Rising prices hurt the poorest of the poor

Farmers sit beside heaps of wheat at a grain market in the northern Indian city of Chandigarh on Monday.

Photo: Reuters

David Blair
April 15, 2008


FROM the villages of Bangladesh to the slums of Haiti, millions of the world's poorest people have been cast into even greater penury by sharply rising food prices. At a stroke, this swift and devastating change in the global economy - which has gone almost unnoticed in the rich world - has inflicted immense suffering.

Rice is the staple in both these countries and its price has doubled in 12 months. If you live in Dhaka or Port-au-Prince, this effectively means that your already meagre standard of living has suddenly been cut in half. Riots and violent demonstrations have been the result.

Why has this happened? Rising food prices have arisen from crucial structural changes in the world economy. Over the past year, global demand for foodstuffs has risen substantially, caused largely by the rapid emergence of middle-class consumers in China and India.

Taken together, these giant countries now have a new middle class about 600 million strong.

This increase in global demand has coincided with new constraints on the supply of food. Fertile land which once grew foodstuffs is now being used to produce biofuels, such as ethanol, or grain for livestock feed. Freak weather in some food-producing countries, notably Australia, have substantially reduced their output.

All this means that food prices across the board have risen by about 40 per cent since last northern summer.

Not every poor nation has been gravely affected by these developments. In many African countries, where millions live as subsistence farmers, global food prices are largely irrelevant. People eat what they grow.

The most vulnerable countries are those with large urban populations and little arable land, rendering them dependent on imports.

In theory, market forces should ensure that the situation is self-correcting over time. As prices rise, farmers will have an incentive to grow food instead of biofuels, and grain for human consumption, rather than for livestock. In the meantime, nations like Bangladesh and Haiti are enduring terrible suffering.

The only answer is for the rich world to subsidise their food supplies.

Telegraph, London

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