simple answer to your free market question; support the “FairTax”. A thorough understanding of the FairTax will convince most people that by ending our current taxing system, jobs and money will flood America, be copied by other nations and help solve many of our worst problems.
The Government was responding to a real problem in a free market sort of way
That statement says it all…
*hint* The Government, by its nature, cannot respond in a free market way, it can only regulate and enforce the free market, not direct it, and it remain a free market.
Jim M are you saying that by switching to a national sales tax we will solve the food crisis in Haiti and elsewhere? Please be more specific as the sales tax has been debated here a few times and found wanting.
Rhinehold Are you saying the ehtonol market is overregulated? Most environmental gains have been causes by the government prodding the free market along. Until the free market can see a profit in anything they dont change. Are you saying the prodding is the problem? Do you have any particular ideas that would help instead of a general blame the government statement. How can the free market solve this problem or will the governments of the world need to get involved and do it?
Im not seeing an incentive for the corporate farmers to grow more crops to solve the problem. More crops/competition will drive their prices down wont it?
JimM offered the following speculation and personal opinion:
j2t2, Simple answer to your free market question; support the “FairTax”. A thorough understanding of the FairTax will convince most people that by ending our current taxing system, jobs and money will flood America, be copied by other nations and help solve many of our worst problems.
Pretty illogical construction, there, JimM. A thorough understanding of the FairTax means what? That one agrees with it? That seems to be you implication. That anyone who reads it thoroughly and disagrees with it, does not understand it.
That is the same logic as saying Mr. X kidnapped Mrs. Y and tortured her for justifiable reasons and anyone who listens to Mr. X’s explanation and doesn’t agree that is true, simply doesn’t understand what Mr. X is trying to say.
Second illogical construction. While it is true that ending our current tax system would, for a short time, increase jobs and cash flow in America before the nation filed bankruptcy for not honoring its foreign debts, the UnFair Tax goes way beyond simply calling for an end to the current tax system. It installs another one, a national sales tax, which exempts the wealthy from much of their tax burden, shifts that burden onto the consumers, which would restrict consumption and slow economic growth for a time, not to mention moving millions of middle class folks closer to the poverty line qualifying such folks crossing the line for a paltry rebate check.
What evidence is there that other nation’s would follow America’s failed UnFair Sales Tax system which inevitably bred class warfare and revolt against the very wealthy for having paid fractions of 1% of their incomes in taxes, while middle and wage class consumers paid between 23 and 40% of their incomes in taxes depending on whether Soc. Sec. and Medicare were kept as safety nets or not going forward?
That was a deceptive few words at the end of your comment: “and help solve many of our worst problems”. Deceptive because you make no mention of the new problems a national UnFair sales tax play would introduce, ignoring entirely the validity of opportunity costs when it comes to economics. There is no such thing as a taxing system that will exact the same relative costs on all equally, and therefore, all tax plans have downsides and negative consequences for a few, some, or most.
A Flat Tax system, regarded by many as the fairest system, has enormous costs associated with it like inflexibility to meet the nations needs by targeting tax increases or cuts on those best able to continue to succeed with them. There is no taxing system without costs and negatives.
Unless and until the proponents are willing to delineate the real downsides of a national sales tax system, it will remain a minority religious experience of imagination, one in which proponents anticipate being miniscule consumers and hording enormous sums now being paid in federal taxes, thereby enriching themselves by gaming the sales tax system.
Reality however, would not be gamed so easily. Where are the safety nets of Soc. Sec. and Medicare in the UnFair Tax system? Where are the Estate Taxes and Investment Taxes in the UnFair Tax system which prevent an outright Aristocracy from causing another Storming of the Bastille as occurred in 18th century, and the beheading of the Aristocrats in Charge? Answer: The UnFair Tax system offers no such preventive provisions.
In fact, it anticipates doing away with safety net programs for the handicapped, the elderly, the infirm, the injured, and its new growing class of working poor, worked for by the same people touting the UnFair Sales Tax system.
