Watch it slip
Watch it slide
I bet $10 on the losing horse
Feel the grip
Of my bride
Watch me do it again
Where’s my dinner?!
– Short Lip Fuser, Rocket from the Crypt
Empty Stomachs
As Evergrande faces collapse, countless individuals are left grappling with the loss of their savings. Simultaneously, food prices are escalating rapidly.
The United Nations Food and Agriculture Organization (FAO) reports that global food prices surged nearly 33% year-over-year as of August. Costs for vegetable oil, grains, and meat have risen significantly. Alarmingly, this pattern of increasing food prices often leads to social unrest and upheaval.
A decade ago, similar inflation in food prices contributed to the Arab Spring in the Middle East and North Africa. Furthermore, food shortages were rampant in Communist Romania during the 1980s, culminating in the overthrow and execution of dictator Nicolae Ceausescu on Christmas Day in 1989.
Revolutions are seldom inspired by a population with full stomachs. Historically, significant increases in food prices have sparked uprisings against oppressive regimes.
For instance, leading up to the French Revolution, famines were common. A notorious moment occurred when Marie Antoinette, upon learning that the peasants had no bread, casually declared, “let them eat cake.”
The subsequent Flour War riots led to the downfall of King Louis XVI, and eventually the Reign of Terror ensued, fueled by rapid hyperinflation and societal discontent that Napoleon later exploited.
If only there had been a bit more bread available.
“I Don’t Eat Bread”
According to FAO data, adjusting for inflation and annualizing trends reveals that food prices are at their highest levels in nearly sixty years. Alastair Smith, a senior teaching fellow at Warwick University, recently observed:
“Food is more expensive today than it has been for the vast majority of modern recorded history.”
Officials from Tunisia, Egypt, Morocco, Romania, India, Turkey, and Russia are racing against time to mitigate the impact of escalating food prices. Their strategies include price controls, export taxes, fines, subsidies, and trade limitations.
While these measures may yield short-term relief, history shows they often exacerbate problems in the long run by creating supply shortages when prices are kept artificially low.
Romanian Prime Minister Florin Citu is taking a more proactive approach to avert a similar fate as Ceausescu. He aims to reduce the country’s reliance on imported processed foods, believing this will lower costs and improve the trade deficit.
When questioned about rising bread prices, he quipped, “I don’t eat bread.”
Does he enjoy cake instead?
It’s clear that rising food costs aren’t limited to developing nations.
In the United Kingdom, increasing natural gas prices threaten the food supply. Several fertilizer plants have suspended operations due to soaring energy costs, leading to a shortage of carbon dioxide, a byproduct essential for food processing and preservation.
This shortage disrupts the food supply chain, halting deliveries of frozen goods and raising alarm about a potential food crisis.
President Biden’s New Plan to Tackle Rising Food Prices
In the United States, food prices have demanded attention from White House officials, whose primary goal seems to be shifting blame elsewhere.
The detrimental effects of government lockdowns and resulting supply chain disruptions are often overlooked as contributors to rising food costs. The staggering $4 trillion created through money printing goes largely unmentioned, aside from acknowledging that government stimulus has kept meat demand stable.
In the eyes of White House staff, the government bears no responsibility. Instead, they have identified a villain for the public to scrutinize. In a recent blog post, they pinpoint the rising food prices as a consequence of “pandemic profiteering” by the four major meat processing companies.
Here’s their reasoning:
“Four large conglomerates overwhelmingly control meat supply chains, driving down earnings for farmers while driving up prices for consumers. The meatpacking industry buys cattle, hogs, and chickens from farmers, processes them, and then sells them to retailers. This consolidation serves as a key choke point in the supply chain.”
“The consolidation gives these middlemen the power to squeeze both consumers and producers. History shows that these large processors consistently earn higher profits, while families pay more at the grocery store and farmers receive less for their products. Without this corporate consolidation, prices could be lower and fairer for all.”
It’s important to acknowledge that the authors may not fully understand the reasons behind the consolidation in the meat processing industry. They raise questions about whether prices would indeed be lower without such consolidation.
What truly seems to matter is that attributing rising food prices to this consolidation offers an easy narrative for justifying increased government intervention, which often leads to disastrous effects.
As stated in the White House blog:
“As we restart the world’s largest economy, the Biden-Harris Administration is committed to creating a fair and equitable food system for all.”
To combat the challenges in the meat processing sector, President Biden has unveiled plans to allocate $1.4 billion from COVID-19 stimulus funds to support small producers and workers. He has vowed to “crack down on illegal price fixing” and established a new White House Competition Council to drive the transformation of the food system.
However, the outcomes of government intervention often discourage production, inflate prices, and, ultimately, can lead to empty shelves in supermarkets. The ramifications of this cascade effect could be food insecurity and the unrest that accompanies it.
Sincerely,
MN Gordon
for Economic Prism
Return from President Biden’s New Plan to Tackle Rising Food Prices to Economic Prism
