The Common Good
July 2008

A Human-Made Disaster

by Elizabeth Palmberg | July 2008

The dramatic rise in world food prices has pushed millions into poverty. Here's a look at 10 factors--from agrofuel production to rising meat and dairy consumption--that have contributed to ...

The writer of the biblical book of Revelation, commenting on a Roman food crisis, expressed outrage that a day’s wage was not enough to feed a laborer’s family. Part of the problem was that local grain production had been undercut by cheap Egyptian imports and the greater profitability of livestock feed, while the province of Asia saw food staple prices rise because grain was less profitable than wine.

Sound familiar? It should—because the current crisis of world food prices, which has sent 100 million people into poverty, is a mostly human-made disaster.

The problem today is not a lack of food—it’s that it’s too expensive. Many of the world’s poor were already paying up to 80 percent of their income for food; in the last year, rice more than doubled in price, wheat nearly doubled, and corn went up by two-thirds. And the sad truth is that human beings set things up this way.

Here are 10 factors—most of them preventable—that led us to the global food-price crisis we’re in today:

1. Fossil-fuel-intensive farming models. It’s long been obvious that, as our planet’s accessible oil and gas supplies dwindle, their price will go up. Yet for the last several decades, the U.S. and other rich countries have pushed a farming model in which farms are large, heavily mechanized, and geared for export to distant markets. This model ran into the ground many of the small-scale, local farms that had the ability to grow food locally and sustainably (and that, in the global South, had provided some kind of subsistence for former peasants who have now become hungry urban slum dwellers).

Export-oriented factory farming slurps up huge quantities of fossil fuels—to transport massive amounts of food halfway around the globe, to run mega-tractors, and to make non-organic fertilizer using natural gas. So the price of food is linked to the shifting, and rapidly rising, price of crude oil—which has gone up more than 80 percent in the last year.

2. Biofuel production. Food prices are tied to oil prices both going and coming, because rising fossil fuel prices—combined with massive government subsidies in the U.S. and Europe—make it more attractive to convert corn and soy into agrofuels. To fill one SUV tank with corn ethanol takes 450 pounds of corn—enough to feed a person for a year. (Don’t count on an environmental payoff, either—many estimate that factory farming, distilling, and transport of ethanol together burn roughly a gallon of gas per gallon of ethanol produced.) U.S. ethanol production is estimated to have caused at least half of the rise in world corn demand for the last three years; corn is displacing wheat acreage on many U.S. farms.

3. Rising meat and dairy consumption in the U.S., China, and India. Most commercial livestock is raised on feed grain, and it takes up to eight pounds of grain to make one pound of meat. Many news stories blame this problem exclusively on India and China, which are consuming more meat as more of their citizens rise out of poverty. Instead of simply blaming Asian appetites, however, the U.S. should take a hard look at the example it sets and its own ever-increasing meat consumption per person—now up to 222 pounds per year, 78 pounds more than in 1950.

4. Poor nations’ dependence on imported staples and the volatile world market. ­Before the neoliberal craze of the past two and a half decades forced many poor countries to gut their farm policies, most grew enough food for their own people and then some. In 1960, the developing nations of the world produced $7 billion more in farm products than they imported each year. But during the 1990s, surplus changed to deficit, which reached $11 billion per year by 2001.

As we’re seeing now, the big problem is that markets can fluctuate wildly—and, when the commodity is daily bread, the brunt of those fluctuations is borne by those least able to bear it: the poor. In a crisis, nations that grow more food than they need can and do look out for their citizens by slapping restrictions on exports, but food importers have no such option.

How did so many poor countries get so dependent on imported food? For the past several decades, wealthy nations pushed hard to get poorer countries to stop using tariffs, quotas, and other policy tools that protected their farmers from being driven out of business by factory-farmed imports. The International Monetary Fund used the debt crisis, which started in the 1970s, to foist neoliberal farm policies on debtor nations. The World Bank pushed these policies through its economic advice and conditions for loans and aid. NAFTA turned Mexico into a corn importer and drove more than a million campesinos off their land, while the World Trade Organization required prospective members to throw out import quotas and other key parts of the poor-nation farm policy toolbox.

Rich-country policy experts didn’t do all this because they wanted to cause malnutrition, poverty, and rioting. Partly, they were influenced by self-interested international agribusiness (for example, a former Cargill executive helped write the WTO’s agricultural provisions). Partly, they wanted poor nations to grow luxury export crops, such as flowers, so they could keep making payments on foreign debts. Mainly, though, “experts” genuinely believed that “market signals” would produce the best of all possible worlds for everyone. They were wrong.

