Soaring food prices

FOOD prices around the world are soaring. In the estimate of The Guardian, food prices have surged by about 20 per cent this year, making 345 million people food insecure.

This points to only one thing: a broken global food system. But first, a few words on the hungry and angry in Southeast Asia. Here, food inflation numbers are hard to come by, but average inflation will tell a similar story.

According to The Economist, which quotes Asean-affiliated think tank AMRO, all 10 members of the bloc are forecast to be hit with an inflation rate of 5.2 per cent this year, more than double that of last year’s. Panic-inducing prices are also being imported into the Philippines, Thailand and Singapore, three countries that rely heavily on imported food and fuel.

It will be wrong to go away thinking that Asean countries aren’t doing anything about it. Here is how they try to soften the blow, according to The Economist: raising the minimum wage (the Philippines and Laos), dole out cash to the poor (Singapore, Malaysia and Indonesia), subsidise fuel or fertiliser (Indonesia, the Philippines, Malaysia and Thailand) or cap prices for essential goods (Malaysia and Thailand).

Such measures have worked for a few net exporters, but not for the rest. Also, being curative measures, they are good only for the short term. They don’t get rid of the disease.

What does is a revamped global food system. The problem is, as World Food Programme chief economist Dr Arif Husain argued in an article in May, world leaders tend to only address the current crisis, not prevent future ones.

Myopia rules. The Ukraine war did not cause the food crisis, Husain argues. We agree. It only deepens a pre-existing appalling one. As WFP’s analysis indicates, the dire crisis is one of access and affordability, not supply.

But the power of a few makes the many go hungry. When it comes to grain, a Guardian report reveals, four companies, the Archer-Daniels-Midland Company, Bunge, Cargill and Louis Dreyfus, control an estimated 70 to 90 per cent of the global grain trade. Seeds and chemicals suffer a similar fate, with three multinationals — Bayer-Monsanto, Dupont-Dow and Chem-China Syngenta — controlling 60 per cent of the trade. Ditto grocery stores. Do not get us wrong.

We are not against companies making profits. After all, commerce is about profits. Our concern, and we think it should be the concern of world leaders who want to repair the global food system, is concentration of power in the hands of a few. When power is so concentrated, profiteering — as opposed to profit making — will not be far away.

There are a few ways to fix this. First is to get the companies to make their products more affordable. This is easier said than done. Challenging their dominance isn’t easy.

Second is to impose a windfall tax on profiteers. Oxfam suggests a 90 per cent windfall tax on excess profits. In the non-governmental organisation’s calculation, this will yield US$490 billion in global tax.

This will not only help in solving the food crisis, but also discourage profiteering.

Finally, governments must ensure that farmers and producers reap what they sow and consumers are not priced out by the powerful few.

Free market economists would be quick to protest at such government “interference”. To the dismal scientists, we say this: there is no such thing as a free market.


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