SV: [OPE] The genocidal implications of biofuels

Martin.Kragh@hhs.se

Just a note on the food debate. If the majority of the populations in the so called Third World are producers of food, shouldn't they benefit from rising prices? I have not seen any discussion of this in the media, which more often focus on urban regional problems than rural areas (even though this is where the majority of people live).

To rephrase in relation to Juriaan's post; if 3-10 percent of GDP in many countries have been lost to higher costs of food, where did that money go?

Kind regards

Martin 

Från: ope-bounces@lists.csuchico.edu [mailto:ope-bounces@lists.csuchico.edu] För Jurriaan Bendien
Skickat: den 6 juli 2008 15:07
Till: ope@lists.csuchico.edu
Ämne: [OPE] The genocidal implications of biofuels

As I mentioned a year ago on OPE-L, the question there is about "food versus cars" http://ricardo.ecn.wfu.edu/~cottrell/ope/archive/0707/0036.html The Left and the Davos people were talking about global warming, but it's hard to stay warm if you have nothing to eat, and basically many environmental concerns will go by the board, if you cannot even purchase enough food for consumption with what you earn. 

I am not sure what that estimate of 75% exactly refers to, but the World Bank already reports publicly that:

Some 41 countries have lost 3% to 10% of their GDP from rising food, fuel and commodity prices since January 2007. Over 30 countries have been hit by food riots, as the impact of the crisis reaches the household level. http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21828803~pagePK:34370~piPK:34424~theSitePK:4607,00.html

The food import bill of the Low Income Food Deficit Countries (LIFDCs) is expected to reach US$169 billion in 2008, 40 percent more than in 2007. http://www.fao.org/newsroom/en/news/2008/1000845/index.html

Taking together with the loss of market confidence caused by credit crises, the decline in the average industrial rate of profit, and the declining housing market globally, it's enough for the "slowdown" to lurch slowly into a real world recession I would think, in particular because it is not possible to adjust to all these problems very quickly. 

The first half-year drop in 2008 real GDP growth is not limited to developing countries either - think of the US, France, Spain, Ireland, New Zealand, Korea, Italy, Iceland... in 2009, GDP growth in Germany, the strongman of the European economy, is likely to be just over 1%, perhaps 1.3% or so, and in the EU generally, I think the weighted real GDP growth rate in 2009 could be cut nearly in half, i.e. it would be not much more than 1%. In total, stagnation in the Triad countries, and a somewhat reduced growth rate in China and India, would mean that the world real GDP growth measure would actually dip below 3% in 2009. Remember also, that the price-hikes are not just limited to energy and food, but also affect many other industrial raw materials ("commodities"). 

Rising food prices create political unrest in poor countries. Thus, the FT comments:

"Western countries have upgraded the food and fuel crisis into a national security concern as they fear record high energy and agriculture commodity costs are destabilising key developing regions of the world. (...) One Washington official said: "What we have been watching is behaviour [that indicates] China, India, Indonesia, Vietnam [and] Malaysia simply can't bear the burden on the central budget and that the medium- to long-term confluence of oil and food prices is just too much." He added: "It is leading to a real security issue where the streets are talking to the president." http://www.ft.com/cms/s/0/de9ae814-3f2a-11dd-8fd9-0000779fd2ac.html

The NYT then queries:

"Is it best to specialize in whatever food grows best in a country's soil, and trade it for all other food needs - or even, perhaps, specialize in services or manufacturing, and trade those for food? Or is it best to seek self-sufficiency in every type of food that will, weather permitting, grow within a country's borders? The usual answer from economists, and the United States' position for decades, is that the world benefits most if every country specializes in growing (or servicing or making) what it can most efficiently, and trading for the rest.  (...) India and other countries, as well as some nonprofit groups, are quick to point out that economic arguments - that countries specialize in the production of whatever they can make most efficiently - are unconvincing, as long as rich countries heavily subsidize their farmers." http://www.nytimes.com/2008/06/30/business/worldbusiness/30trade.html?pagewanted=2&_r=1&sq=hoarding%20food&st=nyt&scp=1: from Torrey.csuchico.edu (torrey.CSUChico.EDU [132.241.82.60]) by orthrus.csuchico.edu (8.13.8/8.13.8) with ESMTP id m66Ffssr008465; Sun, 6 Jul 2008 08:41:54 -0700

