The Historical, Economical, and Political Origins of the Food Crisis of 2006-2008 - Coursework Example

The Historical, Economical, and Political Origins of the Food Crisis of 2006-2008 Beginning in 2005 and continuing to 2008, food prices increased by 83%. A break-down of specific food increases reveals the severity of the problem (Mittal, 2009). For example between 2005 and 2008, the price of maize tripled, with wheat prices increasing by 127% and rice prices increasing by 170% (Mittal, 2009). The sharp and persistent increase in food prices was particularly important for least developed countries and the poor in general, as they spend a large portion of their limited income on food. As a result, the sharp increase in food prices led to “panic” and “protest in developing countries” (Headey & Fan, 2010, p. 13). In addition, world hunger and poverty increased by 40 million (Mittal, 2009). The European Commission (2011) cited three primary reasons for the global food crisis. Firstly, there was an increasing demand for cereals by oil-producing countries. Secondly, the increasing cost of fuel impacted agricultural sectors as agriculture relies on fuel for production. Finally, an increasing demand for biofuel from food crops diminished food supplies, forcing prices upward (European Commission, 2011). This research paper analyses the food crisis of 2006-2008 and puts these causes in their historical, economical, and political contexts. The Historical Origins of the Food Crisis 2006-2008 According to Weis (2013) the historical origins of the global food crisis is the cumulative impact of a number of factors that placed unprecedented demands on agricultural products. To begin with, an increase in demand for meats in industrial states such as China and other Asian countries caused a decrease in train and oilseed which were needed for feeding livestock which were in turn converted to meat (Weis, 2013). In addition, in response to concerns about climate change and carbon emissions, developed countries such as the US and the EU, implemented energy programmes that required the use of biofuels which are converted from food sources such as corn/maize (Weiss, 2013). According to the United Nations Environmental Programme (2009) the production of biofuel crops, increased demands for meat and cereal together with food stock market prices and extreme weather all contribute to “competition for crop land” which puts a strain on the environment (p. 6). Therefore the historical origins of the food prices can be characterized as related to environmental changes that create competition for available crop land. The United Nations Environmental Programme (2009) reports that: The natural environment comprises the entire basis for food production through water, nutrients, soils, climate, weather and insects for pollination and controlling infestations (p. 6). The increasing degradation of land, urbanization, population growth and the use of food crops and land for the production of non-food sources reduced the crop land and therefore available food (United Nations Environment Programme, 2009). Naylor, Liska, Burke, Falcon, Gaskell, Rozelle, and Cassman (2007) argue that the US supplies approximately 40% of the world’s maize. With one fifth of the US maize going to domestic biofuels, the supply of maize to a growing global population decreases. Substituted crops require crop land. In the meantime, farmers in developing countries were and continue to attempt to provide biofuel crops to developing countries and in turn increased the demand for substituted croplands. This demand for substituted crop lands put a strain on the environment and therefore resulted in soil degradation and the depletion of rain forests. As a result, the available croplands have become increasingly depleted or incapable of yielding enough food to meet the demand (Naylor, et al., 2007). The historical origins of the food crisis of 2006-2008 was therefore intertwined with the environment. Ehrlich, Ehrlich and Daily (1993) predicted this outcome more than a decade ago. According to Ehrlich, et al., (1993), population growth and the high dependence of agriculture on the environment would eventually lead to a food shortage. According to Ehrlich, et al., (1993) as the population increased, the demand for more food to feed the growing population would assert more pressure on available crop land and would in turn lead to a food shortage. While acknowledging that the 2006-2008 global food crisis is tied to environmental damages and pressures placed on the environment for crop conversion and crop substitution, von Braun, Fan, Meinzen-Dick, Rosegrant and Pratt (2008) argue that a lack of innovation, investment and preparedness explain the historical origins of the crisis. Farmers and states alike were not