Who Triggered the Global Food Price Rise? “China and India”
Who Triggered the Global Food Price Rise?
By: Dr. A.K. Enamul Haque Ph.D
with Philip Shaw M.Sc
President Bush in his recent statement has said “When you start getting wealth you start demanding better nutrition and better food, so demand is high, and that causes the price to go up.” He was referring to the recent world food price increase in the world. I believe about 3-4 months back Phil also asked me whether there is increasing demand for food from India. I guess he must have read similar arguments and wanted to get first hand information from me. I remember telling him that I am surprised to hear it and that I don’t think that India was behind the food price increase. I also asked Phil to look into the Internet because information is available on this. Was there a significant rise in demand for food from India if it is was is a sudden rise or was it systematic. 
However, President Bush did it again. My first reaction was to ignore it but the problem was that it is coming from the mouth of the most powerful person of the world. However, it was Condi Rice who said it first. Pull them together and you can understand who was talking! Indian reaction to the comments was not very polite. KS.Venkataraman read it and wrote, “Bush’s statement that the global food shortage is due to Indians eating more is illogical and crude. Such a statement would normally have been treated with the contempt that it deserves but for the fact that it comes from the President of USA. While there is more affluence in India in recent times, it is largely among the middle and upper income groups who were not “starving” earlier and have been eating adequately. Obviously affluence does not make our stomachs grow in size! It is reflected in other ways! Bush only proves that politicians are the same everywhere and would go to any extent to invent excuses for their lack of performance.” (KS.Venkataraman).
I have no idea who is this Venkataraman but his comment is very informative. On that day I was in Hyderabad India at the University of Law. I could see the anger and frustration among the Indians who realized that a person like President Bush was taking refuge under the blanket of India.
Much of my arguments were put forward in the above quotation but let me tell the story with some real numbers! An average US citizen eats 5 times more than that of an Indian. Each Indian eats about 178 Kg of grain a year, while it is 1046 Kg for US (which is twice that of European and thrice that of a Chinese). In 2003 a US citizen consumed 946Kg of rice and in 2007 it is 1046 kg a year. Clearly, average US citizens are consuming more today. A US citizen drinks 78 liter of milk a year while Indian citizen drink only 36 liter a year. It is only 11 liters for a Chinese. The average US citizen consumes 41 Liter of vegetable oil a year while it is only 11 kg in India
It is true that an there are nearly 17 million new faces added to India each year and so demand for food in India is growing. However, did it happen over night? If the process of income growth is not abrupt and if the process of population growth was not abrupt then we expect a gradual increase in food demand and hence an increase in prices but a sudden rise in the price of rice cannot be explained buy such gradual phenomenon.
In fact, most of us are puzzled with such a sudden jump in food prices. It’s true that increasing oil prices, which also happened in the early 70s when Bangladesh for a brief period experienced famine, has preceded increased prices. That time the world order was in trouble and so the World Bank and IMF hatched a strategy to create a new economic order. The US on that occasion deliberately stopped shipment of food to Bangladesh. The politics of food or use of food as a weapon to suppress criticism against capitalism led many countries to switch to a more “self-reliant” economy. It was clearly inefficient. But there was no option. Today, with a new food crisis, many exporting countries virtually banned the export of rice from their countries. This resulted in further increases in prices.
In 1995, when the WTO was created it was assumed that no one could stop the export of products to other countries which would maximize efficiency between nations. A freer trading regime would create incentives for individual countries to allocate scarce resources efficiently in favor of more competitive products. Today due to the increase in rice prices, country after country has taken measures to stop rice exports in the world market and the WTO could not do much to stop it. This is a lesson for countries who are food deficit and also poor. They have learned that food production should have been their priority. This will drain resources for many poor countries but given the problems in rice production there is no choice left for them.
However, the central questions remain – who triggered the price rise? There are several schools of thought and we have seen President Bush’s version. Another one may be climate change. It has made world weather volatile causing some crop failure in 2007 and 2008. Vietnam lost its crop, Bangladesh lost its crop, India had a bad year in rice production, and so on. Who is responsible for this? If you are an American you will say India and China are some of the current biggest polluters in terms of carbon emission and if you live in this part of the world, it will be developed nations who had burnt so much fossil fuel in the past 100 years that the climate has changed. There is another explanation too. The rice price rise has been preceded by a rise in the oil price. This was preceded by a war in Iraq and so the Iraq war has done it so on and so forth. The key point however, is that blame game will not work. It may work well for capturing votes, fooling common citizens in each country but the fact is that prices are up and every one should play the game responsibly. Millions of people’s fate is linked with the price rise. Hunger, death and conflicts are looming in the sky and so we all should work toward reducing the pain instead of putting the blame on others.