Government support to farmers in OECD countries was estimated to be $258 billion in 2007. This represented 23 per cent of total farm receipts, down from 26 percent in 2006 and 28% in 2005, the lowest level since OECD estimates began in 1986. http://www.oecd.org/document/47/0,3343,en_2649_201185_40900655_1_1_1_1,00.html

But in reality, intra-industry trade (IIT) has been growing all the time, meaning that the same kinds of foods are both imported and exported by the same countries. Seasonal differences can explain some of that, but a lot of it (especially processed foods, of course) has nothing much to do with seasonality. 

As regards the developed countries, AAFC estimates that:

"Between 1985 and 1996 world agri-food trade has more than doubled, growing from $US 209 billion to $US 463 billion. This value growth represents a 13.6% annual compound growth rate. (...) Regional trade agreements, which have been internally pressured by improved global communications, low transportation costs, and a gradual homogenization of tastes and preferences across regions, have tended to integrate markets with similar resource bases and technology. As these markets have become integrated, intra-industry trade has mushroomed. The integrated markets have allowed multinational firms to achieve economies of scale by breaking their production processes into many geographically separate steps. The result has been both a substantial increase in the volume of trade (imports as well as exports) and a change in the composition of trade. Traditionally, countries exported products whose production processes intensively use the resources which they have in the most supply, and import products whose production processes intensively use the resources which they have in the least supply. As multinational firms divide their production processes across countries, individual countries see their export and import compositions change, from being completely different in nature from each other to being very similar in nature. In other words, as the exports of developed countries have risen rapidly, so have their imports, with most of the trade taking place in similar product classes. http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1181245464049&lang=e

In other words, the volume of world trade in food, has increased vastly more than the actual world output of food. 

As regards the developing countries, thirty years ago Ernest Mandel wrote an article entitled "The more food there is, the more people go hungry" (transl. Intercontinental Press, 1978, pp 428-429) which is not a bad description of what happened. The Grubel IIT index for foodstuffs traded internationally by developing countries is not very far below manufactured goods, the difference is perhaps 20-25%. In the case of China, the same goods are being imported as well as exported in about two-fifths of the trade volume.

For 2006, FAO estimated that 854 million people worldwide were undernourished. This was 12.6 percent of the estimated world population of 6.6 billion, or nearly one in eight people living on the planet. FAO reports that the number of hungry people increased by about 50 million in 2007 alone, as a result of high food prices, and that:

"In order to reduce the number of undernourished in the world and meet growing demands, global food production needs to double by 2050. Production increase must occur mainly in developing countries where the poor and hungry live, and where more than 95 percent of the projected population increase will occur. Their farmers will need access to modern inputs, storage facilities and rural infrastructure." http://www.fao.org/newsroom/en/news/2008/1000866/index.html

FAO also says "To produce and prepare food that is safe to eat, whether for market or for the family, rural producers need access to safe water and proper sanitation. One billion people, most of them living in rural areas of developing countries, lack access to clean water and more than twice that number have no adequate sanitation. Public investments in this area are urgently needed to create the conditions where food and agricultural markets can flourish." http://209.85.135.104/custom?q=cache:K8nwL9TSb2EJ:ftp://ftp.fao.org/docrep/fao/010/ai196e/ai196e00.pdf These are longterm infrastructural investments, which are however unlikely to occur simply through market activity aiming to make a quick buck in the shortest possible time. It may actually take a popular revolution to bring them about.

The grim question is how the investments can be accomplished at all, if the national income of developing countries actually falls, due to higher import prices and capital flight. But if anything is clear, it's that the prices for prime agricultural land are in the lift, worldwide, and that the large investors are likely to buy up a lot of that land.

Jurriaan

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