The High Price of High Food Prices


In the United States, it’s easy to forget about the importance of food prices. If you don’t live there, you might not even notice the extensive droughts in the Midwest and Rocky Mountains, because they do not always manifest themselves in price spikes. This is mostly because of a century of legislation designed to protect the domestic food markets from wild fluctuations in price, which were devastating to farmers in the 19th century. In modern times, the Economic Stabilization Act of 1970, the Farm Bills (including food stamps), and other programs ensure that business, and subsequently consumers, are sheltered from extreme food price fluctuations.

Other countries are not always so lucky. Not only may they lack effective institutions for keeping food prices stable, the institutions they do have are often corrupt and do the opposite of their American counterparts. In many former colonies in West Africa, for example, commodity prices were controlled by marketing boards from the European colonizer. These boards would, in theory, promote export economies to develop in the colonies, but in practice were used to overcharge when exporting the goods and underpay the farmers who brought them to the coast. Similar institutions still exist in some African countries, and they continue to hold back economic development (for more on marketing boards and the economics of poverty, I recommend Why Nations Fail by Daren Acemoglu and James Robinson.)

And now we’ll make everything worse by adding a problem that all countries share: global warming. The World Bank’s new numbers show that unpredictable weather patterns caused by global warming will drive up the prices of agricultural commodities. Again, we are seeing the interconnected nature of global warming’s problems. It will drive up insurance costs all around the world, because places that may have seemed safe from natural disaster will no longer be so. Increased uncertainty naturally increases costs because of this—you have to pay for risk management, and if you’re a food grower, the price of your product will have to recoup that cost.

It gets worse. A paper from the International Monetary Fund found that, throughout time, there is a direct correlation between increased food prices and political instability and ‘deterioration of democratic institutions’ in developing economies. Riots, crime, terrorism, and armed rebellion all increased as food prices increased. The United States and other wealthy countries are protected from this effect by their more robust sets of institutions designed to mitigate the impacts of economic crises.

This theme arises repeatedly in studying the effects of global warming: heat waves are not the only problem that will arise as the planet warms. Unpredictable consequences cascade through the complex, interconnected economic and governmental institutions of the globalized world. And again, we see poorer countries suffering from global warming more than wealthy countries.  

 

What can an ordinary person do about it? Regardless of where you live, think about ways to consume food that is secure. Secure food is local food, and food that is grown in a climate to which it is accustomed. You’ve probably heard people telling you to “eat local” to lower your carbon footprint, but in global warming worst-case scenarios, that may become the only option.


Can you think of other concepts of sustainability that would minimize the effects of food scarcity, especially in the developing world?


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