The cover story of last week’s Spectator was about the political impact of rising crop prices: John R. Bradley, who alone predicted the Egyptian revolution, explained how the same phenomenon is happening again. His piece speaks best for itself but today HSBC has released some research making the same point. I thought Coffee Housers may be interested.
The picture above shows how much of the US is hit by drought now, and given that it’s the number one exporter this has hit world prices. The price of wheat, corn and soyabean has rocketed by 30 per cent, 25 per cent and 42 per cent, respectively since the start of the year. As Bradley argued, today’s crop prices will inflate tomorrow’s meat prices. The drought would be bad anyway, but its effect on hunger is exacerbated by the decision to use crops for the supposedly environmentally friendly ethanol. Learning no lessons from the 2008 food price spike, and anyway resenting the import of foreign oil, the US government has demanded an ever-greater share of this food is used for cars.
Now, will this result in political unrest? In his piece, Bradley said we should remember that food accounts for about a tenth of a British person’s budget but this is 40 per cent in Egypt. Its also high in Argentina and the Philippines (both 38 per cent) Mexico (30 per cent) and Vietnam (40 per cent). Bradley’s piece also referred to the correlation between the global food price index and riots in general. This is shown by the below graph.
The G20 is mulling a crisis meeting, but disaster could be averted. Asian and African crops have been unaffected. Just like after the 1929 crash, the real risk is the drying up of trade. ‘Whether this is merely another hindrance to growth or something more meaningful depends on governments’ behaviour from here,’ says HSBC. When America chose protection in 1930, it triggered the global depression. And it was the hoarding of food in 2008 that led to the shortages which caused such mayhem. Egypt, the world’s largest wheat importer, has been placing forward contracts with Russia and Ukraine. But India is already starting to hoard, and there are signs that Russia is considering the same policy (it is suffering a drought, too).
As Karl Popper famously observed, mankind can predict solar eclipses with great precision but we always tend to be surprised by revolutions. The UK Foreign Office had no clue about the Arab spring, nor did any political scientist. The collapse of the Soviet Union surprised Sovietologists (including Prof Condi Rice). Sometimes, politics – the spread of ideas, the demand for freedom etc – has embarassingly little to do with the direction which countries take. Mundane things like the price of bread can matter more than we think.
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