Global Food Crisis- A neo liberal Frankestein

For many reasons, the year 2008 etched a watershed in terms of the financial volatility and unprecedented meltdown. The fears of recession still not cleared from the skies where giant investment firms, turn after turn, lookup to Federal Reserve for respite. The cyclical process after a long undisrupted illogical boom has started taking its toll shattering the capital markets one by one. However, when financial markets affect only the upper sections who has the potential resources for speculation, another crisis has been looming over, threatening to throw billions back into the damning vortex of hunger. This year stands apart itself in an unprecedented ferocity in terms of steep rise in the staple food prices.

The food price had remained quite stable for the last three decades, explained by multifarious reasons. The agricultural revolution as triggered by the new scientific practices and integrated Government approach had almost ensured that the Globe has got enough to feed its teeming population. Since the start of 2006, the average world price for rice has risen by 217%, wheat by 136%, maize by 125% and soyabeans by 107%. The price rise reached monstrous level to trigger food riots across the globe, from Philippines to Africa, from Bangladesh to Latin America. The rise is discriminatory in itself as it impacts the poorest among the poor disproportionately draining off their meager capacity to satisfy basic necessities. Global food reserves have plummeted into worst levels forewarning a deeper malaise. In all respect the situation has reached the nadir of  hope as recapitulated by World Bank authorities – the present crisis in food prices is erasing off 60% of our achievement in poverty eradication for the last 3 decades, dragging a billion back into the abject poverty.

            The root cause analysis will be a challenging task as it is interlinked in a complex outline with the labyrinth of enormous global network of capital and policy neglects, prompting any partisan to tweak the facts suiting their line of argument. As already touted  by US President and German Chancellor, high priests of altar of Global finance are seeing a just corrective pattern attributed to the changing diet pattern of the developing world, especially of India and China. The prospering middle class of these countries have moved up the food chain with the consumption tilting to meat and animal products which indirectly effect pressure on the staple food which remains its costly inputs. The spiraling population pressure is also exacerbating the demand side pulls.   Thus the crisis is being explained in terms of demand side peaks. But an empirical analysis will disprove this demand side monocausal explanation. Except in Soya consumption, developing nations hasn’t seen any spike in staple food. In a rather ironical findings, even when India and China have been galloping in terms of economic growth since 1990s, the average calorie consumption of its people has seen a gradual decline. This study undertaken by Utsa Patnaik is undermining the myth of growth itself. Although China has shown slight improvement in its indicator since 2005, its well below 1990 level. Adding this into the stable picture of the population dynamics where China has almost reached its targeted stability and India seeing decline in the population growth, the demand side explanation of the crisis smacks of hurried eye washes.

            Thus rejecting the demand side myth of convenience, we should foray into explaining the structural constraints and destabilizing forces which acts on the supply side. The crisis in food scenario is concomitant with volatility in hydro carbon price. The steep rise in the oil price has a domino effect on the farmers with the absorption layer provided by Government subsidies being dismantled. This exposes the farmer to the vagaries of illogical international speculations. The fluctuations in the prices manifest itself through the energy intensive mechanization, power consumption for irrigation, fertilizers and transportation costs. Thus multiplier effect of oil price rise complicates the interlinkage and any unregulated commodity speculation in the oil commodity market radically shifts the burden directly on the food price. Combined with the neo-liberal ideology of ‘lesser the Government, the better’ thrusted on the policy decisions, food prices thus become a toy in the hands of never trustable ‘invisible hands’ .

            The next factor destabilizing the food supply is the emergence of Bio fuel. Governments across globe from Europe and US has shifted to BioFuels on a priority base intending to delink themselves from Middle East dependence. The active state support through huge subsidy packages has diverted the farming acreages from food to fuel needs. Traditionally US had remained the food bowl of World, with the wheat from US feeding the starving Africa. Although, food channel was prioritized as an instrument of world dominance, it was undeniable- the role of US farming on world food supply. Thus the sharp variance in the diversion of land for energy purpose has toppled the supply situations to a verge of instability. The increase in the redirecting of corn and oil seeds for bio fuel purpose had a telling effect on the world food price. As a byproduct of this new engagement the wide scale deforestation in Amazon lands contributes in negative terms to the overall greenhouse phenomena debilitating the agriculture further. The drastic change in the climate has also contributed to the disruption in the agricultural seasons. Harsh droughts which ravaged Canada and Australia accompanied by the torrential rainfall in parts of US had an overall dampening impact on the global food production.

