High food prices: can governments help?

Soldiers with the protesters in Tahrir Square, Cairo (picture Ramy Raoof / Flickr)

Read a commentary here from a food industry expert that a spark for the revolutions underway across the Arab world was the high price of food.  There must be something in it: countries such as Egypt and Jordan are major food importers (a lot of their land is desert and unproductive) and so they are vulnerable to movements on world markets, and those movements recently have been upwards.

However, there is rather less in the idea that the best response is for governments to intervene in those markets to keep the prices low.  Is that really something that governments can do successfully?

Analysts quoted in FoodNavigator point out the long-term trend that demand is rising faster than output, thanks to climate change and the switch to energy crops.  (A trend we see reflected in the current increase in the inflation rate in the UK, too.)  Government intervention in the food markets cannot change these underlying facts.  Government stockpiles of grain and other staples to be sold off at artificially low prices are an invitation to waste and corruption, which hardly look like solutions when objections to waste and corruption have been central to the protesters’ demands.

Furthermore, by setting up each national government to chase after enough grain for its own people, those national governments are in fact set up in conflict with each other.  In a bidding war, prices will rise yet higher, which helps the farmers and merchants that sell the grain but will rebound on the poorer countries that are priced out of the market.  The underlying fundamentals need to be addressed as such and not via the proxy of price-rigging.

This is what government action should be devoted to.  Research into more efficient agricultural techniques and crops, including reducing the amount of food that is grown and then spoiled before it can be eaten.  A food policy of this kind asks for countries to work together, not to undercut each other.  Will that be part of the democratic awakening in the Arab world?

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A reliable supply of food was in fact the objective of one of the earliest examples of European federalism, the Wheat Executive of 1916.  Read about it here: http://www.federalunion.org.uk/supranational-issues/

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