Who caused the world food crisis?

by Barry Artiste | April 29, 2008 at 08:56 am | 339 views | 2 comments

Opinion
Barry Artiste, Now Public Contributor

Certainly an "Inconvienent Truth" lost on those who presented Al Gore with his Nobel Prize and by some Environmentalists who thought no further than their Hybrid cars.

We are now by all accounts in the midst of a global food crisis: key grain prices were up 40% to 130% in the last year, people are protesting and hardship is mounting. But it could soon be worse. Governments and agencies all over the world are gearing up for a global "New Deal" on agriculture policy to solve the food crisis, which means the people who brought us the food crisis are the same people who now want to fix it.

The World Bank reports that prices of staples have jumped 80% since 2005. The price of rice hit a 19-year high last month, and wheat rose to a 28-year high, twice the average price of the last 25 years. Factors behind the surge in prices are varied, including bad weather in some regions, soaring demand from growing populations, and US$100-a-barrel oil.

But no factor gets more consistent credit for food price turmoil than the international biofuels stampede. Spurred on by what can only be described as massive subsidies and supporting regulations, farmers all over the planet are giving up on food production and shifting to fuel production.

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eastvanray

at 18:23 on April 29th, 2008

A perfect example of why playing with market signals through subsidies is a dangerous game. If you subsidize something the market will produce more of that thing and less of whatever they were producing before the subsidy. In the case of agriculture that has had a very predictable result...increased production of the subsidized thing (biofuel pre-cursors) and less production of the less subsidized thing (food). I am not sure why anyone is surprised by this. It is about as simple as supply and demand gets.

Governments should stop playing with tools they clearly do not fully understand and get out of the way of natural market mechanisms. If the people want biofuel then the demand will push prices up and farmers will respond by increasing production. Subsidies are like steroids. They create unnatural outcomes and can create havoc within the systems they are supposed to be helping. Besides they are a waste of tax dollars and nothing more than a redistribution of wealth for political gain.

Now either subsidies have to be dropped or food prices have to rise to shift production back to food. It has been a dumb experiment in Keynesian economics.

Barry Artiste

at 22:34 on April 29th, 2008

I agree EastVanRay, but to be fair, the Conservatives on the outset were not crazy about all this Biofuel business. Opposition parties, Media and the Eco-Public continually lambasted the Conservatives into action, in particular the Environment Minister. Having Al Gore say the Conservatives are doing nothing on Biofuels and sitting on their hands, ultimately the Conservatives I suppose gave into special interest pressures, as Canadian Joe Public sat on their hands and didn't tell the Conservatives to do otherwise. It is the loudest who scream from the rafter that get action from government, and the ones who didn't want Biofuels, knowing the consequences in all this, did not act or scream at all. Governments do rely on Public input on both sides in order to act. One side was the loudest. On the other hand Governments love a silent public when they are looking at pushing unpopular bills as well. Usually Opposition Parties notify the media and Public. Once passed, the public outrage and the Government say, Hey, where were you when we said we were going to pass it? That is what Town hall meetings are for and political ridings have meetings with their voters as well. If you do not get involved in expressing your voice to your politician, it is pretty much the same as not voting.

Thanks to you both for your insightful comments.