“Food (In)Security: Natural Disaster or Man-Made Crisis?
Daniel Baart is a Research Officer at the Office of the Asia-Pacific Policy Advisor at Maritime Forces Pacific Headquarters, Canadian Department of National Defence. The comments provided here are thus the author’s editorial views only, and do not represent the official policy of the Canadian Forces or Department of National Defence.
Since the mid-1970s the reaction of many governments and international organizations to supply crises of essential commodities has been the creation of strategic national reserves: the United States created the Strategic Petroleum Reserve in 1975 following the oil embargo of 1973-74, and several sub-Saharan African states created grain reserves in the same period due to severe Saharan droughts and a concurrent worldwide shortage of cereal grains. In the meantime it has become prudent practice for many states around the world to create policies that ensure adequate food supplies in troubled times.
In the past year, world food prices have skyrocketed, with the global price of wheat and rice increasing 130% and 74% respectively, since March of 2007. The massive price increase put stresses on individuals and governments alike to ensure health and family well-being on the one hand, and to maintain public security and confidence in government on the other.
While pundits blame everything from global warming and biofuels to the increasingly insatiable Chinese palate, scant attention has been paid to economic nationalism and the artificial barriers to agricultural trade put in place by market-wary governments. These man-made barriers and policies, meant to safeguard public interest, have served to restrict the international supply of food and to discourage growth in the agricultural sector. This month’s In Focus will explore the ways in which economic nationalism is both the cause and the effect of the current world food crisis, and the impact that such a strategy has on national and regional security matrices.”
Strategic Reserves or National Hoarding?
During the current crisis in food prices, several countries have announced that they will work towards the creation or strengthening of their strategic grain reserves, while others have enacted similar policies in stopping the export of food stuffs. These states are seeking to create domestic reserves and surpluses that can be tapped for the purpose of maintaining low prices and public support for the government. The stakes of the current crisis are potentially very high: there are plenty of examples throughout history of revolutions carried out on empty stomachs and anger at governments who are often powerless to do anything about food shortages. Recently, food riots in Haiti and anti-immigrant violence in South Africa reminded these governments that unaffordable food and deteriorating standards of living have the power to force regime change and government instability. As a result, India is chief among the states building reserves and is also one of the states curbing exports, along with major rice producers like Vietnam and Thailand. Though governments in Bangkok and Delhi hope to shore up their authority and take steps to increase public welfare, economists warn that these protectionist policies will do nothing to help the current worldwide food crisis, and in the long term will actually erode food security while exposing government impotence.
Given the real national security risk posed by soaring food prices, it is only reasonable that a government would take immediate steps to control prices and stabilize the supply of basic food staples.
It is the prime duty of the state to maximize its potential for survival, and protectionist trade practices are often a part of this strategy. More careful consideration of the crisis at hand, however, would likely cause the governments in question to rethink their approach.
The principle of a strategic reserve is quite simple and born of the natural reaction to conserve in times of scarcity. These reserves, whether of petroleum or grain, are stocks bought, maintained and replaced continually by governments or private organizations for the purpose of alleviating strain on the home market; when prices increase unexpectedly or catastrophic events limit regular supplies, the government can release stocks from the reserve to lower prices and lessen the effects of supply interruption. As long as the strategic reserve lasts, prices on the domestic market can be kept under control through well-timed releases.
Unfortunately the idea of removing large portions of the supply of a commodity from worldwide trade will do nothing to fix the overall situation. Though intuitively persuasive, this kind of state-level hoarding, with its attendant siege mentality, will ironically and cruelly only support the continued rise of prices for those commodities hoarded. For example, India’s plans to build a reserve of wheat and rice, when coupled with its concurrent ban on grain exports, has a dual effect of withholding a large portion of the world supply as well as continuing to draw on imports from other countries. The Asian Development Bank has blamed export bans by states like India, China, Pakistan and Thailand for “increased price volatility and uncertainty in the international rice markets” and the overall reduction of worldwide stocks.
Those contemplating export restrictions or strategic reserves might look to US management of the Strategic Petroleum Reserve for guidance. Realizing the negative effect that the continued maintenance of reserve stocks could have on the price of oil on the world market—not to mention on the coffers of the government—the US Department of Energy decided to halt deliveries to the reserve temporarily in hopes of increasing the supply available on the market. Though the results of this hiatus may not be clear for some time, this common-sense approach illustrates that during times of high prices, limiting supply through hoarding and restrictions is likely not a constructive approach to restraining the crisis.
