Thursday, April 24, 2008
So now, instead of bank runs, we have food runs. Panic has seized the minds of American food consumers and now there are runs on basic grain staples in Wal-Marts, Costcos and Sam’s around the country. People are now buying massive quantities of rice after reading articles such as this one from the Wall Street Journal, where we are faced with the very odd spectacle of investment advisers recommending that Americans stock up on foods as a hedge against global rising food prices. It makes sense on a certain level, as rice is definitely tastier than Bear Stearns stock certificates.
This panic is fun to watch, as it ends up being a classic self-fulfilling process. People stock up, the shelves go empty (as the store distribution system is not set up to deal with a sudden spike in demand like this) and it will take a while for the plentiful stocks of rice in this country to make their way back onto the shelves. But in the meantime the empty shelves will prompt more panic buying, as people think the shelves are empty because of a lack of rice, and not because the supply chain isn’t used to dealing with irrationality on a massive scale.
The real problem is not here, where we have plenty of food, but in many places elsewhere on the globe. Food riots are popping up like mushrooms after a rain, as countries are dealing with a perfect storm of economic and weather problems that are affecting different parts of the food supply around the world. My brother in his new blog today posts an article from this week's Economist which covers the problem.
Or, rather, problems, because anyone who thinks that there is one problem causing all of this is being myopic. Natural catastrophes such as drought are playing a large role in all of this, but only in local areas. Rice harvests around the world are abundant, but there are many places where they are not, due to a lack of water for the thirsty crop. Distribution remains the largest problem there. But the main problems are economic.
To blame those on the left, a huge problem has historically been a crude and mishandled subsidizing of food production. This is one of the main reasons for the riots – the prices have gone up so much because they were held artificially low to begin with, at levels that were economically unsustainable. And while giving away rice and wheat to a hungry populace may sound like a good idea, over the long term it’s a disaster, as it gives farmers no reason to produce anything. Well, except for drug crops like cocoa and poppies, whose prices are supported at artificially high levels due to their illegality.
But lest I sound like a rampant capitalist, a large amount of the blame goes to those on the right. The fiscal policies of this country have managed to devalue the U.S. dollar to a great degree, and the U.S. dollar is the main currency of international trade. This is one of the main reasons the price of oil has gone through the roof. And for the exact same reasons, it’s why the price of traded food, and therefore all food, is going through the roof as well. For the past year, the supply of and demand for food has not in and of itself changed appreciably, but the currency used to purchase food has changed dramatically. Which is why 2008 is the year of food riots, and not 2007.
And to blame everyone, no matter their political persuasion, most of the grain on the planet doesn’t feed people; it feeds cows, pigs and chickens (there are 1.5 billion cows on this planet, weighing as much as all 6 billion people, and 50 billion chickens hanging out all over the globe.) Eating meat is a grossly inefficient way to get calories from the soil to peoples’ bellies – the most common statistic is that it takes ten calories of grain to produce one calorie of meat, and it's estimated that 70% of all agriculture on this planet is directly devoted to livestock, and not people. And now that millions of newly affluent people in Asia want a new lifestyle to go along with their new found wealth, they are looking at the only culture that historically has a lifestyle of plenty for guidance and inspiration. America, land of car driving carnivores. America has three great inspirational exports to the new middle classes of Asia: a love of cars, a love of meat and a love of Pentecostalism. The world would be a better place if those millions instead stuck to riding bikes to a vegetarian restaurant to discuss Confucianism.
Of course, our country would be a better place if we did that as well, instead of driving the SUV to Wal-Mart to load up on a hundred pound bag of rice we wont be eating.