With the world consuming more food than it produces and global grain stocks the lowest for 30 years, food prices are soaring from Indonesia to Indianapolis. Some experts called it the Perfect Storm and others a tsunami.
More intense and more frequent weather disasters put an increasing number of people at risk of hunger. Food riots broke out in widely scattered parts of the world, even hounded the Haitian prime minister out of office.
The global food crisis has a common denominator with the still unfolding subprime mortgage debacle whose losses the International Monetary Fund (IMF) now estimates at $1.1 trillion: Greed. Predatory lending coupled with criminal profiteering was behind the still unfolding subprime mortgage debacle whose losses the International Monetary Fund now estimates at $1.1 trillion. It is the largest loss of wealth in modern U.S. history. And greed also played a big part in the pell-mell rush to move land out of food production and into ethanol biofuels.
Corn at $6 a bushel is up 30 percent in four months. Wheat prices jumped 130 percent in a year and wheat stocks are at their lowest in 60 years. Globally, rice hit historic levels, partly driven by Australia’s six years of drought.
India’s finance minister Palaniappan Chidambaram said, “When millions of people are going hungry, it’s a crime against humanity that food should be diverted to biofuels.” World Bank President Robert Zoellick said surging food costs could translate into “seven lost years” in the fight against worldwide poverty. Thirty-three countries are at risk of social upheaval, he warned.
The head of one of the world’s largest oil companies told us, not for attribution by name, that commodity speculators also bought gazillions in oil futures to sit on them until the profit looked right, then dribbled them out at $110 to $117 a barrel, double the price a year ago. Cynical speculators reckoned drivers would rather cut down on food for the family than gas for the car.
The real estate crisis, says the IMF’s Global Financial Stability Report, “is now spreading beyond the U.S. subprime market — namely to the prime residential and commercial real estate markets, consumer credit, and the low-to-high grade corporate credit markets.” Weaknesses in risk management systems and lack of “prudential supervision,” are, the IMF added, at fault.
Hardest hit by food shortages are what the Rome-based World Food Program lists as the world’s “ultra poor” (162 million who barely exist on less than 50 U.S. cents a day); the “medial poor,” (323 million who subsist on between 50 cents and $1 a day); and the “poor,” (485 million on between 75 cents and $1) — or almost 1 billion people on $1 a day or less, from Darfur to Afghanistan. Most of them have been priced out of buying even subsistence level rice. More than 25,000 people die from hunger every day across the world.
In Washington last week, World Food Program (WFP) chief Josette Sheeran lobbied for an additional $500 million. The White House kicked in $200 million for USAID’s food program. In Afghanistan, $77 million is needed to feed 2.5 million, or 10 percent of the population, that cannot pay the higher costs for staples.
WFP’s budget shortfall for 2008 is forcing Miss Sheeran, a former undersecretary of state for economic, energy and agricultural affairs, to decide whether to provide “40 percent less food or do we reach out to 40 percent less people,” which she says are equally unacceptable.
With wars in Iraq and Afghanistan costing $12 billion a month and Gulf countries pumping a cornucopia in the hundreds of billions of dollars a year, WFP’s humanitarian needs are chump change. They could easily be met with a tiny fraction of what some hedge fund managers made betting against subprime mortgages and those that held them.
George Soros and James H. Simons each pulled almost $3 billion in 2007, according to Institutional Investor’s Alpha magazine. John Paulson, also a hedge fund jockey, won the race to riches at $3.7 billion in 12 months.
In a full-page piece in the Financial Times headlined “Mind the gap,” John Plender, senior editorial writer and columnist, wrote, “As financial crisis leaves Anglo-American capitalism looking tarnished, a period in which rising inequality and stagnant average incomes seemed tolerable to voters, is drawing to a close.” “You do not need to be a neo-Malthusian,” echoed the FT’s Victor Mallet, “to worry about the demands of a global population rising by 80 million a year.”
Already, Miss Sheeran knows from her peripatetic assignment, that this global crisis quickly translates into less health care and education, less nutritious food, fewer meals, and selling household assets in desperation. School attendance also declines when there is less to east under the tents of refugee camps.
Miss Sheeran heads a U.N. organization that employs 10,000 in 78 countries with a budget of $3 billion that rations food to some 80 million. One-time Deputy U.S. Trade Representative, she pushed the global food crisis to the top of the agenda for world leaders meeting in Washington for the spring meeting of IMF and the World Bank. She has also succeeded in making hunger the top priority for the next meeting of the Group of Eight major industrialized nations in Tokyo July 7.
Arnaud de Borchgrave is editor at large of The Washington Times and of United Press International.