prepared for crop conversion and crop substitution. Had farmers and states invested in research and development, they may have been able to properly and adequately meet the demand for food crops for both food and non-food purposes and the crisis may have been avoided (von Braun, et al., 2008). In short, the historical origins of the food crisis of 2006-2008 can be attributed to environmental damages brought about by exploitation of crop lands and food crops. The conversion of crop land for substituted crops and for non-food sources resulted in overuse of crop land, depleting its fertility and availability. Most of these underlying factors can be traced to increases on fuel prices which resulted in a higher demand for biofuel crops. In addition, population growth put additional pressure on croplands and the end result was a higher demand for food crops which were not met by an equally high supply. The Economic Origins of the Food Crisis The economic origins of the food crisis is primarily attributed to the higher cost of fuel (Jetter, 2008). Fuel energy is used in various stages of the agricultural production system. In this regard, fuel is used for fertilize production and use, the production and use of pesticides and for farming equipment. Fuel is also used in the processing and transportation of crops and for storing and shelving food. Therefore, when fuel prices increased, the price of food increased (Jetter, 2008). In addition to the increase in food prices as a result of the increase in fuel prices, demands for biofuel crops and non-food crop sources, stock commodities increased. As a result, countries producing and exporting crops placed restrictions on exports (Jetter, 2008). As a result, a food shortage followed. The food shortage gave way to increases in food prices which was particularly difficult for developing countries where lower income rates ensured that food security was more critical (Jetter, 2008). According to McMichael (2009) the economic origins of the food crisis 2006-2008 can be attributed in part to increasing income among consumers in emerging economies such as China, South Korea, Mexico, Turkey, India and Poland. In these countries, approximately 1 billion consumers enjoyed increased purchasing power. As a result, they resorted to symbolizing their newly acquired purchasing power by purchasing and using automobiles and eating meat. Together, “these two commodities” increase demands for biofuels and feed crops which contributed to increased food prices and food insecurity (McMichael, 2009). As McMichael (2009) explained automobiles and meat demands influenced “mutual competition for land” and had: …the perverse effect of rendering each crop more lucrative, at the same time as they displace land used for food crops. At the same time, “financial speculation” only added to the developing problem (McMichael, 2009). For instance, when rice increased by more than 30% in March of 2008 and Wheat increased by a similar rate in February 2008, Wall Street became a magnet for new investments. These new investments in food commodities reached approximately US$130 billion indicating that food became a financial investment which further complicated the consumers’ ability to purchase food at a reasonable price (McMichael, 2009). Thus when the global financial crisis took shape, food stocks took a hit (McMichael, 2009). The United Nations tied the economic origins of the food crisis to the global financial crisis of 2007/2008. According to the United Nations, when global liquidity increases and there is “financial innovation” “speculation in commodity prices increase” (Baviera & Bello, 2009). On the other hand: …the financial crisis contributed to the slide in commodity prices from min-2008 as financial investors withdrew from commodity markets and, in addition, the United States dollar appreciated as part of the process of the de-leveraging of financial institutions in the major economies (Baviera & Bello, 2009). It has also been argued that speculative agricultural commodity futures was a significant contributing factor in the increases in food prices between 2007 and 2008. When the credit crunch came in the real estate sector, investors looked to commodity futures and this in turn caused an escalation in trading for food stocks. The investment in commodity futures and then a quick withdrawal after the onset of the global financial crisis gave rise to the sharp increase in food prices (Baviera & Bello, 2009). The difficulty with this assessment is that food prices were increases exponentially well before the credit crunch. Therefore, attempts to tie the origins of the food crisis of 2006-2008 to the global financial crisis of 2007-2008 is tenuous. It is far more likely that the global financial crisis exacerbated the food crisis, but