Rhinehold, government regulations contain do’s and don’ts, and therefore, do indeed direct free markets through punishment of certain behaviors and activities which the free market would otherwise permit, and creating incentives for other behaviors which help balance an unbalancing system (as in the very poorly designed economic stimulus Bill for 158 Billion).
The term Free Market is contextually defined. A pure free market leads to imbalances, excesses and deprivations which in turn lead to social instability, civil war and revolutions. Thus, hardly anyone uses the terms as thus defined. Today, Free Market refers markets which are Free to operate, decide and act within a framework of constraints and oversight as well as government management of imbalances that threaten stability.
Nearly all nations of the world today employ varying degrees of this contextual definition, some far more successfully than others, including government management of imbalances, as evidenced by the rapid growth of Central Banks in all modern industrialized nations, which are extensions in one form or another of government authority.
The err is human, but to really screw up big time you need the support of a government program.
The farmers in Iowa like to get subsidies for ethanol. I would like to get subsidies for the things I do too. Who wouldn’t?
I blame the goverment in this case. Yes. We subsidize ethanol from corn AND we put tarrifs on ethanol from sugar cane. The government is paying to push corn ethanol and holding back other kinds. The farmers and others could not afford and would not have the incentive to do so much harm w/o the government.
Re carbon tax - the carbon tax is designed to curb the use of CO2 and reduce the effects of global warming. It would discourage the use of carbon based fuels and encourage alternatives, which includes biofuels, but also includes wind, solar & tidal power as well as conservation. It allows much more choice than government command and control.
It does not directly address the food problem. It is fairly neutral in this respect, BUT if you believe global warming is a problem, this will address that. You cannot expect anything to solve all your problems. That is precisely the problem with many “environmentalists”. They do not really care about the environment as much as other priorities.
BTW - if you want to address the food crisis one word answers your question - biotechnology.
That anyone who reads it thoroughly and disagrees with it, does not understand it
more wisdom from Davidworld. And he then goes on to prove he is speaking from ignorance himself:
Where are the safety nets of Soc. Sec. and Medicare in the UnFair Tax system.
Anyone reading it completely and understanding it would note that SS is not touched in the Fairtax plan. And further, you’ve been told about that several times and refuse to admit that fact, instead you use the classic fearmongering tactics, tried and true, to scare people away from even debating the plan, when you know your infallable logic can’t match up.
Ignoring of course the numerous economic studies from respected Economists who developed and favor the plan…
Instead, it’s to the conspiracy ridden mind a way to fleece the poor, when in reality it is the only plan that completely eliminates the tax burden of the poor. One can see why that would be opposed…
Rhinehold, government regulations contain do’s and don’ts, and therefore, do indeed direct free markets
Please reread what I said. I stated clearly that the government can (and must) regulate and protect the free market. It just cannot ‘participate’ in it, being a monoply. Monopolies have no place in a ‘free market’ and especially the one monopoly that can use force on individuals.
“Jim M are you saying that by switching to a national sales tax we will solve the food crisis in Haiti and elsewhere? Please be more specific as the sales tax has been debated here a few times and found wanting.” Posted by: j2t2 at April 7, 2008 06:13 PM
j2t2, my response was in reference to your statement about the US loosing manufacturing jobs to China and slave labor.
The “FairTax” may have been debated on this site and found wanting…so what. Many opinions on this site are “found wanting”.
Many liberals on this site have often lobbied for the rich paying their “fair share”. They should all back the FairTax as it will require the rich to pay more taxes.
David, you have answered my statement about a thorough understanding of the FairTax. You don’t understand it and therefore don’t support it. Just one simple point among many I could make.
The FairTax would eliminate caps which are now in place on payroll taxes on Social Security just as there are now, no caps on Medicare. Those wishing to shore up SS and soak the rich should be in favor of the FairTax.
