Dmitry Orlov on food prices

Revolutionary Conditions

Dmitry Orlov

Club Orlov,

7 August, 2012

Travel advisory: Starting in 2013, in many parts of planet Earth there will be too little food and too much political unrest to make them pleasant destinations.

Food is about to get very expensive everywhere: farming states in the US are living through the worst drought since the Dust Bowl; in Russia and Ukraine, heat waves and drought have produced similar results, with estimates for grain production down 30-50% from last year; in India, the critical monsoon rains are already down 22%.

Exacerbating the poor harvests around the world is the brain-dead scheme in the US which mandates that a lion's share of its corn harvest be diverted to ethanol production, raising the price of corn and squeezing out cattle and poultry producers. (This is yet another symptom of a broken political system in the US: with an extremely low EROEI, corn ethanol barely qualifies as a source of energy.)

The problem is further exacerbated by the financialization of agricultural commodities; instead of being used to hedge risk to consumers, the agricultural futures markets have become the playthings of traders who gamble with large blocks of money trying to reap a windfall from disaster. The effect is to make food price spikes much worse; this has already happened in 2008 and is happening again now.

When food gets too expensive, people riot. A study by Marco Lagi et al. (cited in Trade Off by Korowicz) includes the following chart, which shows the timing of outbreaks of social unrest relative to price spikes:

The countries most at risk are those where food makes up a large portion of overall spending: 40% in China, 43% in the Philippines, 45% in Indonesia, 48% in Pakistan, 50% in India and Vietnam, 70% in Congo. If food prices double, much of their population will become malnourished (if it isn't already). Go here to explore these data on your own. (It would be helpful to include data on the percentage of calories each country imports; poorer countries that import basic carbohydrates are most at risk.)

The United States, with just 14% of its spending going toward food, may seem relatively immune to this effect, but it really isn't. There are 50 million people in the US on food stamps, and if food prices double then, unless there is a similar increase in funding for food stamps, this will halve the amount of food available to them. With the federal government's finances in disarray, the Congress deadlocked, and the federal budget headed for sequestration which will result in automatic, draconian budget cuts starting in 2013, such an increase seems unlikely. Millions more people in the US will be forced to choose between buying food and paying their mortgage, resulting in another round of mortgage defaults and the next wave of the endless financial crisis. With the widespread availability of cheap, low-quality processed food in the US, food price increases will mean that such unhealthy food will come to make up even more of the average diet, with negative effects on nutrition and health. The US is not Congo, but it isn't Switzerland either.

Food price spikes and food shortages are very effective in driving people to revolt. Since everyone has to eat, food is not a divisive issue. Whereas political régimes are quite adept at exploiting differences of opinion to divide and neutralize the populace (in the US, issues such as gay rights and abortion rights are their favorite tools) a shortage of food divides the population into the hungry and the well-fed. The well-fed inevitably turn out to be in the minority, defended, for a time, by the slightly less well-fed. They also tend to be associated closely with the régime or the moneyed interests that prop it up, and once they are dislodged, so is the régime.

Political régimes tend to be quite adept at putting down rebellions, but social unrest produced by a food shortage can only be addressed by alleviating the food shortage. If there simply isn't enough food left to distribute, their choices of action become rather limited. In some cases the government can exercise direct political control over food production and feed those who serve and protect it, allowing everyone else to starve. But the last few decades of neoliberal policies around the world have left few countries where this is still possible. Thus, the brunt of the revolt is likely to be focused directly on the transnational companies, and their presence in many countries will either come to an abrupt and messy end, or, where their vital interests are involved, come to resemble a military occupation. Given the recent advances in guerilla warfare, such occupations are likely to come to a messy end as well.

The failure of weak, neoliberal political régimes around the world will expose the men who have really been pulling the strings. Most countries remain nation-states in name only; their sovereignty has been eroded to the point where they are now mere servants to transnational business and finance. Vestigial nation-states continue to serve one function: controlling their borders. They are, in fact, prisons—keeping some people in, others out. But for transnational business and finance they are now porous entities, allowing them to practice labor arbitrage (finding cheapest labor), and jurisdictional arbitrage (finding least regulation). The US government is now little more than a proxy, with its presidential candidates (1, 2) vetted, appointed and financed by the global investment firm Goldman Sachs. A recent vote in the UN General Assembly accusing Bashar Assad of Syria produced a list of the remaining nation-states. These are the only countries whose governments still possess sufficient independence of will to oppose the US-led drive for régime change in Syria. They are: Syria (naturally), Russia, China, Iran, Belorussia, Myanmar, Zimbabwe, North Korea, Cuba, Nicaragua, Venezuela and Bolivia. It remains to be seen how helpful their independence will prove when it comes to them feeding their own people.

The three main indicators of collapse seem to be oil use decline, debt deflation and population decline, with oil the leading indicator and population the lagging indicator. But given the food crisis that is now upon us, it is starting to look like it won't be lagging by very much.