more than likely did not cause it. As the World Food Programme (2014) reported, with the global financial crisis, food insecurity would increase. The global financial crisis put millions out of work and thus purchasing power declined with the result that many more was finding it increasingly difficult to purchase food (World Food Programme, 2014). It would therefore appear that the global financial crisis and the food crisis were independent crises. In other words, it is likely that with or without a food crisis, many people would have suffered difficulties purchasing food. The food crisis was already occurring when the global financial crisis occurred. The global financial crisis only made it more difficult for people to purchase food and thus compounded the food crisis. The World Bank (2013) reported that a food crisis existed even before the official food crisis of 2006-2008. According to the World Bank (2013), 1.1 billion people existed on “less than a $1 a day” and approximately 923 million people suffered from undernourishment prior to the global financial crisis, the food crisis and the fuel crisis. Moreover, the food crisis appears to be on-going in some countries. Although food prices decreased internationally, they continue to be exponentially high in other countries (World Bank, 2013). In summary, since the food crisis itself was economic in nature, it is difficult to identify the economic origins of the crisis with precision. The best that can be concluded is that the economic origins of the food crisis of 2006-2008 is linked to several factors. The first of these factors are the rising income of consumers in emerging economies and their demand for meats which invariably led to conversion of food stock to feed stock. Similarly, the increase in fuel led to the conversion of food stock to biofuels. These conversions led to a food shortage which set of a chain reaction in which producing countries placed restrictions on exports of certain foods. In the meantime, with the onset of the global financial crisis and sharp changes in food commodities on the stock market, food prices continued to increase. The increase in fuel no doubt also directly impacted food prices. Therefore the economic origins of the food crisis are various and combined to either start the food crisis or compounded it. The Political Origins of the Food Crisis In reviewing the food crisis of 2006-2008, the World Bank (2008) identified and explained the political origins of the crisis. According to the World Bank (2008) the food crisis originated out of “decades of trade-distorting policies that have encouraged inefficient agricultural production” by mature economies and “discouraged efficient production in developing countries” (p. 1). The World Bank (2008) acknowledges however, that there were other factors contributing to the food crisis including, increases in fuel prices, increased demand for food, high price of fertilizers, the decline of the U.S. dollar, the production of biofuels, changes on food stock prices and famines and drought. Nevertheless, developed countries’ trade policies have been leading to a situation that exacerbated these problems. For decades developed countries have distorted the international agricultural market by subsidizing their agricultural sectors in ways that could not be matched by developing countries. In addition, developed countries have been producing and importing biofuel crops putting consumers in developing countries at a further disadvantage with respect to the supply of food at reasonable prices (The World Bank, 2008). Gonzalez (2011) adds to this line of thinking by arguing that farmers in developing countries provide approximately 70% of global food and their survival relies on their ability to sell their products. Yet these farmers did not reap the benefits of the food crisis where the price of food products increased significantly. The reason for this is that farmers in developing countries do not have the benefit of selling their farming products on the international market and instead, they sell their products via “intermediaries” (Gonzalez, 2011, p. 78). More importantly, the inability of developing country farmers to sell their farm products directly prevented the production of more food when demands increased and this contributed to the food crisis. Gonzalez (2011) also argues that this inequality accorded farmers in developing countries which is associated with the food crisis has “its origins in the colonial subordination of the Third World” which functioned to transform much of the Global South into supply zones of food and raw materials to fuel European capitalism” (Gonzalez, 2011, p. 68). This state of affairs did not stop when colonialism ended as developing countries continued to suffer from a lack of “self-sufficiency” which necessitated exports to intermediaries who could perfect the final product (Gonzalez, 2011, p. 68). This was only compounded by developing countries’ reliance on food imports from developed countries (Gonzalez, 2011). This reliance increased as food prices escalated and farmers in developing countries found that they were unable to compete for a share of international markets with farmers from developed countries receiving lucrative agricultural subsidies (Gonzalez, 2011). The political origins of the food crisis of 2006-2008 is therefore connected to the colonial area. The colonial era established a clear subordinate role for developing countries’ farmers, a role that they were unable to shape even after the colonial era came to an end. The reality is, farmers in developing countries have lost out on a major source of income which could trickle down to the real economy and improve the real economy. However, as a result of trade distortion, they are unable to benefit from the demands placed on food supplies and this inevitably contributed to the food crisis when farmers from developed countries began producing food crops for biofuels and other countries responded by imposing export restrictions. Conclusion The political, economic and historical origins of the food crisis of 2006-2008 are intricately linked. Although it is possible to categorize the political, economic and historical origins of the 2006-2008 food crisis, they all are all intertwined. For example, the economic factors such as the increase in fuel prices co-existed with political inequality that put farmers from developing countries at a disadvantage. Likewise, the increasing need for biofuels although related to the historical origins of the crisis are also linked to both the political and economic origins of the crisis. In other words, the economic, historical and political origins of the food crisis functioned together to both create and compound the food crisis of 2006-2008. Bibliography Baviera, M. and Bello, W. July-August 2009. ‘Food Wars.’ Monthly Review, Vol. 61(3) [online 17 February 2014] http://monthlyreview.org/2009/07/01/food-wars Ehrlich, P.R.; Ehrlich, A.H. and Daily, G.C. March 1993. ‘Food Security, Population and Environment.’ Population and Development Review, Vol. 19(1): 1-32. European Commission. 20 January 2011. ‘Causes of the 2007-2008 Global Food Crisis Identified.’ Science For Environment Policy, DG Environment News Alert Service. [online 16 February 2014] http://ec.europa.eu/environment/integration/research/newsalert/pdf/225na1.pdf Gonzalez, C.B. 2011. ‘The Global Politics of Food: Introduction to the Theoretical Perspectives Cluster.’ University of Miami International American Law Review, Vol. 43: 77-87. Headey, D. and Fan, S. 2010. ‘Reflections on the Global Food Crisis: How Did It Happen? How was it Hurt? And How Can We Prevent the Next One?’ International Food Policy Research, Research Monograph 165: 1-142. Jetter, K. M. 15 May 2008. ‘Origins of the Current Food Crisis.’ Presented to the Assembly Committee on Human Services Informational Hearing, Sacramento, CA: 1-7. McMichael, P. July-August 2009. ‘The World Food Crisis in Historical Perspective.’ Monthly Review, Vol. 61(3). [online 17 February 2014] http://monthlyreview.org/2009/07/01/the-world-food-crisis-in-historical-perspective Mittal, A. June 2009. ‘The 2008 Food Price Crisis: Rethinking Food Security Policies.’ United Nations Conference on Trade and Development, G-24 Discussion Paper Series, 1-40. Naylor, R.L.; Liska, A.; Burke, M.B.; Falcon, W.P.; Gaskell, J.C.; Rozelle, S.D. and Cassman, K.G. November 2007. ‘The Ripple Effect: Biofuels, Food Security, and the Environment.’ Environment, Vol. 49(9): 30-43. United Nations Environment Programme. February 2009. ‘The Environmental Food Crisis: The Environment’s Role in Averting Future Food Crises.’ A UNEP Rapid Response Assessment, 1-104. Vo Braun, J.; Fan, S.; Meinzen-Dick, R.; Rosegrant, M.W. and Pratt, A. N. 2008. ‘What to Expect from Scaling UP CGIAR Investments and “Best Bet” Programs.’ International Agricultural Research for Food Security, Poverty Reduction and the Environment, Consultative Group on International Research and International Food Policy Research Institute, 1-48. Weis, T. 2013. ‘The Meat of the Global Food Crisis.’ The Journal of Peasant Studies, Vol. 40(1): 65-85. World Bank. June 2008. ‘Global Food Price Crisis – Trade Policy Origins.’ The Poverty Reduction and Economic Management Network, No. 119: 1-4. World Bank. 7 October 2013. ‘Food Crisis: Overview.’ The World Bank. [online 17 February 2014] http://www.worldbank.org/foodcrisis/bankinitiatives.htm World Food Programme. 2014. ‘Dossier: Global Food Crisis in Depth.’ WFP. [online 17 February 2014] http://www.wfp.org/global-food-crisis-in-depth Read More