Rhinehold, government is an employer. It participates in the free market. It taxes, removing disposable income from consumers in exchange for other services. It participates in the free market. Government, all governments, remove resources available to the free markets for its own uses. It participates in the markets. Governments consume goods and services, it participates in the ‘free markets’.
The problem with ideology is that it is blind to reality. As I said, the concept of free markets is contextual. Nobody wants true free unbridled markets, which explains why there are none save for in the arena of illegal black markets like ‘Blood Diamonds’ and drugs where there is only one rule driving enterprise, profit above all other values.
Thanks, JimM for demonstrating the truth of the tautology I described your argument as.
JimM, whose version of the UnFair Tax calls for a lifting of SS and Medicare caps and preserving those programs? Or, is your reply making this crap up as you go along? Please provide a reference, if you can. Thanks.
You keep making the statement that there are no ‘unbridled markets’, who is suggesting one?
If the government is participating in the free market, as you suggest, as a monopoly, which they are, instead of doing what they should be doing and regulating and protecting the free market from monopoly, then the market isn’t free.
So let’s dispense with the nonsense that we have a free market at all, ok? And further dispense with the erronious suggestion that the free market, which we don’t have, is the reason for our societal ills.
HR 25 calls for preserving SS, in fact it relies upon SS.
But you know that so your demand for ‘which version’ does that is spurrious at best.
“JimM, whose version of the UnFair Tax calls for a lifting of SS and Medicare caps and preserving those programs? Or, is your reply making this crap up as you go along? Please provide a reference, if you can. Thanks.”
Posted by: David R. Remer at April 8, 2008 05:30 PM
As Rinehold answered above, HR25 is the only version of the FairTax introduced in the house for consideration..
The FairTax includes funding (at today’s levels) for both SS and Medicare. Payroll taxes today include SS on income only (not unearned income such as interest and dividends) up to the current cap. Those earning more than the cap stop paying into the SS fund at that point.
With SS (and Medicare) funding is coming from the FairTax, with all new spending being taxed. Wealthy persons who spend more will pay more. Even foreigners (about 50 million per year) visiting the US and making new purchases here will help fund our SS and Medicare. No longer will those with unearned income be excused from paying SS as all new spending (with no limits), will pay the FairTax.
Liberals who wish to “soak” the rich will finally have their dreams realized. If you truly wish to understand the FairTax, read the bill or buy the FairTax book.
Long before the democratic congress passed this terrible bill which will massively INCREASE the amount of food we turn to fuel….the science was out there that food to fuel was WORSE for the environment and driving food costs up, thus starving people around the globe.
Lets be real here. The politically correct, junk science left got their way. And now people are starving and the pollution is actually worse for ethanol not better. Forests are being cut down, wet lands plowed under, all to provide ethanol for the US.
Scientists are now coming out stating they were afraid to speak out on this because of the political pressure. After all, if it’s politically correct….then you either support it or lose that job, lose that grant, miss out on that promotion. The left was screaming for those who oppose the “man made global warming worse” religion to be FIRED for daring to be “ignorant”. Now we see those ignorant scientists who dared to oppose the radical left are RIGHT.
Ethanol from crops is BAD. People are dying. The UN is begging the world to stop. But democrats pushed through and celebrated their big ethanol bill. As long as political correctness wins out over reason, logic, and science….the left will be happy. No matter how many people starve to death because of it.
My how quickly politically correct science flip flops. I guess I was stupid yesterday for opposing food to fuel and now I’m a genius? Oh now, since I was right yesterday, I must be an evil rovian neocon!
Thanks Stephen for echoing my sentiments as well. How long will it be before the politically correct position is to support the “man-made global cooling” crowd.
Question, will AlGore be required to return his Oscar and Nobel awards as his work is a total fabrication in support of fleecing America?
Pretty easy to guess what will come out of all this. The US has too much food per capita and we need to give more food and money away until our income and food consuption matches that of much poorer countries. We also have too much land per capita and to help fix that we probably need to absorb more uneducated 3rd world immigrants at an even faster rate than we already are doing so.
Check out Time’s April 7th issue.