Price Controls/Growth Controls
Protectionism will also imperil the state’s long-term ability to feed itself and its customers abroad. While price controlling reserves and trade barriers will protect consumers temporarily from fluctuations in global prices, these devices do nothing to help the domestic agricultural sector and in the long run do great damage. To begin with—and in either the case of a strategic reserve, or subsidies, or even export controls—the price of government maintenance of these policies is likely to increase as time progresses while the benefits decrease.
In the case of price controlling practices, there is little incentive for farmers to plant more, or those with capital to invest in the agricultural sector as the presence of a fixed or low price ensures that there is potentially little return on the investment. This is precisely what has transpired in Burma, which in the 1930s was the world’s largest exporter of rice and today (even pre-Cyclone Nargis) is only a marginal player in the global market. With a view to ensuring the supply of cheap rice to government and military officials, Burmese farmers are forced to sell their crops at such a low price that they have little ability to purchase fertilizer, high-yield seeds or modern equipment. Though no reliable figures are available, Thai experts report that most Burmese rice farmers grow only enough for personal consumption, making the Irrawaddy Delta only a fraction as productive as it might otherwise be. Were the government to allow domestic producers access to the world market, this time of food crisis could yield their highest profits in decades. At the same time, a focus on the product rather than the producer usually means that the government makes little investment on infrastructure to support expanding agriculture. In Burma, lack of farmer resources and government inattention to critical rural infrastructure adds up to mean that rice paddies lie fallow and irrigation channels silt up while local farmers sink deeper into poverty and global consumers face unreachable prices for basic foodstuffs. Money spent on artificially setting prices or filling warehouses with high-priced imported products could just as well be spent building roads, irrigation systems and refrigerated storage facilities to support the export potential of the domestic producers who could reap the benefits of selling at market prices.
Weakening International Confidence
Not only are attempts to control prices and stabilize supply too often counterproductive as a means of promoting public well-being and safeguarding national security, but they also have a deleterious effect on regional and international relations of states. As supplier countries throw up barriers to commodity exports, countries dependent on food imports begin to feel the stress of these practices. In this view, the national food security of export nations like India or Thailand necessarily comes at the expense of a government like the Philippines. At least one commentator has dubbed the enactment of such trade barriers the “starve your neighbour” policy. Japan and Switzerland, two powerful states dependent on food imports, recently teamed up to try to have the World Trade Organization restrain export restrictions. In making Tokyo’s case, the Japanese representative cautioned that such trade barriers put their own food security at risk. It is probably not out of the question to predict that if such practices continue, cordial relations between states may suffer.
The Food Security Dilemma: an Economist’s Solution
In the final analysis then, there is a food security dilemma in today’s global agricultural market environment not unlike the classic security dilemma of political science. In seeking to maximize the integrity of the state, governments often take ‘defensive’ action that introduces tension among the neighbours and reduces overall global security. In the case of the food security dilemma, the economist’s solution would be to recommend that while stockpiling and regulatory behaviours are needed, their object should be the means of food production, and not the products themselves. Hoarding only further restricts supply and sets up adversarial relationships between states competing for food resources. Subsidies and market controls can limit investment, and over time this will undoubtedly serve to undermine production capacity. It is this capacity that should be steadfastly protected. Recently the Philippines—the world’s largest importer of rice and thereby on the frontlines of the crisis—made steps towards declaring all ricelands and irrigated areas in the country protected territory to safeguard them from other forms of development. Moves like this, when coupled with the government infrastructure projects and the establishment of accessible credit schemes for farmers should help encourage enough growth in agriculture to increase production, and thus lower world prices.
A worldwide problem like the current increase in food prices cannot easily be attributed to a single global demographic or climatic event. While it is undeniable that the global agricultural outlook is dramatically affected by population growth, changing patterns in food production and climate shocks, governments should seek to temper these challenges rather than exacerbate them with bad policy. The ability of governments to adapt to changing conditions in the global market with smart policies, both within their borders and among their neighbours through international organizations, will determine their survivability in the long-run. In short, if governments do not become as savvy to the global economics of food production as they have to the global economics of industrial production, they threaten the survival of individual families, the stability of governments, and the future of global cooperation.