            The consistent neglect of world and national authorities towards agricultural sector has been a steady phenomenon, worldwide since 1960s. The lacunae after green revolutions and the over enthusiastic focus on secondary and tertiary sector persisted since then. The neglect was severe in third world countries where consequences were sharp owing to the population inertia on the agriculture. The excess labour couldn’t be absorbed into more productive areas due to various policy malfunctions and at the same time, land productivity couldn’t be enhanced adding to the depletion in the natural productivity owing to the aftereffects of inputs oriented Green Revolution. The agricultural productivity saw a virtual stagnation in an emerging power like India with no further land being utilized for agriculture. On the other side, a dangerous trend of conversion of rich agriculture land for industrial purpose is also gathering momentum, suiting the new liberal equations of Growth ideology. The synergy seen in 1960s between scientific community, farmer and the government seems lost for ever.

            The structural conditions hampering easy flow of food production can be traced to the changing global finance and capital structure. Invasion of profit seeking hot funds into the commodity market has vitiated the already delicate conditions further. The neo-liberal agenda of deregulation amounting to market fundamentalism give birth to rampant short term speculators who have no concern other than short term profits. Volatility is the key word where speculators relish themselves. The rocketing scales of investments from hedge funds into commodity market have reached astronomic proportions compared to 2 years back. The volatility drives speculators and they drive volatility. Market fundamentalists have conveniently forgotten this basic premise in  their hurry for opening up new avenues of profit. When investments graze over equity market, the speculation can be allowed, but over essential commodities it has harsh brunt over the starving populations who wont count in the myopic race for profits. As Jayati Gosh has pointed out the concomitant volatility in food price and oil has associational nature and the fundamental nature of speculators is driving this volatility.

            The integration of world markets through the financial globalizations has thrown open the public into the throes of often illogical dynamics which rule the global financial sectors. Any volatility is thus penetrated into the local markets contradicting the essential feature of just demand and supply equations at local level. This feature is compounded by the manipulated phasing out of Public Distribution Systems. The oft quoted reason behind the PDS dismantling – distortions in market- becomes an irony in the phase of global distortions. This is better exemplified by the Indian market where the price remained high even after a record procurement. The irony is further deepened by the sheer pledge of speculation as not distortion but the essential gods with Invisible hands! Manytimes it is argued that agricultural produce is often deflated and its high time the farmer get his due. But the already deep rooted agro giants like Cargil foods usurp the surplus value and dominates the global trade disproportionately. The euphemistic chant of ‘ farmers time has come’ is a disguised eulogy for these corporate giants which make a kill while the world starves around.

            The neo-liberal agendas have succeeded in twisting the concept of food security itself. In the 1980s itself many third world countries including India started reciting the mantra learnt from International masters ‘ Food security is not what you store but what you can buy’. At the first sight this looks innocuous, however a deeper analysis brings out hidden pattern of linking the market into the food supply and allowing profit seeking sharks to swamp the market meant for basic subsistence of world population. The dislike for PDS and food reserves thus has an ideological base formulated in the policy makers of developing world in 80s itself.

            Thus an analysis of root cause scenario has provided us base enough for repudiating the Demand hypothesis as advocated by the Financial world. Economists world wide have shredded this theory into pieces already, citing the empirical findings itself. On the supply side the structural conditions and constraints have ramifications on a scale never thought before. And as we have seen already, this crisis has its root in the policy and implantations- which can be controlled. The food supply is such integral not to be thrown into the whims of financial markets. Deep rooted national policies are required to fight off this crisis. As exemplified by the experience of Venezuela and other Latin American countries who could be more susceptible, determined state actions are instrumental in the fight for human existence. More investment in the agriculture research is the need of the hour as well as the realization of tactical importance of food security