Do you really think that, if the rest of the world goes to hell in a handbasket, that we can just sit back and not be affected? Do you really think that global warming will magically not damage the US? As the old song goes, it’s a small world after all.
So we have food riots, and here we are debating nuclear power, the true definition of “free market economy”, and the frickin’ Flat Tax?!? Rowan brings up a serious issue, one that is the result of bipartisan pandering to agribusiness, and we all break down into partisan bickering?! If I had a stick long enough, I would beat you all about the head and neck with it. We have a perfect storm of economic issues, global warming, military overextension, and massive personal and national debt, and here we are, fiddling away like Nero as our Rome burns down around our ears. Grow up people! Let’s talk about solutions, not point fingers.
leatherankh, your reference to the “frickin’ Flat Tax?!?” reveals your ignorance of it as a very good solution for one of our national problems. Opposition to good solutions is usually an attempt to maintain advantage and power and often is driven by greed.
Do you actually know anyone who likes the present tax code with all its convoluted and manipulated language and usage?
leatherankh thanks for the article. Your comment is spot on. Evidently I started the tax thing by asking what the free market solution to the problem is so I apologize to Rowan, But it wasnt my intent to sidetrack the issue.
So this time I will be mopre specific
So all you free market types blaming the global warming crowd, government etc. aside from the stock answer of lowering taxes what is the free market answer to this free market problem?
Biofuels are the so called free market stop gap measure between the oil companies filling your cars gas tank with gasoline and filling your cars fuel cell with hydrogen which they plan to produce from oil and biofuels. Let’s face the fact that this solution is as good as your going to get from free market Democrats and free market Republicans.
It is also the best solution for the American people who wish to maintain their 90MPH mass consumption lifestyles. Why should we care if there are food riots in other countries or if a bunch of foreigners die of starvation because they can’t afford food? Isn’t it true that the herd is made stronger when the weaklings are culled?
I know all about the “FairTax”: a 23% (which is really a 30%) national sales tax, yada yada. My point is not whether it is a good idea or not, but that what good would restructuring our tax code do for the issues that Rowan brings up? Not saying you are, but it makes you sound like you are trying to change the subject and rack up points for your favorite cause.
Leatherankh, Rowan said, “The United States is not immune to the food catastrophe happening around the globe. Eckholm, writing in the NY Times reported that the confluence of a flagging economy and inflation are driving increased food stamp usage. Since only those near or below the poverty line are eligible for food stamps, growth of usage shows growth in this population. However, it under-represents the number of people who are struggling. The cost of everything is going up while wages remain stagnant (at best). While many folks may hold onto their jobs, the increasing costs are dramatically eroding incomes. We should look for dramatically increasing food bank usage as the various forces at play on the food supply continue to mount.”
Since Rowan talks about three problems, flagging economy, inflation, and jobs leaving American shores it is certainly pertinent to talk about a solution to these pressing problems, that is, The FairTax. And please, don’t play the 23%, 30% numbers game. No matter which formula is used the resulting tax collected at the point of purchase is the same.
All the flat tax will do is simplify the tax code, not improve it. It will not fix the biggest issue our tax code has, namely that the rich pay a lower overall tax rate than the middle class. The 23/30 thing is a flat tax advocate’s attempt to put a wig on a pig, not the other way around. And most importantly, a flat tax is not going to reduce the pressures our insistence on turning food into fuel is putting on the global food market, deforestation, and global warming, so I fail to see how it really has anything to do with Rowan’s overall point. We need to wean agribusiness off the public teat and start finding solutions to global warming that are global, not national.
leatherankh, you’re talking about a Flat Tax and I am talking about the FairTax. Big difference, you should actually take a look at the H.R. 25 bill to understand its benefits. It completely resolves the rich vs middle class tax issue.
Beyond the basic necessities for which everyone, including the rich, will get a credit, the rich who spend more will pay more. Your dreams of soaking the rich will come true. Read the bill and then attempt to refute what I wrote.