5. The gutting of poor countries’ farm policies. Until a couple decades ago, most poor nations’ governments had offered their small-scale farmers non-predatory loans, technical advice, and subsidies for fertilizer and seeds. But the World Bank and other international institutions pushed poorer countries hard to end these policies. “The whole thing was based on the idea that if you take away the government for the poorest of the poor that somehow these markets will solve the problems,” according to economic development pundit Jeffery Sachs. “But markets can’t step in and won’t step in when people have nothing. And if you take away help, you leave them to die.”

Market signals, such as current high prices for crops, do little good if farmers do not have access to credit, seeds, or roads to transport produce even short distances. For example, it’s reported that farmers in Kenya’s Rift Valley are planting only a third of what they did last year—because fertilizers are more expensive and affordable loans aren’t available. Seventy percent of the world’s hungry people live in rural areas, so helping smallholder farmers will directly fight hunger by cutting poverty in rural communities.

6. The dismantling of strategic grain reserves. Until the 1996 Farm Bill, the U.S. set aside grain reserves; many other countries have also, on neoliberal advice, cut or eliminated their own reserves in recent years. By selling when prices were sky-high (as they are now), and buying when prices plummeted, such reserves helped even out extreme oscillations of the market, protecting both consumers and farmers. China still has grain reserve holdings of at least 30 percent of annual production—and, in the wake of the current crisis, you can expect other countries to take a renewed interest.

7. Harmful rich-country farm policies. Rich countries are not willing to expose their farmers to the risks of market fluctuations, so they use a policy tool poor countries can’t afford: massive subsidies. As the head of grain-trading giant Archer Daniels Midland put it in 1995, “People who are not in the Midwest do not understand that this is a socialist country.” It is politically convenient for the U.S. to subsidize its big farmers, so—until the ethanol boondoggle—we dumped ultra-cheap grain overseas, driving small farmers off the land.

U.S. farm subsidies help politically powerful agribusiness more than they help farmers themselves: About three-quarters of all commodity payments go to the largest 10 percent of farmers. Rural community economic development is shortchanged and small-scale, sustainable farms almost ignored; the recently passed Farm Bill won’t change any of these problems. What we need is not less U.S. farm policy, but better U.S. farm policy.

8.Unfettered agribusiness. Agribusiness corporations are profiting obscenely from the food crisis. For instance, Monsanto’s net income for the three months ending in February was $1.12 billion, more than double the year before. Cargill’s profits in the first quarter of 2008 were more than $1 billion, up 86 percent from a year earlier. Bunge, a big soybean processor, had quarterly net earnings up 1,964 percent.

One reason for these profits is that there’s not much competition. Just three companies (Cargill, Archer Daniels Midland, and Bunge) dominate global grain trading. Four companies account for almost all fertilizer sold, and five control the world seed market. This control lets them squeeze farmers’ profit margins. Government antitrust regulators have been asleep at the wheel: “In the absence of any regulation or enforcement of regulations, you can reduce competition to three or four players,” as Steve Suppan of the Institute for Agriculture and Trade Policy put it. Perhaps most troubling, agribusinesses are able to “buy” legislation and almost literally write the rulebook of international trade to suit themselves, at the expense of poor people and the environment.

9. Speculation. When the bubble burst on Wall Street’s home mortgage scheme, investment managers decided that oncoming food scarcity equaled a great opportunity for profit. So U.S. financial houses created many new ways to invest in commodities—often complicated instruments not governed by traditional commodity markets’ regulations. Unprecedented amounts of money poured in, at sharply rising rates: In the past two years, an estimated $100 million a day, skyrocketing to $1 billion a day this February and March. This kind of money bid up the market, further inflating the already disastrous prices that would be passed on to the world’s poor. Investors benefited as millions went hungry.

10.Bad Weather. A drought in Australia and floods in some parts of Africa last year definitely contributed to the current food crisis. This is the only factor listed here that is not mainly caused by human choices—but stay tuned to the story of human-driven climate change, which certainly will affect world food supplies in the future.

The Revelation passage mentioned above decries charging a denarius, about a day’s pay, for a quart of wheat or three quarts of barley while “oil and wine” production remains unaffected (Revelation 6:6). In modern terms, we might ironically say, “A kilo of tortillas for 10 pesos and a cup of rice for a day and a half’s wages, but do not harm ethanol or triple cheeseburgers!”

Today, even more than during the time of the Roman Empire, decisions about economic and farm policies are moral choices that we must make with the common good in mind. And it shouldn’t take an apocalypse—or a global catastrophe—to wake us up to that.

Elizabeth Palmberg is assistant editor of Sojourners.

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