http://www.abc.net.au/news/stories/2008/04/30/2231223.htm

Just to prove that I do occasionally have a social conscience, I’m publishing a link to the ABC News site about the world food shortage we are currently experiencing.

This was actually raised in the Bloomberg news over the last few weeks – I’ve had access to this channel as I’ve been travelling – and is considered quite critical.  One thing that we all know is that there is enough food in the world to feed every one.  The biggest issue is how it is distributed.  Obviously the fairest way to distribute food (as with anything really) is to sell it, compensating the grower/producer for their time, costs of production and investment of capital in their activity.  This also means that produce is also only distributed as needs as money must be outlaid for the purchase.  The problem that we have now encountered is that to distribute food, you need oil, or more specifically petrol.  The price of oil, on the world market rather than at the pump, has increased by 60% in the last 12 months.  So now, in countries like India, there is enough food being imported, but people don’t earn enough to pay for it.  And this is in a country where wages are not static, but have been rising as rapidly, if not more rapidly than Australia.  Hence a food shortage caused by the inability to pay.  And before any one goes on any rant about dropping prices, bear in mind that price is not arbitrary.  It needs to compensate growers, cover the cost of transport and compensate those importing and selling the food before the final consumer makes the purchase.  The ABC article which I have published is also interesting as it cites that increased energy and production costs means that producers in developing countries can not afford to grow as much – hence are working at a level below maximum capacity.  This shows that not only the price that is being charged is fair, but was extremely low before hand, to the point that producers were not making enough of a margin to accommodate price fluctuations or even look at expanding production in the future.  Bloomberg also cited the drought we are having in Australia as one of the reasons why food production is less than is was.  Whilst we do export a lot, the second impact of this is that we potentially have to look at importing more food to make up the shortfall, depending on how drastic the drought really was.

Ban-ki Moon the UN Secretary General does make a good point that if this is prolonged, it may cause civil unrest on a global scale.  As Napoleon Bonaparte is attributed with saying, “Any society is only three meals away from revolution.”  And I do think that in this time, if we are to preserve the benefits of International Trade, it is time to consider how we can ensure it continue ensure it works for us all.  International Trade turns us into a truly global community so that success and failure (or more prices and supply) are no longer up to any one nation, if one part doesn’t work so well, the whole world feels the impact.  I’m not advocating aide or subsidisation, but I do think that every country will need to start considering the impact of food shortages on our trading partners and how that will shape their attitude towards trade in the future.

Share on Facebook