To me it will need another revolution in agricultural production to guarantee food for the poor if we assume that each country must solve its own food problem. This has severe environmental consequences. On the other hand, even today the total supply of food is good enough to feed all the people of the world and in this case, we need to work to make the food supply chain efficient so that food reaches everyone.
Getting It Right: Burgeoning Food Demand Is Much More Than “China and India”
By Philip Shaw M.Sc.
I remember the conversation with Enamul very well. I asked him about Indians eating more food. I asked him, “Is India importing a lot more food?” I got one of those delays on the phone akin to when western high school boys ask a girl out on a date. There is always a moment of hesitation.
I had said to Enamul that commodity prices had risen with the excuse that India and China were on a buying spree. In other words, as incomes rise in Asia, the people will demand more meat in their diet, which requires more grain. The resultant push in demand for these commodities will send prices skyward. For any North American farmer this past winter, that explanation was like gospel.
However, I’ve always had trouble with it. I’ve had trouble with it because from my perch as an agricultural commentator in Canada I get the opportunity to repeat that all the time. However, I’ve walked in the rice fields of South Asia. I’ve been to China, but something tells me that Hong Kong doesn’t count. In my heart of hearts, I just couldn’t believe that India was having this huge effect on “food demand.”
So I’m cutting President Bush some slack. Enamul and the author he quoted don’t like President Bush for reasons that are well documented in the pages of this column. However, President Bush was only repeating a well-worn line that he could have read from any agricultural economic discourse in the United States. With farm prices double and sometimes triple historical values President Bush like all western politicians is getting bombarded with questions about food and biofuel.
I, like Enamul don’t know KS.Venkataraman. So K.S. got googled and now I know he’s an Indian writer who lives in the U.S. and publishes both there and in India. In North America higher food prices and biofuel policies have been in the news lately. So I find it hard to believe that K.S. Venkataraman hadn’t heard the arguments. It’s either that or he is well positioned to pour water over the “India and China” argument with regard to greater food demand.
Enamul sheds some great light on the world of food security. He makes mention of the WTO and its reduction of trade barriers to foster freer trade around the world. However, when the price of rise rose to higher and higher levels some countries stopped exporting rice, leaving some in untenable positions. The WTO could not to anything about it. Clearly it leaves third world nations with impetus to never rely on somebody else to feed their people.
There is a certain great “hype” about all this. On one side you have a mainly urban western media decrying food inflation and biofuels like they just discovered modern production agriculture. On the other side you have real people who cannot afford their staple rice, which has nothing to do with biofuel. Where is the truth? I don’t know but I do know it’s not all about “China and India.” When it comes to food production and distribution in this world, there is much to be desired.
Clearly there is a great divide. In many ways it mirrors this column, East versus West. For instance Enamul has told me many times about famine in Bangladesh in the early 1970′s and the Nixon administration deliberately cutting off food shipments. The divide is between those who are one abject step from poverty all their lives and those like us in the west that never doubt there will be food in the grocery stores tomorrow. There are big differences here, but clearly western governments take their food for granted. The western squawk these days is more about the price of bread going up 15% while the percentage of disposable income spent on food continues to go down.
The difference harkens me back to a day in Bangladesh circa 2003. Enamul and I had a slight fender bender that day and we had to visit an informal auto repair shop. (That means a couple of kids on the side of the road who take old car headlights and use fire and heat to remold them onto other cars) While we were waiting I saw a family of three eating on the side of the road. They hardly had any clothes on; in fact it was pretty obvious they hardly had anything at all. They were eating rice, where they got it I don’t know. Enamul informed me they probably begged for it.
So what are they doing now with rice prices through the roof? Going further its pretty obvious for those nations on the food production edge, a food security policy makes good sense. Ditto for western nations, but invariably they’ll never get it because their farm sectors are so efficient.
At the end of the day our food problem in 2008 is a very complex problem. I agree with Enamul. We need a food production revolution in those nations, which need to feed their poor. And back here in the west we need a revolution in the food production media hype machine. It’s not all about “increased food demand from China and India.” Sometimes it’s just about getting it right.